credit support annex (CSA)

A Credit Support Annex (CSA) is a legal agreement between two parties engaged in derivatives trading, outlining how they manage credit risk. It specifies collateral arrangements, such as cash or assets, that one party must provide to the other to cover potential losses if their financial health declines. The CSA helps reduce the risk of default by ensuring that both parties have a predefined mechanism to mitigate exposure, fostering safer and more transparent trading. It is typically attached to a master trading agreement and governs collateral exchange, valuation, and thresholds over the life of the derivative contract.