Glossary

A · B · C · D · E · F · G · H · I · L · M · N · O · P · R · S · T · U · V · W

A

Additional Termination Event

A Termination Event the parties write into the Schedule for themselves, on top of the ones the master text already lists. There is exactly one here — Part 1(g), Facility Termination — and it is what ended the swap on Friday 1 December 2028, five days after Facility A was prepaid in full. Like every Termination Event it is no-fault: nobody had done anything wrong. Schedule, Part 1(g) · Chapter 11

Affected Party

The party a Termination Event concerns. Under Part 1(g) that is Atlas (Party B) alone, which is not an accusation and attaches no default interest to the flows — it identifies whose circumstances triggered the clause and, with it, who determines: clause 6.4 gives the Close-out Amount and the statement to the party that is not the Affected Party, which is why Caldermere valued and Atlas checked. Who may designate depends on the event rather than on the label — following an illegality or a tax event an Affected Party may itself designate under clause 6.2, while under Part 1(g) the right is Party A's alone, the two-way determination Atlas asked for and did not get. Clause 6.8 is a separate rule, and does charge the Default Rate on any part of the close-out sum left unpaid after its due date, whatever the ground of termination. Definition: Affected Party · Chapter 11

Affected Transactions

The Transactions a Termination Event actually reaches. Atlas's negotiators confined Part 1(g) to the swap, so on 1 December 2028 the swap was terminated and the cap was not: the cap ran on, unloved and worth nothing, to its own Termination Date of 26 November 2029. Definition: Affected Transactions · Chapter 11

All-in cost

The last line of block B on the Hedge Sheet: loan interest for the period, plus what Atlas paid on the swap, less what it received, less any cap receipt. For P1 that is €532,194.44 less the €12,777.78 receipt — the cap paid nothing — = €519,416.67 for 92 days — 5.75% per annum on the hedged €25,000,000 and 5.95% per annum on the unhedged €10,000,000, actual/360. The whole point of the line is that it barely moves while the value line swings. Hedge Sheet 1 · Chapter 2

American exercise

An option exercisable on any day up to expiry. A name to recognise, not an instrument this edition teaches — it appears once, in Chapter 1's box of words a junior will hear in the first week and should be able to nod at. Chapter 1

B

Barrier option

An option that switches on, or off, when the underlying touches a stated level. A name to recognise; not taught here. Chapter 1

Basis point

One hundredth of one percentage point, so a hundred of them make one per cent. You will hear it constantly on a desk, and this is the only place in the course it appears: every chapter says "percentage points" instead, so that 0.30 percentage points per annum on €10,000,000 stays something you can multiply on paper rather than a piece of jargon. Chapter 9

Basis risk

What is left over when a hedge and the thing it hedges do not move on quite the same number, the same dates or the same terms. It is the reason Chapter 6 hunts six mismatches line by line: dates, day count, floor, business day convention, notional against amortisation, and the rate source with its fallback. Chapter 6

Benchmark (EURIBOR, €STR)

The published rate a floating leg reads, chosen by neither party. Here it is 3-month EURIBOR — the Designated Maturity is three months — fixed in Brussels at 11.00 a.m. on the Fixing Day, deemed zero if it goes below zero under the loan but not under the swap; and €STR, the euro short-term rate, which pays interest on posted collateral and turned €290,000 into €291,852.78 over 184 days. Rate Definitions: Floating Rate · FA definition: EURIBOR · Chapter 6

Bermudan exercise

An option exercisable on listed dates only — neither one date nor any day. A name to recognise; not taught here. Chapter 1

Break cost (swap) / Break Costs (loan)

Two different animals, spelt differently on purpose. The loan's capitalised Break Costs compensate a lender for the rest of the current Interest Period only; a swap's break cost is the rate difference on every remaining period of its life. On the morning of Wednesday 26 May 2027 the loan's Break Costs were nil, because the prepayment landed on a period end, while unwinding €10,000,000 of swap notional produced €109,000 paid by Caldermere to Atlas. Confirmation 3 · FA definition: Break Costs · Chapter 9

C

Calculation Agent

The party that works out the amounts and issues the statements — Party A, on both Transactions, which is normal and worth noticing anyway. The Schedule builds a route out: dispute within one Local Business Day, the parties consult, two reference market-makers give mid quotations, and the undisputed part is paid on the due date. Atlas used every step of it on Tuesday 5 December 2028. Schedule, Part 4.3 · Chapter 12

Calculation Period

The swap's accrual period, deliberately identical to the loan's Interest Period: 26 February, 26 May, 26 August and 26 November, Modified Following, on days that are business days in both TARGET and London. The first day is the Reset Date, the last day is the Payment Date. There are nineteen of them, and the last is a 48-day stub running 27 May to 14 July 2031. Rate Definitions: Calculation Period · Chapter 6

