# Can a Determining Party Unilaterally Revise a Close out Calculation after It Has Been Issued? ▴ Question

**Published:** 2025-08-01
**Categories:** Question

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## Concept

The question of whether a Determining Party may unilaterally revise a [close-out calculation](https://prime.greeks.live/area/close-out-calculation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) strikes at the heart of financial market integrity. The architecture of the [ISDA Master Agreement](https://prime.greeks.live/area/isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is engineered to provide certainty and finality in moments of maximum stress, such as the termination of a portfolio of derivatives following a default. Within this system, the close-out calculation is the terminal procedure designed to produce a single, definitive net payment obligation. Its primary function is to crystallize the economic value of the terminated transactions at a specific moment, thereby preventing open-ended risk exposure.

The system is predicated on the principle that once this value is determined and communicated, it forms the basis of a binding legal obligation. Any capacity for [unilateral revision](https://prime.greeks.live/question/what-are-the-primary-differences-between-unilateral-cva-and-bilateral-cva-in-practice/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) would dismantle this finality, introducing a fatal instability into the protocol. It would transform a mechanism designed for [dispute resolution](https://prime.greeks.live/area/dispute-resolution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) into a source of perpetual dispute.

The prohibition against unilateral revision is a core feature of this systemic design. The process grants the Determining Party, typically the non-defaulting party, a significant degree of authority in performing the calculation. This authority is balanced by a strict set of duties. Under the 2002 ISDA Master Agreement, the Determining Party must act in good faith and use [commercially reasonable procedures](https://prime.greeks.live/question/how-do-courts-interpret-commercially-reasonable-procedures-in-close-out-amount-calculations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to produce a [commercially reasonable result](https://prime.greeks.live/question/how-do-courts-interpret-commercially-reasonable-procedures-in-close-out-amount-calculations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

This standard is not a mere procedural guideline; it is an objective, enforceable benchmark. The calculation, once issued, is a definitive statement of account based on market conditions at a precise point in time. Allowing a party to amend this statement based on subsequent market movements or a reconsideration of its own inputs would grant it an option it did not bargain for, effectively allowing it to re-price the terminated portfolio at the other party’s expense. This would undermine the entire economic purpose of the [close-out netting](https://prime.greeks.live/area/close-out-netting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) mechanism, which is to provide a clean and final termination of the parties’ mutual obligations.

> The close-out calculation under an ISDA Master Agreement represents a definitive and binding determination of value, engineered for finality to ensure market stability.

Therefore, the system architecture treats the initial calculation as a singular, dispositive act. It is a snapshot of value. The framework does acknowledge that errors can occur. A distinction exists between correcting a demonstrable mathematical or clerical error and performing a wholesale redetermination of the [close-out amount](https://prime.greeks.live/area/close-out-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

The former involves the rectification of a mistake to ensure the calculation reflects the originally intended inputs and methodology. The latter, a redetermination, implies a new assessment, potentially using different inputs or assumptions, which is precisely what the principle of finality is designed to prevent. The courts have reinforced this view, scrutinizing any attempt to submit a revised calculation with deep skepticism, particularly when it appears to be a reaction to a disappointing initial result or an attempt to improve one’s position after the fact. The system’s integrity demands that the [Determining Party](https://prime.greeks.live/area/determining-party/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) gets one opportunity to perform its duty correctly. Any subsequent adjustments are subject to judicial review and must be justified as corrections of [manifest error](https://prime.greeks.live/area/manifest-error/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), not as opportunistic second attempts.

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## The Role of Finality in Market Architecture

In over-the-counter derivatives markets, certainty is the bedrock of liquidity and risk transfer. The ISDA [Master Agreement](https://prime.greeks.live/question/what-are-the-key-differences-between-a-prime-brokerage-agreement-and-an-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) functions as the operating system for this market, and the close-out mechanism is its critical fail-safe protocol. Finality within this context means that upon the occurrence of a specified event (a default or [termination event](https://prime.greeks.live/area/termination-event/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)), there is a clear, predictable, and legally robust process for ending the contractual relationship.

The issuance of a close-out calculation is the culmination of this process. It is the point at which all outstanding obligations are collapsed into a single net present value.

