Derivatives · glossary
What it costs, or gains, to replace the ended trades. It is a replacement cost, never a fine, and can run either way. Here it was €786,000: the swap's value of €765,000, plus €21,000 for undoing the bank's own hedge. Clause 6.6 · Chapter 12
Explained in Chapter 12, Close-out: the Number, of Derivatives.
Atlas had promised to pay a fixed 3% on €15,000,000 for the rest of the loan's life, and to receive the floating rate back. Ending the swap leaves a gap in the bank's book. The Close-out Amount is what it costs to fill that gap. It is a replacement cost, measured against a standard in the clause…Read Chapter 12, Close-out: the Number →
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