# Can a Determining Party Solely Rely on Its Internal Models for a Close-Out Valuation? ▴ Question

**Published:** 2025-08-05
**Categories:** Question

---

![An exposed high-fidelity execution engine reveals the complex market microstructure of an institutional-grade crypto derivatives OS. Precision components facilitate smart order routing and multi-leg spread strategies](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-microstructure-2.jpg)

![A sharp, crystalline spearhead symbolizes high-fidelity execution and precise price discovery for institutional digital asset derivatives. Resting on a reflective surface, it evokes optimal liquidity aggregation within a sophisticated RFQ protocol environment, reflecting complex market microstructure and advanced algorithmic trading strategies](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-precision-execution.jpg)

## Concept

A Determining Party cannot, as a matter of institutional prudence and legal integrity, solely rely on its internal models for a close-out valuation. The entire architecture of derivatives markets, codified within frameworks like the [ISDA Master Agreement](https://prime.greeks.live/area/isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), is built on a foundation of objective, [commercially reasonable](https://prime.greeks.live/area/commercially-reasonable/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) standards. Relying exclusively on proprietary models introduces an inherent conflict of interest and fails the test of objective reasonability, a standard that has been repeatedly scrutinized and upheld in financial jurisprudence. The process demands a valuation that is not only mathematically sound from an internal perspective but also demonstrably fair and reflective of prevailing market conditions at the time of termination.

The core of the issue lies in the definition of a commercially reasonable result. This is a concept that extends beyond the internal logic of a firm’s own risk and pricing engines. It requires an outward-looking validation. An [internal model](https://prime.greeks.live/area/internal-model/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), however sophisticated, represents a singular, subjective view of the world.

It is calibrated to the firm’s specific portfolio, risk appetite, and hedging strategies. To use it as the sole arbiter in a close-out, where the financial outcome for a counterparty is at stake, is to substitute a bilaterally agreed-upon market reality with a unilateral declaration. This approach is fundamentally unstable and opens the door to significant legal and financial challenges.

> A close-out valuation’s integrity rests on its verifiable connection to external market realities, preventing the process from becoming a unilateral exercise of power by the Determining Party.

The ISDA framework explicitly provides a hierarchy of inputs for this reason. It anticipates the need for a robust and defensible process. The protocol guides the [Determining Party](https://prime.greeks.live/area/determining-party/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to first seek external, observable data points. These can include quotations for replacement transactions from third-party dealers or other relevant [market data](https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

[Internal models](https://prime.greeks.live/area/internal-models/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) are permitted, but their use is conditional. They are typically reserved for situations where external data is unavailable or demonstrably unreliable, such as in highly illiquid markets or for exceptionally exotic instruments. Even in these cases, the models themselves must be consistent with those used by the firm in the regular course of its business for valuing similar transactions, a stipulation designed to prevent the creation of ad-hoc models that might unfairly favor the Determining Party.

Ultimately, the system is designed to produce a pre-estimate of the economic loss suffered by the non-defaulting party. This loss is measured by the cost of replacing the economic equivalent of the terminated transaction. A valuation derived purely from an internal model, without reference to the actual, [observable market](https://prime.greeks.live/question/to-what-extent-can-valuation-models-replace-observable-market-prices-in-a-dispute/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) where such a replacement would take place, fails to accurately capture this cost.

It becomes a theoretical calculation rather than a reflection of tangible economic impact. The obligation to act in [good faith](https://prime.greeks.live/area/good-faith/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and use commercially reasonable procedures is an active duty to seek objective validation, ensuring the final [close-out amount](https://prime.greeks.live/area/close-out-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a fair representation of market value, not just an output of a proprietary black box.

![An exposed institutional digital asset derivatives engine reveals its market microstructure. The polished disc represents a liquidity pool for price discovery](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-execution-system.jpg)

![Interconnected translucent rings with glowing internal mechanisms symbolize an RFQ protocol engine. This Principal's Operational Framework ensures High-Fidelity Execution and precise Price Discovery for Institutional Digital Asset Derivatives, optimizing Market Microstructure and Capital Efficiency via Atomic Settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-high-fidelity-execution.jpg)

## Strategy

The strategic framework for a Determining Party executing a [close-out valuation](https://prime.greeks.live/area/close-out-valuation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a disciplined, multi-layered process designed to achieve a legally defensible and commercially reasonable outcome. The primary strategic objective is to construct a valuation that is robust enough to withstand challenges from the defaulted counterparty, liquidators, or courts. This requires a systematic approach that prioritizes objective evidence over subjective judgment, effectively building a “portfolio of proof” to support the final calculated amount. The strategy is not about finding the most favorable number; it is about finding the most defensible one.

![A refined object featuring a translucent teal element, symbolizing a dynamic RFQ for Institutional Grade Digital Asset Derivatives. Its precision embodies High-Fidelity Execution and seamless Price Discovery within complex Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-for-optimal-execution-and-deep-liquidity-aggregation.jpg)

## The Valuation Input Hierarchy

The cornerstone of a sound valuation strategy is adherence to a clear hierarchy of inputs, moving from the most objective to the least. This mirrors the fair value principles found in accounting standards and is implicitly required by the “commercially reasonable” standard of the ISDA [Master Agreement](https://prime.greeks.live/area/master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). A Determining Party’s strategy should be to exhaust the possibilities at each level of the hierarchy before moving to the next, documenting the reasons for each decision.

- 
**[Level 1 Inputs](https://prime.greeks.live/area/level-1-inputs/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Direct Market Evidence** ▴ This is the gold standard. The strategy begins with sourcing actionable quotes for a [replacement transaction](https://prime.greeks.live/area/replacement-transaction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) from independent, arm’s-length market participants. This involves a request-for-quote (RFQ) process directed at several reputable dealers in the relevant market. The number of quotes sought is a strategic consideration.
While the 2002 ISDA does not mandate a minimum of three as the 1992 version did, obtaining multiple quotes provides a much stronger defense against claims of “cherry-picking” a favorable price. The strategy here is to create a competitive, observable snapshot of the market price for replacing the terminated trade’s economic profile.

