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Derivatives are crucial for the global economy, enabling firms to hedge risks. For this market to function effectively, strong legal foundations are essential. Without common legal standards, firms would use unique contractual language, leading to disagreements and prolonged negotiations. The ISDA Master Agreement has standardized these contracts over 35 years, providing a common template for trading relationships between derivatives counterparties. It defines key terms like "default" and conditions for contract termination, ensuring firms can transact confidently with a shared understanding of the market. Additionally, the agreement allows for customization of relationships and transactions in the event of a default.