A system that permitted a party to unilaterally withdraw and resubmit its calculation would lack this essential finality. It would create a state of perpetual uncertainty. The recipient of the calculation would be unable to rely on it for its own risk management, accounting, or liquidity planning. This uncertainty would have a cascading effect, impairing the firm’s ability to manage its other market positions and meet its obligations to other counterparties.

The entire chain of modern finance, which relies on the dependable valuation of assets and liabilities, would be weakened. The principle of finality is therefore a structural necessity, ensuring that the close-out process extinguishes risk rather than amplifying it.

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## What Constitutes a Binding Calculation?

A close-out calculation becomes binding upon its effective delivery and communication to the other party. The ISDA framework does not prescribe a specific form for this communication, but it must be clear, unequivocal, and provide sufficient detail to show how the amount was determined. The delivery of this notice triggers a legal obligation.

The calculated amount becomes a debt due and payable. This is the point of no return for the Determining Party in terms of its methodology and substantive inputs.

The binding nature of the calculation is reinforced by the legal framework surrounding it. Should the recipient dispute the calculation, its recourse is not to ignore the notice but to challenge it through the dispute resolution mechanisms specified in the agreement, which may ultimately lead to litigation. In court, the burden would be on the Determining Party to demonstrate that its [original calculation](https://prime.greeks.live/question/from-a-legal-perspective-how-does-novation-alter-the-fundamental-rights-of-the-original-counterparties/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) complied with the contractual standard of using “[commercially reasonable](https://prime.greeks.live/area/commercially-reasonable/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) procedures to produce a commercially reasonable result.” An attempt by the Determining Party to submit a “revised” calculation during this process would be viewed as an admission that its original calculation was flawed.

The court’s focus would remain on the validity of the initial determination, not on the merits of a subsequent, revised one. The system is designed to assess the correctness of the action taken at the time it was taken, preserving the temporal logic of the close-out.

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## Strategy

The strategic considerations surrounding the revision of a close-out calculation are complex, pivoting on the critical distinction between correcting an error and opportunistically redetermining an outcome. For a Determining Party, the strategy begins long before any calculation is issued. It lies in establishing and documenting a robust, transparent, and defensible procedure for arriving at the close-out amount. The governing 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) is one of objective [commercial reasonableness](https://prime.greeks.live/area/commercial-reasonableness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

This imposes a significantly higher burden than the more subjective “rationality” standard associated with the 1992 Agreement. A successful strategy requires building a process that can withstand judicial scrutiny, proving that the methods used were not merely plausible, but were objectively fair and aligned with market practice at the time of termination.

Once a calculation is issued, the strategic landscape shifts dramatically. If the Determining Party discovers a potential mistake, it faces a critical decision. The primary strategic goal is to preserve the integrity of the close-out process while rectifying a genuine error. Attempting a unilateral “revision” is a high-risk maneuver that is likely to be challenged and viewed unfavorably by a court.

A more sound strategy involves transparency. This may include notifying the counterparty of the discovered error, providing a detailed explanation of its nature and impact, and proposing a corrected calculation. This approach frames the action as a good-faith effort to comply with the contractual obligation to produce an accurate result, rather than an attempt to manipulate the outcome. It shifts the focus from a unilateral act to a bilateral discussion, which, even if contentious, is more likely to be seen as commercially reasonable.

> A Determining Party’s strategy must be built on the foundation of objective commercial reasonableness, as a unilateral revision risks being invalidated by courts in favor of the original calculation’s finality.

The counterparty’s strategy upon receiving a revised calculation is more straightforward ▴ to scrutinize it intensely. The recipient should immediately question the basis for the revision. Is it a correction of a clear, mechanical error (e.g. a data entry mistake, a currency conversion flaw)? Or does it represent a change in methodology, the introduction of new [market data](https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that was available but not used previously, or an adjustment to a discretionary input?

The latter category suggests a redetermination, not a correction. The strategic response is to reject the revised calculation and hold the Determining Party to its original statement, asserting the principle of finality. This forces the Determining Party to justify not one, but two different calculations, a position of significant legal vulnerability. The case of Lehman Brothers Special Financing v. National Power Corporation serves as a powerful illustration, where a party’s attempt to revise its calculation years later was a central point of contention and ultimately unsuccessful.