Calculation statement

The determining party's written statement of the Early Termination Amount, in reasonable detail and binding in the absence of manifest error. There are two in this file: the statement of Monday 4 December 2028 claiming €471,793.05, and the revised statement of Tuesday 12 December 2028 that corrected it to €376,147.22 and left a balance of €32,000.00. "Binding" is not "unreadable" — both errors in the first one were found by reading dates. Clause 6.4 · Chapter 12

Cap

An option on a rate: for a premium paid once, the seller pays the excess of the fixing over an agreed level on an agreed amount, and otherwise pays nothing. Confirmation 2 is a cap on €10,000,000 at 4.00%, traded on Tuesday 24 November 2026 for a premium of €120,000 — 1.20% of the cap's notional — paid on Thursday 26 November 2026 and running from that day to 26 November 2029. It never paid out: 3-month EURIBOR never fixed above 4.00% in this story. Confirmation 2 · Chapter 3

Capacity

The power to enter the contract at all, as distinct from the authority of the person signing it. It is why derivatives lawyers ask for board resolutions and certificates of incumbency before anyone trades: Hazell v Hammersmith and Fulham LBC [1992] 2 AC 1 is the case in which a set of swaps turned out to be beyond the counterparty's powers and void. Clause 3.1 · Chapter 5

Cap Rate

The level above which a cap starts paying: 4.00% here. Read it as an outcome column rather than a formula — at a fixing of 3.20% the cap pays nothing, at 4.50% for a 90-day period on €10,000,000 it pays €12,500, at 6.00% it pays €50,000, and the €120,000 premium is gone in every column. Confirmation 2 — Cap Rate · Chapter 3

Central counterparty (clearing)

The institution that stands in the middle of a cleared trade, becoming the counterparty to each side and calling margin from both every day. Atlas clears nothing: it is a non-financial counterparty below the clearing thresholds, and both of its trades are private contracts with one named bank. Schedule, Part 5.3 · Chapter 14

Close-out Amount

What it costs, or pays, to replace the Terminated Transactions — determined in good faith and by commercially reasonable procedures, and payable by whichever party the number runs against. Here it is €668,000: a mid-market €647,000 as at the Early Termination Date of Friday 1 December 2028, determined by Caldermere as Calculation Agent, plus €21,000 for the bank's cost of terminating its own hedge. It is a replacement cost, never a fine. Clause 6.6 · Chapter 12

Close-out netting

Every Terminated Transaction and every Unpaid Amount collapsed into a single sum owed one way. On the revised statement the Close-out Amount of €668,000 met the €291,852.78 Credit Support Balance owed back by Caldermere and produced one figure, €376,147.22 payable by Atlas. It works because the master, the Schedule, the Confirmations and the annexes are one agreement. Clause 6.5 · Chapter 12

Collar

A cap bought and a floor sold at the same time. The premium shrinks, sometimes to nothing — and the two-way promise comes back, because the floor you sold pays out against you when rates fall. Permitted by the Treasury Policy of 8 September 2026; not bought here. Chapter 3

Collateral Annex

The twelve-paragraph annex under which euro cash moves between the parties as the value of the Transactions moves, by outright transfer of title. It is part of the same single agreement, which is why the €290,000 posted in May 2028 could be netted in the December close-out rather than claimed back separately. Annex, paragraph 1 · Chapter 10

Condition precedent to payment ("flawed asset")

The rule that no party need pay while the other is in default. It suspends the obligation; it does not cancel it — the proposition for which Lomas v JFB Firth Rixson Inc [2012] EWCA Civ 419 is cited here and for nothing else. Caldermere could have withheld the €12,777.78 due on Friday 26 February 2027 while the cross default ran, and paid it anyway. Clause 2.4 · Chapter 7

Confirmation

The document that evidences the terms of one Transaction. It does not create the trade: the swap and the cap bound at 11.05 a.m. on Tuesday 24 November 2026, on a recorded call, when the terms were read back and someone said "done". The paper followed the next day — which is exactly when two errors in it were caught. Clause 9.9 · Chapter 6

Consent letter

The letter of Friday 20 November 2026 from Lenders holding €31,000,000 of the €40,000,000 Total Commitments — 77.50% of Total Commitments — confirming that hedging Transactions are permitted Financial Indebtedness under the Facility Agreement whatever their value, that net payments on them count as finance charges, and that the Master Agreement is not a Finance Document. It exists because clause 18.5 of the loan has no hedging carve-out. Exhibit 1 · Chapter 5

Credit default swap

A premium paid on many dates against a single payment if a named borrower suffers a defined credit event — one-way in its contingent leg, and not insurance in law either. A name to recognise: Chapter 1 gives it a line and Chapter 14 three more, on the same frame as the other families; this edition does not teach it. Chapter 14