- 
**[Level 2 Inputs](https://prime.greeks.live/area/level-2-inputs/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Observable Market Data** ▴ What if direct quotes for a replacement are not available? This can occur in illiquid markets or during periods of systemic stress. The strategy then shifts to using other observable market data to build a valuation. This could include prices for similar or correlated instruments, volatility surfaces, interest rate curves, and credit default swap spreads.
The key is that these data points are external, verifiable, and used as inputs into a valuation model. The model itself might be internal, but its primary drivers are sourced from the market, making the output transparent and replicable.

- 
**[Level 3 Inputs](https://prime.greeks.live/area/level-3-inputs/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Internal Models And Unobservable Data** ▴ Only when Level 1 and Level 2 inputs are demonstrably unavailable or unreliable can the strategy pivot to reliance on internal models using significant unobservable inputs. This is the option of last resort. The strategic imperative here shifts to process and consistency. The Determining Party must be able to prove that the model used for the close-out is the same one used for its own internal risk management and financial reporting in the regular course of business.
Using a specially calibrated model just for the close-out would be a significant red flag. The strategy also involves documenting why external data was deemed unreliable ▴ for instance, by showing that available quotes were purely indicative or so wide as to be commercially meaningless.

![A metallic precision tool rests on a circuit board, its glowing traces depicting market microstructure and algorithmic trading. A reflective disc, symbolizing a liquidity pool, mirrors the tool, highlighting high-fidelity execution and price discovery for institutional digital asset derivatives via RFQ protocols and Principal's Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocols-driving-high-fidelity-execution-and-market-microstructure-optimization-via-principal-prime-os.jpg)

## What Is the Role of Good Faith in the Valuation Process?

The overarching strategic principle is the duty to act in “good faith.” This is an active, not a passive, requirement. It means the entire valuation process must be conducted honestly and fairly. Strategically, this translates into several concrete actions:

- 
**Procedural Fairness** ▴ The process for selecting dealers for quotes, the timeline for the valuation, and the methodology chosen must be applied consistently and without bias. For example, delaying a valuation to take advantage of favorable market movements could be seen as a breach of good faith.

- 
**Transparency And Record-Keeping** ▴ Every step of the valuation process must be meticulously documented. This includes who was contacted for quotes, the quotes received, the market data used, the model version employed, and the rationale for any judgment calls. This documentation is the primary evidence in any subsequent dispute.

- 
**Avoiding Windfalls** ▴ The goal of the close-out is to make the Determining Party whole, not to generate a profit from the counterparty’s default. The valuation should represent a reasonable pre-estimate of loss. Including extraneous costs or using aggressive assumptions that inflate the close-out amount can be challenged as commercially unreasonable. The inclusion of hedging costs, for instance, is permissible but must be directly attributable to terminating the hedges for the specific transactions being closed out.

> A robust close-out strategy transforms the valuation from a subjective calculation into a structured, evidence-based procedure that anticipates and neutralizes potential legal challenges.

![An institutional-grade platform's RFQ protocol interface, with a price discovery engine and precision guides, enables high-fidelity execution for digital asset derivatives. Integrated controls optimize market microstructure and liquidity aggregation within a Principal's operational framework](https://options.greeks.live/wp-content/uploads/2025/07/proprietary-institutional-digital-asset-derivatives-rfq-protocol-engine-facilitating-high-fidelity-execution-and-granular-market-microstructure-analysis-for-prime-os.jpg)

## Comparative Analysis of Valuation Approaches

The table below outlines the strategic considerations for each level of the valuation input hierarchy, highlighting the strengths and weaknesses from the perspective of legal defensibility.

| Valuation Input Tier | Strategic Action | Primary Strength | Potential Weakness / Challenge |
| --- | --- | --- | --- |
| Level 1 | Solicit firm, executable quotes for a replacement transaction from multiple independent dealers. | Highest level of objectivity; directly reflects the market cost to replace the transaction. Creates a clear, third-party audit trail. | May not be possible in illiquid or stressed markets. Requires careful dealer selection to avoid appearance of bias. |
| Level 2 | Use observable market data (e.g. curves, volatilities) as inputs into a standard valuation model. | Grounded in verifiable market data, even without a direct replacement quote. Process is replicable and transparent. | The model itself can be a point of contention. Requires justification for the choice of comparable instruments or data points. |
| Level 3 | Employ internal models with significant unobservable inputs, demonstrating consistency with regular business use. | Provides a valuation method when no reliable external data exists. Allows for valuation of highly bespoke or complex instruments. | Lowest level of objectivity; inherently suspect due to conflict of interest. Places a heavy burden of proof on the Determining Party to justify the model and its inputs. |

Ultimately, the strategy is one of prudent escalation. By starting with the most objective methods and only moving to more subjective ones out of documented necessity, the Determining Party builds a powerful case that it has acted in good faith and used commercially reasonable procedures to produce a commercially reasonable result.

![Intricate circuit boards and a precision metallic component depict the core technological infrastructure for Institutional Digital Asset Derivatives trading. This embodies high-fidelity execution and atomic settlement through sophisticated market microstructure, facilitating RFQ protocols for private quotation and block trade liquidity within a Crypto Derivatives OS](https://options.greeks.live/wp-content/uploads/2025/08/institutional-crypto-derivatives-execution-system-microstructure.jpg)

![A reflective, metallic platter with a central spindle and an integrated circuit board edge against a dark backdrop. This imagery evokes the core low-latency infrastructure for institutional digital asset derivatives, illustrating high-fidelity execution and market microstructure dynamics](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-infrastructure-precision.jpg)

## Execution

The execution of a close-out valuation is a high-stakes operational procedure that demands precision, procedural discipline, and a deep understanding of market mechanics and legal standards. For the Determining Party, the execution phase is where the strategic framework is translated into a concrete, auditable set of actions. The objective is to produce a valuation that is not only numerically correct but also procedurally unimpeachable. This section provides a detailed operational playbook for executing a close-out valuation, focusing on the practical steps required to satisfy the “commercially reasonable” standard under the [2002 ISDA Master Agreement](https://prime.greeks.live/area/2002-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

![A split spherical mechanism reveals intricate internal components. This symbolizes an Institutional Digital Asset Derivatives Prime RFQ, enabling high-fidelity RFQ protocol execution, optimal price discovery, and atomic settlement for block trades and multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-revealing-rfq-execution-core-mechanics.jpg)

## The Operational Playbook a Step by Step Guide

Executing a defensible close-out requires a pre-defined and rigorously followed internal process. This playbook breaks the execution down into discrete phases, each with specific action items and control points.