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## Comparing the 1992 and 2002 ISDA Standards

The evolution from the [1992 ISDA Master Agreement](https://prime.greeks.live/area/1992-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to the 2002 version marks a pivotal shift in the strategic obligations of the Determining Party. Understanding this change is fundamental to grasping the strategic constraints on revising a calculation. The two frameworks establish different standards for how the final close-out amount is to be determined, which has profound implications for any subsequent attempt to alter it.

### Comparison of Close-Out Calculation Standards

| Provision | 1992 ISDA Master Agreement | 2002 ISDA Master Agreement |
| --- | --- | --- |
| Valuation Method | Parties elect between “Market Quotation” and “Loss.” Market Quotation relies on obtaining quotes from reference market-makers. Loss is a broader indemnity standard, allowing the Determining Party to calculate its total losses and costs resulting from the termination. | A single, unified method called “Close-out Amount” is used. This method combines elements of the previous approaches, focusing on the costs of replacing or providing the economic equivalent of the terminated transactions. |
| Governing Standard | The Determining Party is required to act “in a commercially reasonable manner” (for Loss) or to obtain quotes from specified dealers (for Market Quotation). Courts have generally interpreted this as a standard of rationality, meaning the decision will be upheld if it is one a reasonable party could have made, even if other reasonable outcomes were possible. | The Determining Party must “act in good faith and use commercially reasonable procedures in order to produce a commercially reasonable result.” This is a tripartite standard that courts have interpreted as being fully objective. The procedures and the result must both be reasonable when measured against external market standards. |
| Implication for Revision | Under the rationality standard, a party might have felt it had more leeway. A calculation, once made, would be difficult to challenge unless it was demonstrably irrational. An attempt to revise it would still be problematic, but the initial bar was lower. | The objective standard places a much heavier burden on the Determining Party. The entire process must be documented and defensible. An attempt to revise a calculation is inherently suspect, as it suggests the original, objectively derived result was somehow deficient, or the procedure was not commercially reasonable in the first place. |

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## What Is the Process for Correcting a Manifest Error?

While a unilateral redetermination is impermissible, the system does allow for the correction of a “manifest error.” This term refers to a mistake that is obvious and indisputable on the face of the calculation. It is a narrow exception to the rule of finality. The process for correcting such an error is not explicitly defined in the ISDA Master Agreement and must be navigated with extreme care.

- 
**Identification and Documentation** The party that identifies the error must immediately document its findings. This includes specifying the exact nature of the mistake (e.g. incorrect data input, flawed formula application, miscalculation of interest) and quantifying its impact on the final close-out amount. The documentation should prove that the error is clerical or mathematical, not judgmental.

- 
**Prompt Notification** The discovering party must promptly notify its counterparty. The notification should be transparent, providing all the documentation related to the error and a clear explanation of how the corrected calculation was derived. Delaying notification can be interpreted as strategic behavior, undermining the claim of a good-faith correction.

- 
**Providing a Corrected Statement** Alongside the notification, a corrected statement of account should be provided. This statement should be identical to the original in all respects except for the specific correction of the manifest error. All other inputs, assumptions, and methodologies must remain unchanged.

- 
**Seeking Agreement** The correcting party should seek the counterparty’s agreement to the revised figure. If the error is genuinely manifest, the counterparty is likely to agree. If the counterparty disputes whether the issue was a manifest error or a change in judgment, the matter may proceed to formal dispute resolution. In that forum, the focus will be on the narrow question of whether the original calculation contained a clear mistake, not on which calculation is “better.”

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## Execution

The execution of a close-out calculation is a high-stakes, time-sensitive procedure that demands operational precision and a deep understanding of the governing legal standards. A Determining Party’s actions are governed by the strict mandate of the 2002 ISDA Master Agreement ▴ to act in [good faith](https://prime.greeks.live/area/good-faith/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and deploy commercially [reasonable procedures](https://prime.greeks.live/question/how-do-courts-interpret-commercially-reasonable-procedures-in-close-out-amount-calculations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to achieve a commercially reasonable result. This is an operational directive. It requires the construction of a repeatable, auditable, and defensible process for valuing a terminated derivatives portfolio.

The prohibition on unilateral revision means that this process must be executed correctly the first time. There is no opportunity for a second attempt based on a change of heart or strategy.

Operationally, this translates into a series of non-negotiable steps. The Determining Party must first establish a precise “as of” valuation date and time, typically the [early termination date](https://prime.greeks.live/area/early-termination-date/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). All market data, [replacement transaction](https://prime.greeks.live/area/replacement-transaction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) quotes, and other inputs must be anchored to this specific point in time. The methodology for valuation must be selected and applied consistently across the entire portfolio.