Credit Support Balance

The running total of cash the holder has received under the Annex and owes back. Caldermere held €290,000 from Wednesday 31 May 2028, with interest at €STR, taken flat at 1.25% per annum, actual/360, for the 184 days to 1 December 2028 — €1,852.78 — giving a Credit Support Balance of €291,852.78 on the Early Termination Date. Annex, paragraph 6 · Chapter 10

Credit support default

The Event of Default that fires when a party fails to make a transfer the Annex requires, two Local Business Days after notice of the failure. It is the reason a collateral call is a legal deadline and not an invoice: miss the wire due on Wednesday 31 May 2028 and the whole file is in default two days later. Clause 5.1(c) · Chapter 10

Cross default (v cross-acceleration)

Default on other borrowed money above the Threshold Amount — and the words are wide: "not paid when due or capable of being declared due". From 31 December 2026 the loan's Leverage breach made €35,000,000 capable of being declared due, comfortably over Atlas's €5,000,000 Threshold Amount, so an Event of Default existed under the swap too. Cross-acceleration would have waited for the other lender to act. Clause 5.1(f) · Chapter 8

D

Day count (actual/360)

The convention that counts the days that actually elapsed and divides by a 360-day year. Both the loan and both Transactions use it, everywhere, which is one mismatch this file does not have. It is why 3.00% per annum on €25,000,000 comes out at €191,666.67 for the 92 days of P1 rather than a round quarter's worth. Rate Definitions: Actual/360 · Chapter 2

Day-one value

What the statement shows on the day you trade, before anything has happened: €18,000 in Caldermere's favour, mid-market, as at Tuesday 24 November 2026, on the desk's statement of 25 November. It is not evidence that anyone was cheated — it is the bank's spread inside the fixed rate, about 0.02 percentage points per annum on €25,000,000 over the life — and it is a value, not a bill. Chapter 6 · Chapter 9

Dealer / end-user

The two kinds of party in this market. A dealer makes prices, runs a book and lays off each customer trade with a mirror trade of its own — which is why Caldermere's collateral call on Atlas was the echo of a call being made on Caldermere, and why €21,000 of the close-out was the cost of undoing that mirror. An end-user, like Atlas, hedges something real and holds one or two trades. Chapter 14

Default Rate

The Termination Rate plus 1% per annum — 2.30% per annum here — running on anything left unpaid after the due date on early termination. It earned €16.36 on the €32,000.00 outstanding from 6 to 14 December 2028, eight days, actual/360. Its everyday cousin is the default interest that clause 2 charges on late payments during the life of a Transaction. Definition: Default Rate · Chapter 12

Delivery Amount / Return Amount

The two directions of a collateral movement. A Delivery Amount is Exposure less the Threshold less the balance already held, transferred only if it reaches the Minimum Transfer Amount and rounded up to the next €10,000 — €282,000 became the call for €290,000 on Tuesday 30 May 2028. A Return Amount is the cash coming back when Exposure falls, rounded down when it is transferred at all: at 30 June 2028 it was €63,000, far below the €250,000 Minimum Transfer Amount, so nothing moved and the rounding was never reached. Annex, paragraph 2 · Chapter 10

Derivative

A contract whose payments are worked out from a number neither party controls, applied to an amount nobody lends. That is the whole definition: the number is the underlying — here 3-month EURIBOR — and the amount is the notional. Nothing is lent when the contract is made, and under most of the family nothing is paid at the start either — the option is the exception, and its buyer pays the premium once and owes nothing afterwards. Definition: Transaction · Chapter 1

E

Early Termination Amount

The one net sum produced by an early termination, expressed in the Termination Currency — euro here — and payable by whichever party it runs against, in either direction. On the revised statement it was €376,147.22 payable by Atlas; on the rising-rate path the identical machinery pays about €563,000 to Atlas instead. Definition: Early Termination Amount · Chapter 12

Early Termination Date

The date on which the Terminated Transactions stop, designated by notice: Friday 1 December 2028, named in Caldermere's notice of Monday 27 November. Everything after it is arithmetic. Automatic Early Termination, which would dispense with notice on certain bankruptcy events, was elected not to apply. Definition: Early Termination Date · Chapter 11

EMIR / UK EMIR

The European Union regulation on over-the-counter derivatives, central counterparties and trade repositories, and the United Kingdom's retained version of it. Between them they required this file to be reported to a trade repository, confirmed in time, reconciled periodically and given a dispute procedure — and required no margin on it at all, because Atlas sits below the clearing thresholds. The collateral here was negotiated, not mandated. Schedule, Part 5.4 · Chapter 14

European exercise

An option exercisable on one date only. A name to recognise; not taught here. Chapter 1