![A focused view of a robust, beige cylindrical component with a dark blue internal aperture, symbolizing a high-fidelity execution channel. This element represents the core of an RFQ protocol system, enabling bespoke liquidity for Bitcoin Options and Ethereum Futures, minimizing slippage and information leakage](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-rfq-engine-core-precision-component.jpg)

## Phase 1 Immediate Post-Termination Actions

This phase begins the moment an [Early Termination Date](https://prime.greeks.live/area/early-termination-date/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is designated.

- 
**Assemble the Valuation Team** ▴ Immediately convene a dedicated team. This should include representatives from the trading desk responsible for the product, the risk management department, the legal department, and operations. This cross-functional team ensures all perspectives are considered.

- 
**Inventory Terminated Transactions** ▴ The operations team must produce a definitive, reconciled list of all transactions terminated with the defaulting counterparty. Each transaction’s key parameters (notional, maturity, strike prices, etc.) must be verified.

- 
**Initial Market Assessment** ▴ The trading desk and risk team must conduct a rapid assessment of the market environment for the relevant asset class. Is the market liquid? Are reliable quotes available?
Is the market under systemic stress? This assessment, which must be documented, will determine the initial path down the [valuation hierarchy](https://prime.greeks.live/area/valuation-hierarchy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

![Two abstract, polished components, diagonally split, reveal internal translucent blue-green fluid structures. This visually represents the Principal's Operational Framework for Institutional Grade Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-prime-os-liquidity-framework.jpg)

## Phase 2 Evidence Gathering the RFQ Process

Assuming the initial assessment suggests market liquidity, the primary execution path is to obtain third-party quotes.

- 
**Dealer Selection** ▴ The valuation team selects a panel of dealers to approach for quotes. The selection criteria must be objective and documented. The panel should consist of recognized, arm’s-length market makers in the specific type of derivative being valued. A typical panel size is 3-5 dealers to ensure a representative sample.

- 
**RFQ Formulation** ▴ A standardized RFQ package is prepared for each transaction or group of related transactions. The package must contain the precise economic terms of the transaction to be replaced. The request should explicitly ask for a firm, executable quote to enter into a replacement transaction.

- 
**Dissemination and Deadline** ▴ The RFQ is sent to all selected dealers simultaneously to ensure a level playing field. A reasonable deadline for responses is set, typically within the same trading day, to capture a consistent time slice of the market.

- 
**Documentation of Responses** ▴ All responses, including any refusals to quote, are logged. If a dealer provides only an indicative quote, this is noted, along with the reason if provided. This log becomes a critical piece of evidence.

![A precise, multi-faceted geometric structure represents institutional digital asset derivatives RFQ protocols. Its sharp angles denote high-fidelity execution and price discovery for multi-leg spread strategies, symbolizing capital efficiency and atomic settlement within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-execution-microstructure-framework.jpg)

## Phase 3 Valuation Calculation and Justification

Once the evidence is gathered, the valuation is calculated.

- 
**Analysis of Quotes** ▴ If sufficient [firm quotes](https://prime.greeks.live/area/firm-quotes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) are received, the team analyzes them. Outliers may be scrutinized or, with clear justification, excluded. The method for determining the final value (e.g. the arithmetic mean of the remaining quotes) should be pre-defined in the firm’s policy.

- 
**Executing the Fallback Protocol** ▴ If insufficient firm quotes are obtained, the team formally documents this failure and initiates the fallback to Level 2 or Level 3 inputs. The execution record must show why the quotes were insufficient (e.g. “Only 2 of 5 dealers responded,” “Quotes were indicative only due to market volatility”).

- 
**Model-Based Valuation (If Necessary)** ▴ If a model is used (Level 2 or 3), its execution requires specific controls. The model must be the firm’s standard production model. All inputs, whether observable (Level 2) or unobservable (Level 3), must be sourced, timestamped, and documented. Any unobservable inputs must be justified in writing, explaining why they are a reasonable reflection of market conditions.

- 
**Calculation of the Close-out Amount** ▴ The final Close-out Amount for each transaction is calculated. This includes the valuation of the core transaction plus any attributable costs or gains from unwinding associated hedges, ensuring no double-counting.

![A robust, dark metallic platform, indicative of an institutional-grade execution management system. Its precise, machined components suggest high-fidelity execution for digital asset derivatives via RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-platform-high-fidelity-price-discovery-and-atomic-settlement-infrastructure.jpg)

## Quantitative Modeling and Data Analysis

When relying on Level 2 or Level 3 inputs, the quantitative rigor of the execution is paramount. The table below illustrates a hypothetical data analysis for closing out an interest rate swap using a Level 2 approach, where direct replacement quotes were unavailable.

| Model Input Parameter | Data Source | Timestamp | Value | Justification / Commentary |
| --- | --- | --- | --- | --- |
| USD SOFR Curve | Bloomberg | 03-Nov-2023 16:00 GMT | | Standard market curve for discounting USD cash flows. Sourced at market close. |
| Forward Rate Projections | Internal Model (Bootstrapped from SOFR Curve) | 03-Nov-2023 16:01 GMT | | Derived directly from observable market curve data. Standard, industry-accepted methodology. |
| Counterparty Credit Spread | Markit CDS Data | 03-Nov-2023 16:00 GMT | 250 bps | Observable credit spread for a peer entity of the defaulted counterparty. Used for Credit Valuation Adjustment (CVA). |
| Own Credit Spread | Internal Treasury Data | 03-Nov-2023 16:00 GMT | 120 bps | Firm’s own funding spread, used for Debit Valuation Adjustment (DVA). Consistent with internal reporting. |
| Net Present Value (NPV) | Internal Pricing Engine v2.4.1 | 03-Nov-2023 16:05 GMT | -$2,150,450 | Calculated using the above observable inputs. Model version is the current production version. |

![A translucent teal dome, brimming with luminous particles, symbolizes a dynamic liquidity pool within an RFQ protocol. Precisely mounted metallic hardware signifies high-fidelity execution and the core intelligence layer for institutional digital asset derivatives, underpinned by granular market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-core-intelligence-layer.jpg)

## How Does Market Volatility Affect the Execution Strategy?

Market volatility introduces significant execution challenges. During a crisis (like the 2008 Lehman default), liquidity evaporates, and firm quotes become scarce. The “commercially reasonable” standard is flexible enough to account for this. The execution strategy must adapt:

- 
**Justifiable Delay** ▴ The ISDA Master Agreement allows the valuation to be performed on a date after the Early Termination Date if doing so is commercially reasonable. If the termination date falls on a day of extreme market dislocation, it is a reasonable execution decision to wait a day or two for calmer conditions to obtain a more reliable valuation. This decision must be documented with supporting evidence of the market disruption.