This may involve seeking quotes from third-party dealers, using internal pricing models, or consulting market data services. Crucially, every step, every piece of data, and every decision must be documented. This documentation is the primary evidence that the procedure was commercially reasonable. Should the calculation be challenged, this audit trail will be the centerpiece of the legal defense.

> Executing a close-out calculation is a definitive operational act where the absence of a revision mechanism demands flawless, documented, and objectively reasonable procedures from the outset.

The concept of “commercial reasonableness” is not abstract; it is tested against concrete market practices. A procedure would be deemed unreasonable if, for example, the Determining Party only sought quotes from affiliated entities, ignored readily available and more favorable market data, or used internal models that were inconsistent with industry standards. The result would be deemed unreasonable if it deviated significantly from the economic reality of replacing the terminated transactions at the time of close-out. The execution phase is therefore a rigorous exercise in valuation, documentation, and adherence to an objective standard, all performed under the unyielding pressure of finality.

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## A Procedural Playbook for the Determining Party

To ensure compliance and defensibility, a Determining Party should follow a structured operational playbook. This playbook provides a clear sequence of actions designed to meet the requirements of the ISDA Master Agreement.

- 
**Step 1 Secure The Portfolio** Upon the designation of an [Early Termination](https://prime.greeks.live/area/early-termination/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Date, immediately identify all transactions governed by the relevant ISDA Master Agreement. Freeze the portfolio and confirm all trade details, including notional amounts, payment dates, and other key economic terms.

- 
**Step 2 Establish The Valuation Framework** Define the specific valuation methodology to be used. This decision should be guided by the nature of the transactions and the availability of market data. The framework must be applied consistently across all transactions. For example, deciding to use a mid-market valuation approach for all interest rate swaps.

- 
**Step 3 Gather Market Data** Collect all necessary inputs “as of” the Early Termination Date. This includes obtaining quotes for replacement transactions from a reasonable number of independent, creditworthy dealers, gathering relevant market data (e.g. yield curves, volatility surfaces), and documenting all sources. It is critical to demonstrate that the data gathering was comprehensive and unbiased.

- 
**Step 4 Calculate The Close Out Amount** Perform the calculation based on the established framework and gathered data. The calculation should determine the “gains or losses, and costs” associated with replacing the economic equivalent of the terminated portfolio. This includes accounting for both realized and unrealized amounts, as well as any unpaid amounts due.

- 
**Step 5 Conduct Internal Verification** Before issuing the notice, a separate individual or team should verify the calculation. This review should check for mathematical accuracy, correct application of the valuation framework, and complete documentation. This step is a critical control to prevent manifest errors.

- 
**Step 6 Issue The Close Out Notice** Prepare and deliver a formal notice to the counterparty. The notice must state the final Close-out Amount, the Early Termination Date, and provide details of the calculation in a manner that allows the counterparty to understand how the figure was derived. This act makes the calculation binding.

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## How Is a Close out Amount Quantified?

The quantification of the Close-out Amount is a detailed financial exercise. The goal is to compute a single number that represents the net economic value of the terminated portfolio. The table below provides a simplified, hypothetical example of such a calculation for a small portfolio of two trades.

### Hypothetical Close-Out Calculation Example

| Component | Trade 1 (Interest Rate Swap) | Trade 2 (FX Forward) | Portfolio Level |
| --- | --- | --- | --- |
| Replacement Cost | $1,500,000 (Cost to enter into a new swap with identical terms, based on quotes from three dealers) | -$250,000 (Gain from closing out the forward position at the prevailing spot rate) | $1,250,000 |
| Unpaid Amounts | $75,000 (An unpaid coupon payment due to the Determining Party before termination) | $0 | $75,000 |
| Funding Costs | $12,000 (Documented cost of funding the replacement swap’s initial margin) | N/A | $12,000 |
| Administrative Costs | $5,000 (Legal and administrative fees directly attributable to the termination process) | $0 | $5,000 |
| Sub-Total | $1,587,000 | -$250,000 | $1,342,000 |

In this example, the Determining Party aggregates the costs and gains across the portfolio. The replacement cost for the swap is a positive value (a loss for the Determining Party), while the gain on the FX forward is a negative value (a gain for the Determining Party). These are netted against each other, and then any other outstanding amounts and direct costs are included to arrive at the final, single Close-out Amount. This entire process, including the dealer quotes and cost documentation, must be preserved as evidence of a commercially reasonable procedure.