Event of Default

The fault-based family: failure to pay (one Local Business Day after notice), breach of the agreement (30 days), credit support default, misrepresentation, default under a Specified Transaction, cross default, bankruptcy, and merger without assumption. The party it concerns is the Defaulting Party, the other the Non-defaulting Party — and those two labels belong to this family alone. The Default Rate does not: it is the price of lateness, charged under clause 2.6 on any late payment and under clause 6.8 on any part of a close-out sum left unpaid after its due date, whatever the ground of termination. Clause 5.1 · Chapter 8

Exposure

The Annex's own measure: what would be payable if every Transaction ended on the Valuation Date, at mid-market, netted across the swap and the cap. It was €782,000 in Caldermere's favour as at Friday 26 May 2028 for the Valuation Date of Tuesday 30 May, determined by Caldermere as Valuation Agent — and that, not the €15,000,000 of notional, is what the collateral worksheet starts from. Annex, paragraph 8 · Chapter 10

F

Facility Termination (Part 1(g))

The Additional Termination Event Atlas agreed to in November 2026: if the Facility A Loans are repaid or prepaid in full before the loan's own Termination Date, or accelerated, or Atlas ceases to be the borrower, Caldermere may designate an Early Termination Date for the swap. Atlas struck one limb, confined it to the swap and failed to make the determination two-way. It fired on Monday 27 November 2028. Schedule, Part 1(g) · Chapter 11

Finance Document (designation)

What the Master Agreement deliberately is not. The Facility Agreement lets the Agent and the Company designate any other document as a Finance Document, and nobody did — so the guarantee, the sharing clause and the amendment machinery of the loan never reached the swap. The road not taken, and worth being able to describe. FA definition: Finance Document · Chapter 13

Financial Indebtedness limb (f)

The limb of the loan's definition that catches "any derivative transaction (its marked-to-market value being counted)" — the notional never counts, only the value. At the test date of Friday 30 June 2028 that was €727,000 in Caldermere's favour, mid-market, per the Valuation Agent's statement. FA definition: Financial Indebtedness · Chapter 13

Fixed leg / floating leg

The two streams of a swap. Atlas pays the fixed leg — 3.00% per annum on the notional, actual/360 — and receives the floating leg, 3-month EURIBOR on the same notional and the same dates. Atlas's position, said the short way, is pay-fixed, receive-floating. Confirmation 1 — Fixed Amounts · Chapter 2

Fixing Day

The day the floating rate is observed: two TARGET Settlement Days before the Reset Date. For P1 that is Tuesday 24 November 2026, which is also the loan's Quotation Day and the swap's Trade Date — same day, same screen, same 3.20%. Do not call it the reset. Rate Definitions: Fixing Day · Chapter 6

Floor

A level below which a floating leg is not allowed to fall. The loan has one, at zero. This swap has none — Atlas declined the floored alternative at 3.08% per annum, which would have cost 0.08 percentage points per annum on €25,000,000, or €20,000 a year, and the election was recorded in writing at Atlas's own request. Rate Definitions: Floor · Chapter 2

Floor mismatch

The gap a floored loan leaves against an unfloored swap. If 3-month EURIBOR fixed half a percentage point below zero for a 92-day period, the loan would cost the Margin alone — €245,972.22 — while Atlas would pay its fixed 3.00% per annum and 0.50% per annum on €25,000,000 on the floating leg as well, for an all-in of €469,583.33, 5.25% per annum on €35,000,000. The quarter never came; the mechanism is real. Chapter 2

Forward / future

A price fixed today for an exchange on one later date, binding on both sides — the simplest family of the four. A future is its exchange-traded cousin: the same idea in a standardised contract, with a central counterparty in the middle and margin every day. Neither is traded in this file. Chapter 1

FX forward, cross-currency swap, commodity swap

Three of the neighbours on the same frame as Atlas's trades: a price for exchanging one currency for another agreed today for settlement later; interest in one currency against interest in another over many dates, with real principal usually moving at each end; and a fixed price against a published floating price for a stated quantity, settled in cash with nothing delivered. Three lines each in Chapter 14 and no more. Chapter 14

G

Gross-up

The clause that makes the payer bear a withholding, so that the payee receives the full amount the Confirmation names. Nothing was ever withheld on this file; the clause is there so that a change in tax law does not quietly rewrite the economics of a five-year contract. Clause 2.5 · Chapter 7

H

Hedge

A second contract whose payments move opposite to the first's. It fixes a cost; it does not protect against one — and it only fixes anything while notional, dates, benchmark and floor all match. That is the sentence this whole edition exists to make stick, and the reason a company that hedged can still find itself writing a cheque when rates fall. Chapter 1

Hedge accounting

The set of accounting rules that let a derivative held as a hedge be reported alongside the thing it hedges, instead of swinging through profit on its own. It exists, it is the accountants' problem, and it is worth knowing the phrase when the auditors ask; this course points at it and goes no further. Chapter 13