- 
**Wider Acceptance of Indicative Data** ▴ While firm quotes are ideal, in a crisis, even indicative quotes from multiple dealers can form a body of evidence to support a model-based valuation. The execution record would note that these quotes, while not executable, were used to calibrate or sense-check the internal model’s output.

The execution of a close-out valuation is a procedural minefield where shortcuts lead to costly legal battles. A disciplined, evidence-based approach that respects the hierarchy of valuation inputs is the only way to navigate it successfully. The goal is to create a self-contained, logical, and defensible record that proves the Determining Party acted not as a judge in its own cause, but as a prudent and fair-minded market participant.

![A sophisticated metallic mechanism with integrated translucent teal pathways on a dark background. This abstract visualizes the intricate market microstructure of an institutional digital asset derivatives platform, specifically the RFQ engine facilitating private quotation and block trade execution](https://options.greeks.live/wp-content/uploads/2025/07/systemic-framework-for-institutional-digital-asset-derivatives-rfq-price-discovery-and-atomic-settlement.jpg)

## References

- Contrarian, The Jolly. “Close-out Amount – ISDA Provision.” 2024.

- International Swaps and Derivatives Association. “2002 Master Agreement.” 2002.

- International Swaps and Derivatives Association. “ISDA Close-out Amount Protocol.” 2009.

- Kennedys. “High Court clarifies calculation of Close-out amount under 2002 ISDA Master Agreement.” 2018.

- Stibbe. “OTC derivatives and the ISDA Master Agreement ▴ (how) does it work under Dutch law? (part 1).” 2017.

![Detailed metallic disc, a Prime RFQ core, displays etched market microstructure. Its central teal dome, an intelligence layer, facilitates price discovery](https://options.greeks.live/wp-content/uploads/2025/07/principal-operating-system-intelligence-layer-powering-digital-asset-derivatives-rfq-protocols-for-optimal-execution.jpg)

## Reflection

![A sleek, bi-component digital asset derivatives engine reveals its intricate core, symbolizing an advanced RFQ protocol. This Prime RFQ component enables high-fidelity execution and optimal price discovery within complex market microstructure, managing latent liquidity for institutional operations](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-optimal-execution.jpg)

## From Procedure to Systemic Integrity

The mechanics of a close-out valuation, while intricate, point to a larger truth about market structure. The procedural rigor demanded by the ISDA framework is a system designed to maintain fairness and confidence in the face of failure. It forces a shift in perspective from a proprietary view of value to a market-based consensus. Reflect on your own firm’s operational framework.

Is it designed merely to follow the rules, or does it embody the principle of objective valuation at its core? Is the process for evidence gathering, model validation, and record-keeping an integrated part of your risk architecture, or is it an ad-hoc reaction to a default event? The strength of a financial institution is tested at its weakest points. A robust, transparent, and defensible close-out system is a critical component of that strength, safeguarding the firm and contributing to the stability of the entire market ecosystem.

![Central polished disc, with contrasting segments, represents Institutional Digital Asset Derivatives Prime RFQ core. A textured rod signifies RFQ Protocol High-Fidelity Execution and Low Latency Market Microstructure data flow to the Quantitative Analysis Engine for Price Discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-core-system-high-fidelity.jpg)

## Glossary

<a href="https://prime.greeks.live/area/commercially-reasonable/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An intricate system visualizes an institutional-grade Crypto Derivatives OS. Its central high-fidelity execution engine, with visible market microstructure and FIX protocol wiring, enables robust RFQ protocols for digital asset derivatives, optimizing capital efficiency via liquidity aggregation](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-price-discovery.jpg)

## Commercially Reasonable

Meaning ▴ "Commercially Reasonable" is a legal and business standard requiring parties to a contract to act in a practical, prudent, and sensible manner, consistent with prevailing industry practices and good faith. </a><a href="https://prime.greeks.live/area/isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An opaque principal's operational framework half-sphere interfaces a translucent digital asset derivatives sphere, revealing implied volatility. This symbolizes high-fidelity execution via an RFQ protocol, enabling private quotation within the market microstructure and deep liquidity pool for a robust Crypto Derivatives OS](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-13.jpg)

## Isda Master Agreement

Meaning ▴ The ISDA Master Agreement, while originating in traditional finance, serves as a crucial foundational legal framework for institutional participants engaging in over-the-counter (OTC) crypto derivatives trading and complex RFQ crypto transactions. </a><a href="https://prime.greeks.live/area/internal-model/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central control knob on a metallic platform, bisected by sharp reflective lines, embodies an institutional RFQ protocol. This depicts intricate market microstructure, enabling high-fidelity execution, precise price discovery for multi-leg options, and robust Prime RFQ deployment, optimizing latent liquidity across digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/institutional-rfq-digital-asset-derivatives-execution-engine-core-microstructure.jpg)

## Internal Model

Meaning ▴ An Internal Model defines a proprietary quantitative framework developed and utilized by financial institutions, including those active in crypto investing, to assess and manage various forms of risk, such as market, credit, and operational risk. </a><a href="https://prime.greeks.live/area/determining-party/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A translucent blue algorithmic execution module intersects beige cylindrical conduits, exposing precision market microstructure components. This institutional-grade system for digital asset derivatives enables high-fidelity execution of block trades and private quotation via an advanced RFQ protocol, ensuring optimal capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-core-execution-architecture-intelligence-layer.jpg)