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## What Happens If the Calculation Is Challenged?

If the receiving party challenges the Close-out Amount, the dispute resolution process outlined in the ISDA Master Agreement is triggered. The Determining Party cannot simply issue a new number. Instead, it must defend its original calculation. The process typically involves a period of negotiation between the parties.

If negotiations fail, the dispute may escalate to mediation or litigation. In court, a judge will not create a “new” correct calculation. The court’s role is to assess whether the Determining Party’s original calculation met the contractual standard. If the court finds that the procedure or the result was not commercially reasonable, it may declare the calculation void and rule on the damages based on evidence presented by both sides.

This underscores the immense pressure to execute the initial calculation flawlessly. The entire system is designed to scrutinize that single, binding act.

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## References

- Houben, R. & Snyers, A. (2019). LEGAL GUIDELINES FOR SMART DERIVATIVES CONTRACTS ▴ THE ISDA MASTER AGREEMENT. Inter-American Development Bank.

- Green, R. (2003). The 2002 ISDA Master Agreement Made Simple. Global Capital.

- Walker Morris. (2018). ISDA Master Agreements and the calculation of close-out payments. Walker Morris Publications.

- The National Law Review. (2018). Close-Out Amount Calculations Under 2002 ISDA. The National Law Review.

- International Swaps and Derivatives Association. (2009). ISDA Close-out Amount Protocol. ISDA Publications.

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## Reflection

The rigidity of the close-out calculation process reflects a foundational principle of market architecture ▴ in moments of crisis, clarity and finality are paramount. The inability of a Determining Party to unilaterally revise its calculation is a deliberate design choice, a structural safeguard that forces discipline and objectivity. This prompts a deeper consideration of your own operational frameworks. How are your internal valuation and risk management procedures designed to perform under pressure?

Do they produce outcomes that are not only internally consistent but also externally defensible against a standard of objective, commercial reasonableness? The knowledge that there is no opportunity for revision should inform the design of the process itself, embedding verification, documentation, and unbiased judgment at every step. Ultimately, mastering the market is not about having the freedom to act, but about building systems that produce the correct, definitive action when it matters most.

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## Glossary

<a href="https://prime.greeks.live/area/close-out-calculation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Close-Out Calculation

Meaning ▴ Close-Out Calculation refers to the process of determining the final financial value and obligations of outstanding positions or contracts when a trading relationship or specific agreements are terminated prematurely, often due to a default event or the exercise of a contractual right. </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">
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## 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/question/what-are-the-primary-differences-between-unilateral-cva-and-bilateral-cva-in-practice/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Unilateral Revision

Unilateral CVA prices counterparty default risk in isolation; bilateral CVA provides a net, systemic valuation of reciprocal default risk. </a><a href="https://prime.greeks.live/area/dispute-resolution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Polished concentric metallic and glass components represent an advanced Prime RFQ for institutional digital asset derivatives. It visualizes high-fidelity execution, price discovery, and order book dynamics within market microstructure, enabling efficient RFQ protocols for block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-prime-os-precision.jpg)

## Dispute Resolution

Meaning ▴ In the context of crypto technology, especially concerning institutional options trading and Request for Quote (RFQ) systems, dispute resolution refers to the formal and informal processes meticulously designed to address and reconcile disagreements or failures arising from trade execution, settlement discrepancies, or contractual interpretations between transacting parties. </a><a href="https://prime.greeks.live/question/how-do-courts-interpret-commercially-reasonable-procedures-in-close-out-amount-calculations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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)

## Commercially Reasonable Procedures

Courts interpret "commercially reasonable procedures" as an objective, evidence-based standard for valuing derivative close-outs. </a><a href="https://prime.greeks.live/question/how-do-courts-interpret-commercially-reasonable-procedures-in-close-out-amount-calculations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, precision-engineered device with a split-screen interface displaying implied volatility and price discovery data for digital asset derivatives. This institutional grade module optimizes RFQ protocols, ensuring high-fidelity execution and capital efficiency within market microstructure for multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-module.jpg)