Hedge ratio

How much is hedged, always stated as a percentage of Facility A principal outstanding: 71.43% by the swap and 28.57% by the cap at drawdown, 60.00% and 40.00% after the unwind, 100.00% together in both worlds. An over-hedge is a ratio above 100.00% — which is what the morning of Wednesday 26 May 2027 produced, briefly, at 140.00%. Hedge Sheet 4 · Chapter 9

Hedge Sheet

The one-page exhibit this course opens and closes every chapter on: block A the loan, block B this period's cash, block C the value and the collateral. Block B and block C are never read together on purpose — what Atlas paid this quarter and what Atlas would pay if it all ended today are the two things everybody confuses. The Hedge Sheet record · Chapter 15

Hedging letter / intercreditor

The documents that seat a hedge counterparty among secured lenders — where the security sits, who shares in it, who may enforce and in what order. This deal is unsecured, so neither exists here, and the consent letter does the small amount of work required instead. Fenced off to the security edition. Security & Collateral · Chapter 14

Hierarchy of documents

Which text wins when two of them disagree: the Confirmation over the Schedule, the Schedule over the master text, and the Rate Definitions Annex yielding to all three. It matters because the deal lives in the Schedule and the trade lives in the Confirmation, and the master text is the part nobody reads. Clause 1.4 · Chapter 4

I

Interest rate swap

Fixed against floating on the same notional and the same dates, netted to one payment each time — two-way, so either party may end up paying. Confirmation 1 is one: €25,000,000, later €15,000,000, Atlas paying 3.00% per annum and receiving 3-month EURIBOR, actual/360, quarterly to 14 July 2031. Confirmation 1 · Chapter 2

In-the-money / out-of-the-money

Shorthand for which way a Transaction's value runs today. The swap was in the money to Atlas through the first half of 2027 — €293,000 in Atlas's favour, mid-market, as at Wednesday 26 May 2027 per Caldermere's statement — and out of the money to Atlas from Caldermere's statement of Friday 26 November 2027, which put it at €370,000 in Caldermere's favour, mid-market, onwards to the close-out. Neither state is cash until somebody terminates. Chapter 9

L

Local Business Day

A day on which banks are open in the relevant place — and the unit in which every clock in this agreement is counted: one for a dispute, one for a collateral transfer, two for a payment on early termination after a Termination Event — and two more, running from notice of the failure, before a missed transfer becomes an Event of Default. Counting them correctly is most of what a junior does in a close-out week. Definition: Local Business Day · Chapter 7

M

Majority Lenders

More than 66⅔% of Total Commitments under the Facility Agreement. The consent letter of 20 November 2026 carried 77.50% of Total Commitments — Caldermere's €17,500,000 and Baltra's €13,500,000 of the €40,000,000 — so it bound the syndicate, and Vantry signed as well at the Agent's request. FA definition: Majority Lenders · Chapter 5

Mark-to-market ("mark")

What it would cost, or pay, to replace the Transactions today, at mid-market. It is a value and not a bill: it moves every day, it is stated to the nearest €1,000 because that is how the bank states it, and it becomes money only when somebody terminates or unwinds. The course says "mark" or "the bank's statement", never the initials. Chapter 9

Master agreement

One contract that governs every Transaction between the same two parties, so that a hundred trades have one set of representations, one set of defaults, one close-out and one number at the end. Ours is dated Friday 20 November 2026 and had two trades under it four days later. The training document · Chapter 4

Minimum Transfer Amount

The smallest collateral movement anyone has to make — €250,000 for both parties here — so that neither operations team spends its morning wiring €12,000 about. It cuts both ways: it stopped the call on Monday 22 May 2028, when the Delivery Amount was €245,000, and it stopped every return all summer. Annex, paragraph 2 · Chapter 10

Modified Following

The business day convention both documents use: if a date falls on a non-business day, move it to the next one — unless that crosses into the next calendar month, in which case go back instead. The draft Confirmation said plain "Following", which is not the same thing, and the junior caught it on Wednesday 25 November 2026. Rate Definitions: Modified Following · Chapter 6

N

Negative pledge (as it meets an annex)

The loan's promise not to grant security, with a basket of €1,000,000. It is the reason the Collateral Annex is drafted as an outright transfer of title rather than a charge: there is no security interest to test against the clause, and no consent to ask for. FA Clause 18.2 · Chapter 10

Netting opinion / resolution stay

Two pieces of the plumbing that make close-out netting more than a hope. A netting opinion is counsel's opinion, jurisdiction by jurisdiction and refreshed annually, that the netting would hold against an insolvent counterparty there; a resolution stay is the regulator's power to suspend termination rights briefly against a failing bank, so that the bank can be resolved rather than dismembered. Chapter 14