## Determining Party

Meaning ▴ In the precise terminology of complex crypto financial instruments, particularly institutional options or structured products, the Determining Party is the pre-designated entity, whether an on-chain oracle or an agreed-upon off-chain agent, explicitly responsible for definitively calculating and announcing specific parameters, values, or conditions that critically influence the payoff, settlement, or lifecycle events of a contractual agreement. </a><a href="https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intricate metallic mechanisms portray a proprietary matching engine or execution management system. Its robust structure enables algorithmic trading and high-fidelity execution for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-market-microstructure.jpg)

## Market Data

Meaning ▴ Market data in crypto investing refers to the real-time or historical information regarding prices, volumes, order book depth, and other relevant metrics across various digital asset trading venues. </a><a href="https://prime.greeks.live/area/internal-models/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precisely engineered metallic components, including a central pivot, symbolize the market microstructure of an institutional digital asset derivatives platform. This mechanism embodies RFQ protocols facilitating high-fidelity execution, atomic settlement, and optimal price discovery for crypto options](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-market-microstructure-1.jpg)

## Internal Models

Meaning ▴ Within the sophisticated systems architecture of institutional crypto trading and comprehensive risk management, Internal Models are proprietary computational frameworks developed and rigorously maintained by financial firms. </a><a href="https://prime.greeks.live/question/to-what-extent-can-valuation-models-replace-observable-market-prices-in-a-dispute/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A symmetrical, angular mechanism with illuminated internal components against a dark background, abstractly representing a high-fidelity execution engine for institutional digital asset derivatives. This visualizes the market microstructure and algorithmic trading precision essential for RFQ protocols, multi-leg spread strategies, and atomic settlement within a Principal OS framework, ensuring capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-engine-for-institutional-digital-asset-derivatives-rfq.jpg)

## Observable Market

Valuation models replace market prices in disputes to the extent their justified, auditable assumptions are deemed more relevant than available, but flawed, transactional data. </a><a href="https://prime.greeks.live/area/close-out-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A robust circular Prime RFQ component with horizontal data channels, radiating a turquoise glow signifying price discovery. This institutional-grade RFQ system facilitates high-fidelity execution for digital asset derivatives, optimizing market microstructure and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-engine-for-digital-asset-derivatives-execution.jpg)

## Close-Out Amount

Meaning ▴ The Close-Out Amount represents the aggregated net sum due between two parties upon the early termination or default of a master agreement, encompassing all outstanding obligations across multiple transactions. </a><a href="https://prime.greeks.live/area/good-faith/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, futuristic institutional grade platform with a translucent teal dome signifies a secure environment for private quotation and high-fidelity execution. A dark, reflective sphere represents an intelligence layer for algorithmic trading and price discovery within market microstructure, ensuring capital efficiency for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-rfq-execution-for-institutional-digital-asset-derivatives-1.jpg)

## Good Faith

Meaning ▴ Good Faith, within the intricate and often trust-minimized architecture of crypto financial systems, denotes the principle of honest intent, fair dealing, and transparent conduct in all participant interactions and contractual agreements. </a><a href="https://prime.greeks.live/area/close-out-valuation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precise geometric prism reflects on a dark, structured surface, symbolizing institutional digital asset derivatives market microstructure. This visualizes block trade execution and price discovery for multi-leg spreads via RFQ protocols, ensuring high-fidelity execution and capital efficiency within Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-precision-execution.jpg)

## Close-Out Valuation

Meaning ▴ Close-Out Valuation refers to determining the market value of financial contracts or positions upon the termination or early cessation of a transaction, typically due to a default event or mutual agreement. </a><a href="https://prime.greeks.live/area/master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Internal mechanism with translucent green guide, dark components. Represents Market Microstructure of Institutional Grade Crypto Derivatives OS](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-crypto-derivatives-rfq-engine-for-high-fidelity-execution.jpg)

## Master Agreement

Meaning ▴ A Master Agreement is a standardized, foundational legal contract that establishes the overarching terms and conditions governing all future transactions between two parties for specific financial instruments, such as derivatives or foreign exchange. </a><a href="https://prime.greeks.live/area/replacement-transaction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precise mechanical instrument with intersecting transparent and opaque hands, representing the intricate market microstructure of institutional digital asset derivatives. This visual metaphor highlights dynamic price discovery and bid-ask spread dynamics within RFQ protocols, emphasizing high-fidelity execution and latent liquidity through a robust Prime RFQ for atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineering-driving-institutional-digital-asset-derivatives-execution-across-advanced-rfq-protocols-and-prime-brokerage-frameworks.jpg)

## Replacement Transaction

Meaning ▴ A Replacement Transaction in crypto refers to the execution of a new trade or contract designed to supersede or nullify the financial exposure of a previously initiated, often failed or unfulfilled, digital asset transaction. </a><a href="https://prime.greeks.live/area/level-1-inputs/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An Institutional Grade RFQ Engine core for Digital Asset Derivatives. This Prime RFQ Intelligence Layer ensures High-Fidelity Execution, driving Optimal Price Discovery and Atomic Settlement for Aggregated Inquiries](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-core-high-fidelity.jpg)

## Level 1 Inputs

Meaning ▴ Level 1 inputs, within the fair value hierarchy of accounting standards (e. </a><a href="https://prime.greeks.live/area/level-2-inputs/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A metallic disc intersected by a dark bar, over a teal circuit board. This visualizes Institutional Liquidity Pool access via RFQ Protocol, enabling Block Trade Execution of Digital Asset Options with High-Fidelity Execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-principal-operational-framework-market-microstructure-high-fidelity-execution.jpg)

## Level 2 Inputs

Meaning ▴ Level 2 Inputs, within the context of financial data and systems architecture, refer to market data derived from observable transactions of identical or similar assets in active markets, where valuation relies substantially on quoted prices. </a><a href="https://prime.greeks.live/area/level-3-inputs/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated, multi-component system propels a sleek, teal-colored digital asset derivative trade. The complex internal structure represents a proprietary RFQ protocol engine with liquidity aggregation and price discovery mechanisms](https://options.greeks.live/wp-content/uploads/2025/07/principals-high-fidelity-rfq-engine-for-digital-asset-derivatives-execution.jpg)