## Commercially Reasonable Result

Courts interpret "commercially reasonable procedures" as an objective, evidence-based standard for valuing derivative close-outs. </a><a href="https://prime.greeks.live/area/close-out-netting/?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)

## Close-Out Netting

Meaning ▴ Close-out netting is a legally enforceable contractual provision that, upon the occurrence of a default event by one counterparty, immediately terminates all outstanding transactions between the parties and converts all reciprocal obligations into a single, net payment or receipt. </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">
![Visualizes the core mechanism of an institutional-grade RFQ protocol engine, highlighting its market microstructure precision. Metallic components suggest high-fidelity execution for digital asset derivatives, enabling private quotation and block trade processing](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-core-1.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/determining-party/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A modular system with beige and mint green components connected by a central blue cross-shaped element, illustrating an institutional-grade RFQ execution engine. This sophisticated architecture facilitates high-fidelity execution, enabling efficient price discovery for multi-leg spreads and optimizing capital efficiency within a Prime RFQ framework for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/principal-prime-os-rfq-engine-for-digital-asset-derivatives.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/manifest-error/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A dark, precision-engineered core system, with metallic rings and an active segment, represents a Prime RFQ for institutional digital asset derivatives. Its transparent, faceted shaft symbolizes high-fidelity RFQ protocol execution, real-time price discovery, and atomic settlement, ensuring capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-core-for-high-fidelity-rfq-protocol-execution-and-atomic-settlement.jpg)

## Manifest Error

Meaning ▴ Manifest Error refers to an obvious and unmistakable mistake in a financial transaction or contract, readily apparent to any reasonable person. </a><a href="https://prime.greeks.live/area/termination-event/?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)

## Termination Event

Meaning ▴ A Termination Event, within the structured finance and smart contract paradigms of crypto investing, signifies a predefined condition or specific occurrence that contractually triggers the early dissolution or cessation of a binding agreement or a complex financial instrument. </a><a href="https://prime.greeks.live/question/what-are-the-key-differences-between-a-prime-brokerage-agreement-and-an-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered multi-vane system with opaque, reflective, and translucent teal blades. This visualizes Institutional Grade Digital Asset Derivatives Market Microstructure, driving High-Fidelity Execution via RFQ protocols, optimizing Liquidity Pool aggregation, and Multi-Leg Spread management on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-multi-vane-system-illustrating-institutional-digital-asset-derivatives-rfq-protocols-market-microstructure-optimized-liquidity-aggregation-prime-os-high-fidelity-execution.jpg)

## Master Agreement

A Prime Brokerage Agreement is a centralized service contract; an ISDA Master Agreement is a standardized bilateral derivatives protocol. </a><a href="https://prime.greeks.live/area/commercially-reasonable/?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)

## 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/question/from-a-legal-perspective-how-does-novation-alter-the-fundamental-rights-of-the-original-counterparties/?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)

## Original Calculation

Novation extinguishes an original contract, discharging the outgoing party's rights and duties and creating a new agreement for the incoming party. </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">
![Angular dark planes frame luminous turquoise pathways converging centrally. This visualizes institutional digital asset derivatives market microstructure, highlighting RFQ protocols for private quotation and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-rfq-protocols-for-institutional-digital-assets.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/commercial-reasonableness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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)

## Commercial Reasonableness

Meaning ▴ Commercial Reasonableness, in the context of crypto institutional options trading and RFQ systems, signifies the objective standard by which the terms, conditions, and pricing of a transaction are evaluated for their alignment with prevailing market practices, economic rationality, and prudent business judgment among sophisticated participants. </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">
![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)

## 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/1992-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision instrument with multi-layered dial, symbolizing price discovery and volatility surface calibration. Its metallic arm signifies an algorithmic trading engine, enabling high-fidelity execution for RFQ block trades, minimizing slippage within an institutional Prime RFQ for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trading-platform-calibrating-rfq-protocols-for-high-fidelity-execution-and-market-microstructure-optimization.jpg)

## 1992 Isda Master Agreement

Meaning ▴ The 1992 ISDA Master Agreement serves as a foundational contractual framework in traditional finance, establishing uniform terms and conditions for over-the-counter (OTC) derivatives transactions between two parties. </a><a href="https://prime.greeks.live/question/how-do-courts-interpret-commercially-reasonable-procedures-in-close-out-amount-calculations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![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)