Non-deliverable forward / option

A forward or an option settled in cash in one currency, because the other currency cannot be delivered. A name to recognise; not taught here. Chapter 1

Non-financial counterparty (clearing threshold)

The regulatory category Atlas falls into — a company that hedges, as against a financial counterparty that deals. Below the clearing thresholds it need not clear and need not post mandated margin, which is why the €290,000 call of 30 May 2028 came out of a negotiated annex and not a rule book. Schedule, Part 5.3 · Chapter 14

Non-reliance / relationship representations

Each party's statement that it acts for its own account, makes its own assessment, receives no advice and is owed no fiduciary duty. Banks insist on it, and its effect is felt two years later, when "but the bank advised us" is the first thing a board wants to say — see Springwell Navigation Corp v JP Morgan Chase Bank [2010] EWCA Civ 1221. Clause 3.5 · Chapter 5

Notional

The amount the payments are counted on. Nobody lends it, nobody borrows it, and it never moves: €25,000,000 on the swap, then €15,000,000 from 26 May 2027. Treating it as the exposure is the first error this course guards against — on the worst day of the file, €15,000,000 of notional carried €783,000 of value. Definition: Notional Amount · Chapter 1

Novation (Transferor / Transferee / Remaining Party)

Moving a Transaction to a new counterparty by agreement of all three, with the value paid across so that nobody gains or loses on the transfer. It was the second way out of the orphaned swap in November 2028 — Vantry stepping into Caldermere's side of the swap, paying the value across and recovering it from Atlas in the fixed rate of the trade it wrote instead — and it was not cheaper. Clause 7.1 · Chapter 11

O

Option

A one-way promise bought for a premium: the buyer may take the benefit and never owes anything more. The cap is the only option in this file, and the sentence that follows from it is the one the whole credit structure turns on — after the €120,000 premium, Atlas owed nothing under the cap, ever. Definition: Option · Chapter 3

Orphaned swap

A swap left standing with nothing underneath it. From Monday 27 November 2028, when Facility A was prepaid in full, Atlas held a €15,000,000 pay-fixed swap hedging a loan that no longer existed — a position rather than a hedge for the first time in its life, and running to July 2031. Hedge Sheet 7 · Chapter 11

Over-the-counter (OTC) v exchange-traded

A private contract with a named counterparty, on dates and amounts chosen to match something real — against a standardised contract bought on an exchange and cleared through a central counterparty. Both of Atlas's trades are the first kind, which is why they fit the loan exactly and why their paperwork is this long. Chapter 1 · Chapter 14

P

Partial termination / unwind

Reducing a Transaction by agreement, for a payment, and recording it in a termination confirmation. Confirmation 3 did exactly that on Wednesday 26 May 2027: the swap's notional fell from €25,000,000 to €15,000,000 and Caldermere paid Atlas €109,000 two days later. Everything else in the Confirmation stayed as it was. Confirmation 3 · Chapter 9

Party A / Party B

The market's labels, and the reason every chapter of this course translates them on first use. Party A is Caldermere Bank plc, the dealer; Party B is Atlas Payments Group plc, the company. Quoted clause text keeps the letters; everything around it uses the names, and asks which Caldermere is meant — the desk, credit, documentation, collateral operations, or the Agency team down the corridor. Parties · Chapter 4

Payment netting

Two legs falling due on the same date in the same currency, settled as one wire for the difference. On Friday 26 February 2027 Atlas's €191,666.67 and Caldermere's €204,444.44 became a single payment of €12,777.78 from Caldermere to Atlas. The Schedule extends the same idea across Transactions falling due on a common date. Clause 2.3 · Chapter 7

Period Ledger

The master table behind every block B in the course: each Calculation Period with its dates, its days, its fixing, the two legs, the net payment and its direction, and the all-in line. Every figure a chapter shows is a slice of it, which is why no two chapters can disagree about a quarter. Chapter 2 · Chapter 15

Potential Event of Default

An event that would become an Event of Default with the giving of notice, the passing of time, or both. It matters in two places: the notification undertaking catches it, and Atlas's collateral Threshold drops to zero while one is continuing with respect to Atlas. Definition: Potential Event of Default · Chapter 8

Premium

The one-off price of an option, paid once and gone. Atlas paid €120,000 for the cap on Thursday 26 November 2026 — 1.20% of the cap's notional of €10,000,000 — and that was the end of its obligations under Confirmation 2 for three years. Capping all €35,000,000 would have cost €420,000 on the same terms. Confirmation 2 — Premium · Chapter 3

R

Remaining-differences table

The bank's valuation laid open, and the only way this course ever values anything: the rate gap on each remaining Calculation Period, in euros, added up, and then one adjustment line taken from the statement itself because later money counts a little less. For the €10,000,000 unwound in May 2027 the seventeen rows summed to €125,833.33 and the adjustment of €8,833 brought it to €117,000. Chapter 9 · Chapter 12