## Level 3 Inputs

Meaning ▴ Level 3 Inputs refer to unobservable inputs in financial valuation methodologies, representing an entity's own assumptions about market participant expectations for an asset when observable market data is unavailable. </a><a href="https://prime.greeks.live/area/2002-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A macro view reveals the intricate mechanical core of an institutional-grade system, symbolizing the market microstructure of digital asset derivatives trading. Interlocking components and a precision gear suggest high-fidelity execution and algorithmic trading within an RFQ protocol framework, enabling price discovery and liquidity aggregation for multi-leg spreads on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-system-precision-engine.jpg)

## 2002 Isda Master Agreement

Meaning ▴ The 2002 ISDA Master Agreement is the foundational legal document published by the International Swaps and Derivatives Association, designed to standardize the contractual terms for privately negotiated (Over-the-Counter) derivatives transactions between two counterparties globally. </a><a href="https://prime.greeks.live/area/early-termination-date/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A detailed cutaway of a spherical institutional trading system reveals an internal disk, symbolizing a deep liquidity pool. A high-fidelity probe interacts for atomic settlement, reflecting precise RFQ protocol execution within complex market microstructure for digital asset derivatives and Bitcoin options](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-microstructure-revealed.jpg)

## Early Termination Date

Meaning ▴ An Early Termination Date refers to a specific, contractually defined point in time, prior to a financial instrument's scheduled maturity, at which the agreement can be concluded. </a><a href="https://prime.greeks.live/area/valuation-hierarchy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered components of an institutional-grade system. The metallic teal housing and visible geared mechanism symbolize the core algorithmic execution engine for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution-layer.jpg)

## Valuation Hierarchy

Meaning ▴ Valuation Hierarchy refers to a structured framework that categorizes financial instruments and assets based on the observability and reliability of the inputs used in their valuation. </a><a href="https://prime.greeks.live/area/firm-quotes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An intricate, transparent cylindrical system depicts a sophisticated RFQ protocol for digital asset derivatives. Internal glowing elements signify high-fidelity execution and algorithmic trading](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol-architecture.jpg)

## Firm Quotes

Meaning ▴ Firm Quotes, in the context of institutional crypto trading, represent unequivocally executable price commitments tendered by a liquidity provider, such as a market maker or an OTC desk, for a precisely specified quantity of a digital asset. </a>

**Tags:** [Early Termination Date](https://options.greeks.live/area/early-termination-date/), [ISDA Master Agreement](https://options.greeks.live/area/isda-master-agreement/), [Default Management](https://options.greeks.live/area/default-management/), [Replacement Transaction](https://options.greeks.live/area/replacement-transaction/), [Level 2 Inputs](https://options.greeks.live/area/level-2-inputs/), [Internal Model](https://options.greeks.live/area/internal-model/)	

## Discover More

- 
### [Can Internal Valuation Models Satisfy the Commercially Reasonable Procedures Requirement under the 2002 ISDA?](https://options.greeks.live/question/can-internal-valuation-models-satisfy-the-commercially-reasonable-procedures-requirement-under-the-2002-isda/)
![Angular metallic structures precisely intersect translucent teal planes against a dark backdrop. This embodies an institutional-grade Digital Asset Derivatives platform's market microstructure, signifying high-fidelity execution via RFQ protocols. It demonstrates liquidity aggregation, algorithmic price discovery, portfolio margin capabilities, and systemic risk mitigation within a Prime Brokerage OS.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-high-fidelity-execution-system-architecture.jpg)

Internal models can satisfy ISDA's reasonability test if executed within a robust, transparent, and auditable system architecture.

- 
### [What Specific Documentation Should a Firm Prepare to Defend a Close-Out Amount Calculation under the 2002 Isda?](https://options.greeks.live/question/what-specific-documentation-should-a-firm-prepare-to-defend-a-close-out-amount-calculation-under-the-2002-isda/)
![An intricate, transparent cylindrical system depicts a sophisticated RFQ protocol for digital asset derivatives. Internal glowing elements signify high-fidelity execution and algorithmic trading. A central angular structure represents atomic settlement and multi-leg spread capabilities, ensuring best execution within institutional trading.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol-architecture.jpg)

A firm must prepare a detailed dossier evidencing the objective commercial reasonableness of its valuation process and result.

- 
### [In What Scenarios Might a Court Find a Close-Out Amount Calculation to Be Commercially Unreasonable?](https://options.greeks.live/question/in-what-scenarios-might-a-court-find-a-close-out-amount-calculation-to-be-commercially-unreasonable/)
![A robust, dark metallic platform, indicative of an institutional-grade execution management system. Its precise, machined components suggest high-fidelity execution for digital asset derivatives via RFQ protocols. The textured surface implies granular market microstructure data, supporting price discovery and atomic settlement for block trades within a prime brokerage framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-platform-high-fidelity-price-discovery-and-atomic-settlement-infrastructure.jpg)

A court deems a close-out commercially unreasonable when its process or result deviates from objective, evidence-based market reality.

- 
### [Why Was the Close-Out Amount a Significant Change in the 2002 ISDA?](https://options.greeks.live/question/why-was-the-close-out-amount-a-significant-change-in-the-2002-isda/)
![A macro view reveals the intricate mechanical core of an institutional-grade system, symbolizing the market microstructure of digital asset derivatives trading. Interlocking components and a precision gear suggest high-fidelity execution and algorithmic trading within an RFQ protocol framework, enabling price discovery and liquidity aggregation for multi-leg spreads on a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-system-precision-engine.jpg)

The 2002 ISDA's Close-Out Amount replaced a flawed, rigid valuation system with a flexible, commercially reasonable standard.

- 
### [What Constitutes a Commercially Reasonable Procedure for Calculating a Derivatives Close out Amount?](https://options.greeks.live/question/what-constitutes-a-commercially-reasonable-procedure-for-calculating-a-derivatives-close-out-amount/)
![Abstract geometric forms, symbolizing bilateral quotation and multi-leg spread components, precisely interact with robust institutional-grade infrastructure. This represents a Crypto Derivatives OS facilitating high-fidelity execution via an RFQ workflow, optimizing capital efficiency and price discovery.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-infrastructure.jpg)

A commercially reasonable procedure for a derivatives close-out is a defensible, evidence-based process for valuing a terminated transaction.