## Reasonable Procedures

Courts interpret "commercially reasonable procedures" as an objective, evidence-based standard for valuing derivative close-outs. </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 central processing core with intersecting, transparent structures revealing intricate internal components and blue data flows. This symbolizes an institutional digital asset derivatives platform's Prime RFQ, orchestrating high-fidelity execution, managing aggregated RFQ inquiries, and ensuring atomic settlement within dynamic market microstructure, optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trading-system-facilitating-high-fidelity-rfq-protocol-optimization-for-best-execution-and-atomic-settlement.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/replacement-transaction/?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)

## 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/early-termination-date/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two intersecting technical arms, one opaque metallic and one transparent blue with internal glowing patterns, pivot around a central hub. This symbolizes a Principal's RFQ protocol engine, enabling high-fidelity execution and price discovery for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/principal-grade-digital-asset-derivatives-rfq-execution-engine.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/early-termination/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A detailed view of an institutional-grade Digital Asset Derivatives trading interface, featuring a central liquidity pool visualization through a clear, tinted disc. Subtle market microstructure elements are visible, suggesting real-time price discovery and order book dynamics](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-system-microstructure-display.jpg)

## Early Termination

Meaning ▴ Early Termination, within the framework of crypto financial instruments, denotes the contractual right or obligation to conclude a derivative or lending agreement prior to its originally stipulated maturity date. </a>

**Tags:** [1992 ISDA](https://options.greeks.live/area/1992-isda/), [Termination Event](https://options.greeks.live/area/termination-event/), [Close-Out Calculation](https://options.greeks.live/area/close-out-calculation/), [Commercially Reasonable](https://options.greeks.live/area/commercially-reasonable/), [Determining Party](https://options.greeks.live/area/determining-party/), [Good Faith](https://options.greeks.live/area/good-faith/)	

## Discover More

- 
### [What Specific Evidence Is Required to Prove a Close-Out Calculation Was Commercially Reasonable?](https://options.greeks.live/question/what-specific-evidence-is-required-to-prove-a-close-out-calculation-was-commercially-reasonable/)
![A precisely balanced transparent sphere, representing an atomic settlement or digital asset derivative, rests on a blue cross-structure symbolizing a robust RFQ protocol or execution management system. This setup is anchored to a textured, curved surface, depicting underlying market microstructure or institutional-grade infrastructure, enabling high-fidelity execution, optimized price discovery, and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-engineered-rfq-block-trade-execution-for-digital-asset-derivatives.jpg)

Proving a commercially reasonable close-out requires a meticulously documented, data-driven process that is objectively justifiable.

- 
### [What Is the Standard for Commercial Reasonability under the 2002 Isda?](https://options.greeks.live/question/what-is-the-standard-for-commercial-reasonability-under-the-2002-isda/)
![Intersecting muted geometric planes, with a central glossy blue sphere. This abstract visualizes market microstructure for institutional digital asset derivatives. The sphere embodies a block trade or private quotation via RFQ protocols, ensuring high-fidelity execution and atomic settlement on a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-5.jpg)

The standard for commercial reasonability is an objective, evidence-based framework for calculating a fair termination value.

- 
### [What Are the Key Differences between the 1992 and 2002 Isda Close-Out Protocols?](https://options.greeks.live/question/what-are-the-key-differences-between-the-1992-and-2002-isda-close-out-protocols/)
![A segmented circular structure depicts an institutional digital asset derivatives platform. Distinct dark and light quadrants illustrate liquidity segmentation and dark pool integration. A central element signifies atomic settlement and price discovery within an RFQ protocol, ensuring high-fidelity execution and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-liquidity-aggregation-protocols.jpg)

The 2002 ISDA protocol mandates a single, objective "Close-out Amount," replacing the 1992 version's subjective and varied options.

- 
### [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.

- 
### [What Legal Challenges Can Arise When Determining a Commercially Reasonable Close out Amount?](https://options.greeks.live/question/what-legal-challenges-can-arise-when-determining-a-commercially-reasonable-close-out-amount/)
![A sophisticated, illuminated device representing an Institutional Grade Prime RFQ for Digital Asset Derivatives. Its glowing interface indicates active RFQ protocol execution, displaying high-fidelity execution status and price discovery for block trades. The design suggests robust market microstructure and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-engine-for-digital-asset-derivatives-best-execution-1.jpg)

Navigating close-out amounts requires a precise, objective, and legally defensible valuation process.