Replacement cost

What someone would charge, or pay, to step into your shoes for the quarters that are left. It is the idea the Close-out Amount is built on, and the reason €668,000 was payable by a company that had done nothing wrong: the rest of the 3.00% Atlas had agreed to pay, against the 1.35% the market would charge in December 2028. Clause 6.6 · Chapter 12

Reservation of rights

The letter that keeps a right alive while nothing is done about it — "we are not waiving anything by not acting today". Caldermere's markets desk sent one on Wednesday 24 February 2027, on the cross default, and then paid Atlas €12,777.78 two days later. Exhibit 4 · Chapter 8

Reset Date

The first day of a Calculation Period — the day the new rate starts to apply, not the day it is observed. Keep it apart from the Fixing Day, which falls two TARGET Settlement Days earlier; the loan's word for that earlier day is the Quotation Day. Rate Definitions: Reset Date · Chapter 2

Reverse swap / overlay

A new swap traded to offset an old one, instead of terminating it: pay floating and receive fixed on the same notional and dates, and the two cancel. It leaves both contracts alive, with two sets of payments, two marks and two lots of collateral — which is why Atlas did not do it in November 2028. Chapter 11

S

Schedule

The negotiated part of the master agreement, and where the deal actually lives. The master text is the same for everybody; the Schedule is where the Threshold Amount becomes €5,000,000, where Part 1(g) appears, and where a paragraph agreed in November 2026 decides what happens in December 2028. Schedule elections are future facts. Definition: Schedule · Chapter 4

Set-off

A separate, elected right to net what is owed on early termination against debts under other agreements between the same parties. It is not netting: netting happens inside one agreement, set-off reaches outside it. Neither party needed it here. Clause 6.7 · Chapter 7

Single agreement

The provision that makes the master text, the Schedule, every Confirmation and both annexes one contract. It is the load-bearing sentence of the whole architecture: without it there is no one close-out, no one number, and an insolvency officer could take the trades that suit and leave the rest. Clause 1.3 · Chapter 4

Specified Entity / Specified Transaction / Specified Information

Three Schedule elections that quietly set the reach of clause 5. A Specified Entity is an affiliate whose defaults count as yours — none, here, for either party. A Specified Transaction is another derivative-type contract whose default counts. Specified Information is what Part 3 requires each side to deliver and warrant as accurate. Schedule, Part 1(a) · Chapter 8

Specified Indebtedness

The borrowed money that counts for cross default. The Schedule spells out that it includes the Facility Agreement for Atlas, which is the sentence that made the winter of 2027 an Event of Default under the swap and not merely under the loan. Definition: Specified Indebtedness · Chapter 8

Standard forms, the market's recommended

The published model documents almost every derivatives file in the world is built on — a master text, a schedule of elections, a confirmation per trade, an annex for collateral, and a book of rate definitions. This course's Master Agreement follows that architecture and reproduces none of its words; a real one is longer, harsher and turns on its own facts. The training document · Chapter 4

Swap

Two streams of payments on the same dates, on the same notional, netted to one. It is two-way by nature: whoever is ahead this quarter may be behind next quarter, and nobody knows which. That is what separates it from the cap, and it is the whole reason there is a collateral annex. Chapter 1

Swaption

An option to enter into a swap. A name to recognise; not taught here. Chapter 1

T

TARGET Settlement Day

A day the euro settlement system is open. Together with London business days it defines every date in this file — and the two calendars are not the same, which is why Monday 28 August 2028 moved a Payment Date but did not move a Fixing Day. Rate Definitions: Business Days · Chapter 6

Termination Event

The no-fault family: illegality, tax event, tax event upon merger, credit event upon merger, and whatever the Schedule adds. Nobody is a Defaulting Party, no default interest attaches to the event itself, and only the Affected Transactions end — which is how the swap could be terminated on 1 December 2028 while the cap carried on. The Default Rate still runs under clause 6.8 on any part of the close-out sum left unpaid after its due date, whatever the ground of termination. Clause 5.2 · Chapter 11

Termination Rate

The payee's cost of funds, running on the net sum from the Early Termination Date to the due date — 1.30% per annum here. It produced €67.92 on €376,147.22 for the five days from 1 to 6 December 2028, actual/360. After the due date the Default Rate takes over. Definition: Termination Rate · Chapter 12

Threshold (collateral)

The amount of Exposure a party is allowed to run before any cash moves: €500,000 for Atlas and €2,000,000 for Caldermere — and zero, for either, while an Event of Default or Potential Event of Default is continuing with respect to it. An Independent Amount, of which there is none here, would be posted regardless. Do not confuse it with the Threshold Amount. Annex, paragraph 9 · Chapter 10