- 
### [How Does the 2002 ISDA Master Agreement Improve upon the 1992 Version for Close Outs?](https://options.greeks.live/question/how-does-the-2002-isda-master-agreement-improve-upon-the-1992-version-for-close-outs/)
![A cutaway reveals the intricate market microstructure of an institutional-grade platform. Internal components signify algorithmic trading logic, supporting high-fidelity execution via a streamlined RFQ protocol for aggregated inquiry and price discovery within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-execution-for-digital-asset-derivatives-via-rfq-protocols.jpg)

The 2002 ISDA Master Agreement enhances close-out efficiency by replacing rigid valuation options with a flexible, commercially reasonable standard.

- 
### [How Does Market Volatility Affect the Determination of a Commercially Reasonable Close out Amount?](https://options.greeks.live/question/how-does-market-volatility-affect-the-determination-of-a-commercially-reasonable-close-out-amount-2/)
![Abstract image showing interlocking metallic and translucent blue components, suggestive of a sophisticated RFQ engine. This depicts the precision of an institutional-grade Crypto Derivatives OS, facilitating high-fidelity execution and optimal price discovery within complex market microstructure for multi-leg spreads and atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-market-microstructure-for-institutional-digital-asset-derivatives-rfq.jpg)

Volatility transforms a close-out from a calculation into a rigorous test of your firm's entire operational architecture.

- 
### [How Does the 2002 ISDA Close-Out Amount Improve upon the 1992 Market Quotation Method?](https://options.greeks.live/question/how-does-the-2002-isda-close-out-amount-improve-upon-the-1992-market-quotation-method/)
![A sleek, spherical intelligence layer component with internal blue mechanics and a precision lens. It embodies a Principal's private quotation system, driving high-fidelity execution and price discovery for digital asset derivatives through RFQ protocols, optimizing market microstructure and minimizing latency.](https://options.greeks.live/wp-content/uploads/2025/08/principals-private-quotation-system-intelligence-layer-component.jpg)

The 2002 ISDA Close-Out Amount replaces a rigid polling system with a flexible, commercially reasonable standard for greater accuracy.

- 
### [What Are the Primary Differences in Close out Procedures between the 1992 and 2002 Isda Master Agreements?](https://options.greeks.live/question/what-are-the-primary-differences-in-close-out-procedures-between-the-1992-and-2002-isda-master-agreements/)
![A precision-engineered metallic and glass system depicts the core of an Institutional Grade Prime RFQ, facilitating high-fidelity execution for Digital Asset Derivatives. Transparent layers represent visible liquidity pools and the intricate market microstructure supporting RFQ protocol processing, ensuring atomic settlement capabilities.](https://options.greeks.live/wp-content/uploads/2025/08/robust-institutional-digital-asset-derivatives-trading-platform-for-optimized-rfq-protocol-execution-and-deep-liquidity-access.jpg)

The 2002 ISDA enhances close-out by replacing subjective loss calculations with an objective, commercially reasonable standard.

