This workout asks us to identify whether the following statements regarding documentation are true or false.

The first statement states that the MTA is the level of exposure above which collateral must be pledged. MTA is the minimum transfer amount, meaning that this statement is a false statement. The level of exposure above which collateral must be pledged is referred to as the threshold.

The next statement says that the terms of the standard is that master agreement cannot be changed. The standard ISDA master agreement is published by the ISDA body itself.

However, the terms of this can be adjusted on agreement between the two counterparties to a particular ISDA agreement. So this is a false statement as well. The third statement says that eligible collateral is defined within an ISDA master agreement. Well, eligible collateral is defined within a credit support annex or CSA, but this CSA sits within the ISDA master agreement; so this is a true statement.

The next statement is that ISDAs require exposures must be calculated by both counterparties, this is a false statement. This could be a term within an ISDA, but it's also perfectly acceptable on agreement between the two counterparties for only one side to calculate the exposures and for both sides to be happy with that. The final statement is that exposure must always be calculated on a mark-to-market basis; this is a false statement.

It is not necessarily the case that all derivatives traded between two counterparties have a market price at any point in time. So it may be the case that this particular ISDA term states that on agreement with both counterparties that under such circumstances exposures may be calculated on a mark-to-model basis.