Threshold Amount (cross default)

The size of default on other borrowed money that trips clause 5.1(f): €5,000,000 for Atlas, and for Caldermere 2% of shareholders' equity per its latest audited accounts. Atlas's number was negotiated up from the €2,000,000 the bank first asked for — the loan's own cross-default figure — and it is a different clause and a different number from the collateral Threshold. Definition: Threshold Amount · Chapter 8

Time decay

The same rate gap applied to fewer periods. It is why a value shrinks towards zero as a Transaction ages even if nothing else changes, and why the identical difference of 0.30 percentage points per annum is worth more in 2027 than in 2030. Chapter 9

Title transfer (v security interest)

The design of this Annex: cash transferred under it becomes the taker's outright, to use as it likes, and is owed back as a debt. There is no charge and no security interest, so the loan's negative pledge is not engaged — and the price of that is that Atlas carries credit risk on Caldermere for the €290,000 it posted. Annex, paragraph 3 · Chapter 10

Total Net Debt

The loan's covenant measure of borrowings, which expressly excludes derivative transactions — limb (f) is carved back out, because hedging value swings daily and is not money the Group borrowed. So the swap counted as Financial Indebtedness and did not count for Leverage: both answers are correct, in different clauses. FA definition: Total Net Debt · Chapter 13

Total return swap

One party passes on the whole return of an asset it continues to hold — income and any rise in value — and is paid a rate, and compensated for any fall. A name to recognise: a line in Chapter 1 and three in Chapter 14; not taught here. Chapter 14

Trade Date / Effective Date / Termination Date

Agreed, starts accruing, ends. For the swap: Tuesday 24 November 2026, Thursday 26 November 2026 and 14 July 2031 — the loan's own final date, after a draft that said 26 November 2031 was corrected. The last Calculation Period is a 48-day stub, 27 May to 14 July 2031. Confirmation 1 — Trade Date · Chapter 6

Transaction

One trade under the master agreement, evidenced by its Confirmation. There were three documents and two Transactions here: the swap, the cap, and the partial termination that reduced the swap. Definition: Transaction · Chapter 4

Treasury Policy

The board policy of Tuesday 8 September 2026 that required not less than 50% and not more than 100% of floating-rate term debt to be hedged for at least three years, with swaps, caps or collars, and with relationship banks only. It — and not the Facility Agreement, which has no hedging covenant at all — is the reason there is a hedge, and the reason 140.00% of Facility A principal on 26 May 2027 had to be cured. Exhibit 0 · Chapter 1

Two hats (Agent v counterparty)

Caldermere is the Agent and a Lender under the loan, and the principal on the other side of the swap — the same bank, different desks, different rights, different post rooms. It takes two notices to tell it something and two letters to waive anything, as the waiver of 10 March 2027 discovered when its first draft covered only the loan. Schedule, Part 5.1 · Chapter 8

U

Underlying

The number the payments read, which neither party controls: 3-month EURIBOR, published in Brussels at 11.00 a.m. That the loan already lives on the same number is the whole reason the hedge works. Definition: Underlying · Chapter 1

Unpaid Amounts

Sums that fell due before the Early Termination Date and were not paid, brought into the close-out alongside the Close-out Amount. The €291,852.78 of collateral owed back by Caldermere was one, by Atlas's election. P9 was not one: its Payment Date of 26 February 2029 had not arrived, which is how a claim for €70,145.83 came to be withdrawn. Definition: Unpaid Amounts · Chapter 12

V

Valuation Agent / Valuation Date / Valuation Time

Who values, on what day, as at what moment: Caldermere; each Monday, or the next Local Business Day if the Monday is a holiday; close of business on the Local Business Day before. That is why the call of Tuesday 30 May 2028 was computed as at Friday 26 May, notified by 1.00 p.m. London on the Tuesday and wired on the Wednesday. Annex, paragraph 5 · Chapter 10

Variation margin / initial margin

Collateral against the value a portfolio has today, and collateral against the move it might make tomorrow. Everything in this file is the first kind, negotiated between the parties rather than required by anybody; a mandated regime would have valued daily and allowed no Threshold at all. Chapter 14

W

Wager (why a hedge is not one)

The first of the three doors the law might have filed this contract behind, and does not. Each side has a commercial purpose the contract serves — Atlas a loan whose cost moves, the bank a book of offsetting promises — so the law does not treat it as a bet. The other two doors, insurance and a loan, are shut for their own reasons. Chapter 1

Waiver letter

The letter of Wednesday 10 March 2027 by which the lenders waived the Leverage breach — and, in the paragraph the junior added to someone else's draft, by which Caldermere in its other hat waived the cross default under the Master Agreement as well. The first draft covered only the loan. Exhibit 4 · Chapter 8