---

## Raw Schema Data

```json
{
    "@context": "https://schema.org",
    "@type": "BreadcrumbList",
    "itemListElement": [
        {
            "@type": "ListItem",
            "position": 1,
            "name": "Home",
            "item": "https://options.greeks.live"
        },
        {
            "@type": "ListItem",
            "position": 2,
            "name": "Question",
            "item": "https://options.greeks.live/question/"
        },
        {
            "@type": "ListItem",
            "position": 3,
            "name": "Can a Determining Party Solely Rely on Its Internal Models for a Close-Out Valuation?",
            "item": "https://options.greeks.live/question/can-a-determining-party-solely-rely-on-its-internal-models-for-a-close-out-valuation/"
        }
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "Organization",
    "@id": "https://greeks.live/#organization",
    "name": "Greeks.Live",
    "url": "https://greeks.live/",
    "description": "Greeks.live is the definitive toolkit for the professional options trader, dedicated to empowering our users with institutional-grade data, advanced analytics, and a comprehensive suite of trading tools designed to provide a decisive edge in the market. Every article and guide published under the Greeks.live name is a product of our deep commitment to data-driven analysis and our mission to support the global trading community.",
    "email": "support@greeks.live",
    "logo": {
        "@type": "ImageObject",
        "url": "https://options.greeks.live/wp-content/uploads/2025/07/Greeks.Live-Logo-Icon.svg"
    },
    "hasPart": [
        {
            "@type": "WebSite",
            "name": "About Us",
            "url": "https://about.greeks.live"
        },
        {
            "@type": "WebSite",
            "name": "App Download Page",
            "url": "https://about.greeks.live/#/download/basic_trade"
        },
        {
            "@type": "WebSite",
            "name": "Newcomers' Guide",
            "url": "https://twisty-sign-c8b.notion.site/Guide-for-Greeks-live-X-Deribit-Newbies-5a08a3052822427d800af6eaf3704c8d"
        },
        {
            "@type": "WebSite",
            "name": "Knowledge Base",
            "url": "https://linktr.ee/greeks.live"
        },
        {
            "@type": "WebSite",
            "name": "Option Terminology",
            "url": "https://greekslive.notion.site/88dfc00e7c584d4d8969b6302a79a12f?pvs=4"
        },
        {
            "@type": "WebSite",
            "name": "Terms of Service",
            "url": "https://greeks.live/#/tos"
        },
        {
            "@type": "WebSite",
            "name": "Disclaimer",
            "url": "https://greeks.live/#/disclaimer"
        }
    ],
    "sameAs": [
        "https://x.com/greekslive",
        "https://youtube.com/@greeks_live?si=-KjT0Lkw4WUCI0tD",
        "https://t.me/greekslive_notifications",
        "https://t.me/greekslive",
        "https://pinterest.com/greekslive/"
    ],
    "makesOffer": [
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "RFQ Platform",
                "url": "https://rfq.greeks.live",
                "description": "Execute institutional-grade block trades for crypto options and futures. This platform provides deep, over-the-counter (OTC) liquidity via a professional Request for Quote system.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Lending Tools",
                "url": "https://lend.greeks.live",
                "description": "Manage crypto lending and borrowing activities to earn yield or secure loans. This suite of tools helps users analyze interest rates and manage collateralized debt positions.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Data Lab",
                "url": "https://greeks.live/#/deribit/tools/datalab/BTC",
                "description": "Analyze historical and real-time options data with advanced metrics. This tool is designed for backtesting strategies and identifying market trends through comprehensive data visualization.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Profit & Loss Analysis (PnL)",
                "url": "https://greeks.live/#/deribit/tools/pnl_analysis",
                "description": "Track and analyze the Profit and Loss (PnL) of your options portfolio. This tool provides detailed performance metrics to help traders evaluate and refine their strategies.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Position Visualization",
                "url": "https://greeks.live/#/deribit/tools/pv/BTC",
                "description": "Visualize complex options positions and their corresponding risk profiles. This tool generates payoff diagrams to help traders intuitively understand potential profit, loss, and exposure.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Options Calculator",
                "url": "https://greeks.live/#/deribit/tools/calculator",
                "description": "Calculate the theoretical price and risk parameters ('the Greeks') of crypto options. An essential tool for pricing new trades and analyzing the sensitivity of existing positions.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live Main Platform",
                "url": "https://greeks.live/",
                "description": "The central hub for the Greeks.live suite of professional cryptocurrency options and derivatives trading tools. Access analytics, manage positions, and explore the ecosystem.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Community Forum",
                "url": "https://t.greeks.live",
                "description": "Join the official Greeks.live community. Connect with other traders, share insights, and receive the latest updates directly from the team.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live for Deribit",
                "url": "http://deribit.greeks.live",
                "description": "A dedicated interface for trading on the Deribit exchange. This platform leverages Greeks.live's advanced analytics and tools specifically for users of Deribit's options and futures markets.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live for OKX",
                "url": "http://okx.greeks.live",
                "description": "A dedicated interface for trading on the OKX exchange. This platform integrates Greeks.live's powerful analytics with the OKX marketplace, focusing on its options and derivatives products.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "GLVS.AI Trading Platform",
                "url": "https://www.glvs.ai/",
                "description": "An AI-powered platform for automated crypto options trading. Leverage advanced algorithms and data-driven signals to develop and deploy sophisticated, hands-free trading strategies.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "API Testnet & Sandbox",
                "url": "https://test.greeks.live",
                "description": "A dedicated testnet environment for developers to test their API integrations and automated trading strategies. This sandbox allows for full functionality testing without risking real funds.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        }
    ],
    "subOrganization": [
        {
            "@type": "Organization",
            "name": "GreeksLive HK Co., Limited",
            "email": "support@greeks.live",
            "telephone": "+852-56418949",
            "address": {
                "@type": "PostalAddress",
                "streetAddress": "Unit 11, 27/F, K. Wah Centre, 191 Java Road",
                "addressLocality": "Hong Kong",
                "addressRegion": "North Point",
                "addressCountry": "CN",
                "postalCode": "0000"
            },
            "geo": {
                "@type": "GeoCoordinates",
                "latitude": "22.2932357",
                "longitude": "114.2022026"
            },
            "image": "https://options.greeks.live/wp-content/uploads/2025/08/Wah-Centre-Hong-Kong.jpg"
        }
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "Article",
    "mainEntityOfPage": {
        "@type": "WebPage",
        "@id": "https://options.greeks.live/question/can-a-determining-party-solely-rely-on-its-internal-models-for-a-close-out-valuation/"
    },
    "headline": "Can a Determining Party Solely Rely on Its Internal Models for a Close-Out Valuation? \u25b4 Question",
    "description": "A Determining Party's valuation must be an auditable reflection of market reality, not a unilateral decree from an internal model. \u25b4 Question",
    "url": "https://options.greeks.live/question/can-a-determining-party-solely-rely-on-its-internal-models-for-a-close-out-valuation/",
    "datePublished": "2025-08-05T13:19:42+00:00",
    "dateModified": "2025-10-26T02:22:23+00:00",
    "articleSection": [
        "Question"
    ],
    "author": {
        "@id": "https://greeks.live/#organization"
    },
    "publisher": {
        "@id": "https://greeks.live/#organization"
    },
    "image": {
        "@type": "ImageObject",
        "url": "https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-market-microstructure-1.jpg",
        "caption": "A close-up of precisely engineered dark metallic components against a dark and teal backdrop. This visual represents the sophisticated market microstructure underpinning institutional digital asset derivatives trading. It embodies the robust Principal's operational framework enabling RFQ protocols for high-fidelity execution, ensuring optimal price discovery, atomic settlement, and efficient multi-leg spread management for crypto options."
    },
    "keywords": [
        "2002 ISDA",
        "2002 ISDA Master Agreement",
        "Close-Out Amount",
        "Close-Out Valuation",
        "Commercially Reasonable",
        "Commercially Reasonable Standard",
        "Default Management",
        "Determining Party",
        "Early Termination Date",
        "Firm Quotes",
        "Good Faith",
        "Internal Model",
        "Internal Models",
        "ISDA Master Agreement",
        "Level 1 Inputs",
        "Level 2 Inputs",
        "Level 3 Inputs",
        "Market Data",
        "Master Agreement",
        "Replacement Transaction",
        "Valuation Hierarchy"
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "WebSite",
    "url": "https://options.greeks.live/",
    "potentialAction": {
        "@type": "SearchAction",
        "target": "https://options.greeks.live/?s=search_term_string",
        "query-input": "required name=search_term_string"
    }
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "FAQPage",
    "mainEntity": [
        {
            "@type": "Question",
            "name": "What Is The Role Of Good Faith In The Valuation Process?",
            "acceptedAnswer": {
                "@type": "Answer",
                "text": "The overarching strategic principle is the duty to act in \"good faith.\" This is an active, not a passive, requirement. It means the entire valuation process must be conducted honestly and fairly. Strategically, this translates into several concrete actions:"
            }
        },
        {
            "@type": "Question",
            "name": "How Does Market Volatility Affect The Execution Strategy?",
            "acceptedAnswer": {
                "@type": "Answer",
                "text": "Market volatility introduces significant execution challenges. During a crisis (like the 2008 Lehman default), liquidity evaporates, and firm quotes become scarce. The \"commercially reasonable\" standard is flexible enough to account for this. The execution strategy must adapt:"
            }
        }
    ]
}
```


---

**Original URL:** https://options.greeks.live/question/can-a-determining-party-solely-rely-on-its-internal-models-for-a-close-out-valuation/
