Early termination of derivatives

This Overview is a guide to the Banking & Finance content within the Early termination of derivatives subtopic, with links to appropriate materials.

Terminating derivatives early

Section 6 (Early Termination) of the ISDA Master Agreement sets out the consequences of an occurrence of an Event of Default or Termination Event as described in Section 5 (Events of Default and Termination Events) of the ISDA Master Agreement. In short, the difference between an Event of Default and a Termination Event is that in an Event of Default, there is a party that can be blamed, whereas generally in a Termination Event, the event just happened or was outside a party's control.

Section 6 also sets out how the close out netting mechanism operates following the occurrence of an Event of Default or Termination Event.

For more information on Section 6 generally, see Practice Note: Scope of the ISDA Master Agreement—Section 6 (Early Termination).

There are differences between the 1992 ISDA Master Agreement and the 2002 ISDA Master Agreement as to how payments are made on an early termination of derivatives. These differences are set out in more detail

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