By Mike Duncan | October 2026
Your hedging strategy was decided by a document few people read
A treasury has a five-year USD exposure. It identifies the right hedge and gets a price, then ends up rolling three-month FX forwards. Nothing went wrong and no policy was broken. The decision was made years earlier, in the schedule to the ISDA Master Agreement and the CSA, negotiated by credit and legal.
ISDA CSA negotiation sets much of the ground under a hedge before a treasurer compares quotes: which banks are on the panel, what collateral they accept, whether the credit line stretches to five years, and what happens if the exposure goes away early.
On an illustrative five-year USD 50 million FX forward for a low investment grade corporate, the cost runs from 13.0 bps a year under a two-way CSA with a zero threshold to 38.9 bps unsecured inside the credit line, about USD 65,000 against USD 194,500 a year. The unsecured trade feels easy because no collateral moves, but the bank’s credit charge (CVA) and funding costs end up in the price.
Thresholds, eligible collateral, break clauses and the bank panel can all be negotiated, and long-dated hedging for corporates can depend on them. It is much easier to fix them before the five-year hedge is in front of you than when the market is already moving.
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The Small Print Sets the Price