- 
### [Can a Determining Party Ever Revise a Close out Amount Calculation Once It Has Been Issued?](https://options.greeks.live/question/can-a-determining-party-ever-revise-a-close-out-amount-calculation-once-it-has-been-issued/)
![Abstractly depicting an Institutional Grade Crypto Derivatives OS component. Its robust structure and metallic interface signify precise Market Microstructure for High-Fidelity Execution of RFQ Protocol and Block Trade orders. The angular teal plane represents a transparent Liquidity Pool driving Price Discovery and Atomic Settlement.](https://options.greeks.live/wp-content/uploads/2025/07/principals-integrated-crypto-derivatives-rfq-protocol-architecture.jpg)

A Determining Party's ability to revise a Close-Out Amount is a conditional protocol, activated only by manifest error or a breach of good faith.

- 
### [What Are the Primary Differences in the Close-Out Calculation between the Two Agreements?](https://options.greeks.live/question/what-are-the-primary-differences-in-the-close-out-calculation-between-the-two-agreements/)
![Two robust, intersecting structural beams, beige and teal, form an 'X' against a dark, gradient backdrop with a partial white sphere. This visualizes institutional digital asset derivatives RFQ and block trade execution, ensuring high-fidelity execution and capital efficiency through Prime RFQ FIX Protocol integration for atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-optimized-execution.jpg)

The 2002 ISDA Agreement replaces the 1992's subjective rationality with an objective, commercially reasonable standard for close-out.

- 
### [What Constitutes a Commercially Reasonable Procedure in a Close-Out?](https://options.greeks.live/question/what-constitutes-a-commercially-reasonable-procedure-in-a-close-out/)
![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)

A commercially reasonable close-out is the systematic, good-faith execution of a defensible valuation to crystallize risk into a fair value.

- 
### [How Many Quotes Are Needed for a Commercially Reasonable Close out Calculation?](https://options.greeks.live/question/how-many-quotes-are-needed-for-a-commercially-reasonable-close-out-calculation/)
![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)

The number of quotes is not prescribed; the governing principle is a commercially reasonable process to achieve a fair market valuation.

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        "1992 ISDA",
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            "@type": "Question",
            "name": "What Constitutes A Binding Calculation?",
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                "text": "A close-out calculation becomes binding upon its effective delivery and communication to the other party. The ISDA framework does not prescribe a specific form for this communication, but it must be clear, unequivocal, and provide sufficient detail to show how the amount was determined. The delivery of this notice triggers a legal obligation. The calculated amount becomes a debt due and payable. This is the point of no return for the Determining Party in terms of its methodology and substantive inputs."
            }
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        {
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            "name": "What Is The Process For Correcting A Manifest Error?",
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                "text": "While a unilateral redetermination is impermissible, the system does allow for the correction of a \"manifest error.\" This term refers to a mistake that is obvious and indisputable on the face of the calculation. It is a narrow exception to the rule of finality. The process for correcting such an error is not explicitly defined in the ISDA Master Agreement and must be navigated with extreme care."
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                "text": "The quantification of the Close-out Amount is a detailed financial exercise. The goal is to compute a single number that represents the net economic value of the terminated portfolio. The table below provides a simplified, hypothetical example of such a calculation for a small portfolio of two trades."
            }
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                "text": "If the receiving party challenges the Close-out Amount, the dispute resolution process outlined in the ISDA Master Agreement is triggered. The Determining Party cannot simply issue a new number. Instead, it must defend its original calculation. The process typically involves a period of negotiation between the parties. If negotiations fail, the dispute may escalate to mediation or litigation. In court, a judge will not create a \"new\" correct calculation. The court's role is to assess whether the Determining Party's original calculation met the contractual standard. If the court finds that the procedure or the result was not commercially reasonable, it may declare the calculation void and rule on the damages based on evidence presented by both sides. This underscores the immense pressure to execute the initial calculation flawlessly. The entire system is designed to scrutinize that single, binding act."
            }
        }
    ]
}
```


---

**Original URL:** https://options.greeks.live/question/can-a-determining-party-unilaterally-revise-a-close-out-calculation-after-it-has-been-issued/
