Dealers call for revised language on break clause close-outs

Current methodology to calculate a close-out value following the exercise of a break clause results in inaccuracies, claim dealers

Derivatives dealers are calling for a change in the way the close-out price is calculated on trades where a break clause has been exercised, claiming the existing treatment – laid out in the 2006 product definitions published by the International Swaps and Derivatives Association – produces inaccurate close-out values.

Dealers have started to pay close attention to break clauses, which have historically been added to longer-dated derivatives contracts to ease the concerns of internal credit