# How Does the Close out Amount Methodology Differ from Market Quotation? ▴ Question

**Published:** 2025-08-02
**Categories:** Question

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## Concept

An institutional counterparty default triggers a critical question of valuation. The core of your inquiry ▴ how the [Close-Out Amount methodology](https://prime.greeks.live/question/how-does-the-close-out-amount-methodology-handle-illiquid-or-bespoke-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) differs from [Market Quotation](https://prime.greeks.live/area/market-quotation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) ▴ is not a matter of subtle semantics. It represents a fundamental evolution in the architecture of risk management for over-the-counter (OTC) derivatives, a shift from a rigid, prescriptive protocol to a flexible, principles-based framework. This change was forged in the crucible of market crises, where the older system revealed its structural limitations.

Market Quotation, the mechanism embedded within 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), operates as a highly structured, almost mechanical, process. It mandates that the non-defaulting party solicit price quotations for a replacement transaction from a specified number of leading dealers in the relevant market. The methodology is predicated on an assumption of a functioning, liquid market where multiple, high-credit-quality institutions are able and willing to provide firm prices.

Its objective is to achieve a valuation grounded in observable, third-party data, thereby creating a clear, defensible audit trail. The system’s design prioritizes procedural objectivity above all else.

> The transition from Market Quotation to Close-Out Amount marks a pivotal change from procedural rigidity to commercial reasonableness in derivatives settlement.

The Close-Out Amount methodology, introduced in 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 a direct response to the failings of its predecessor. It replaces the prescriptive requirement for multiple quotes with a broader, more dynamic directive ▴ the determining party must calculate its losses or gains in a “[commercially reasonable](https://prime.greeks.live/area/commercially-reasonable/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” manner. This framework empowers the valuating party to use any relevant information it deems appropriate.

This can include quotes, but it also explicitly allows for the use of internal proprietary models, data from analogous markets, and adjustments for liquidity and [credit risk](https://prime.greeks.live/area/credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The system acknowledges that in a dislocated or one-sided market, obtaining multiple [firm quotes](https://prime.greeks.live/area/firm-quotes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) from top-tier dealers might be impossible or, worse, might yield a distorted valuation that does not reflect the true economic reality of the terminated transaction.

This evolution can be understood through a systemic analogy. Market Quotation is akin to a navigation system that relies solely on a fixed map. On clear roads with established routes, it is perfectly reliable. During an unexpected system-wide traffic collapse, with road closures and detours, the fixed map becomes a liability.

[Close-Out Amount](https://prime.greeks.live/area/close-out-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), conversely, is a modern GPS that integrates the fixed map with real-time satellite data, traffic flow analysis, and predictive algorithms. It is designed to find the most efficient route through a dynamic and unpredictable environment. Its purpose is to arrive at the correct destination ▴ a fair economic value ▴ even when the established pathways have disappeared.

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## Strategy

The strategic choice between the 1992 and [2002 ISDA](https://prime.greeks.live/area/2002-isda/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Master Agreements, and thus between their respective close-out methodologies, reflects a counterparty’s core philosophy on risk, liquidity, and operational resilience. The shift from the prescriptive nature of Market Quotation to the flexible framework of Close-Out Amount was a deliberate architectural redesign aimed at improving stability during periods of systemic stress.

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## From Prescriptive Rules to a Principles Based Approach

The strategic underpinning of the Market Quotation methodology is the pursuit of objective, verifiable evidence of loss. By requiring the non-defaulting party to obtain multiple quotes from pre-approved “[Reference Market-Makers](https://prime.greeks.live/area/reference-market-makers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite),” the [1992 ISDA](https://prime.greeks.live/area/1992-isda/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) sought to minimize disputes by grounding the final settlement amount in external market data. This approach works efficiently in stable, liquid markets where dealers are active and pricing is transparent.

However, its rigidity becomes a critical vulnerability when market liquidity evaporates. During the 2008 financial crisis, for instance, obtaining the requisite three or four quotes for complex derivatives became practically impossible, rendering the Market Quotation process unworkable and leading to legal challenges over what constituted a “commercially reasonable” valuation in its absence.

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## What Are the Core Tenets of Each Valuation System?

The Close-Out Amount methodology of the 2002 ISDA was engineered to solve this very problem. Its core strategic principle is “[commercial reasonableness](https://prime.greeks.live/area/commercial-reasonableness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite),” a term that grants the determining party the latitude to construct a valuation based on the best information available in the prevailing market conditions. This approach internalizes the reality that a single indicative quote, combined with a robust internal pricing model and adjustments for credit and funding costs, may produce a more accurate measure of economic loss than a forced reliance on non-existent firm quotes. It shifts the focus from a procedural checklist to a defensible and holistic valuation process.

> The fundamental strategic difference lies in how each methodology sources its data ▴ Market Quotation relies on external, active markets, while Close-Out Amount can leverage internal models when external markets fail.

A pivotal distinction that emerged from legal precedent is the treatment of the transaction’s full lifecycle. The Market Quotation approach generally followed a “value clean” principle, meaning the transaction was valued as if it would run to its scheduled maturity, ignoring the economic impact of [early termination](https://prime.greeks.live/area/early-termination/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) rights. The Close-Out Amount explicitly reverses this, allowing the valuation to account for all terms of the transaction, including the creditworthiness of the counterparty and the value of embedded termination options. This provides a more complete and economically accurate picture of the loss incurred.

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## Comparative Framework of Valuation Methodologies

To fully grasp the strategic implications, a direct comparison of the operational parameters is necessary. The following table outlines the fundamental differences in the architecture of the two systems.

### Table 1 ▴ Comparison of Market Quotation and Close-Out Amount

| Feature | Market Quotation (1992 ISDA) | Close-Out Amount (2002 ISDA) |
| --- | --- | --- |
| Core Principle | Procedural objectivity through external quotes. | Economic accuracy through commercial reasonableness. |
| Information Sources | Firm quotes from specified Reference Market-Makers. | Any relevant information, including quotes, internal models, and market data. |
| Quote Requirements | Typically requires a minimum of three firm quotes. | No minimum number; one or even zero quotes may be acceptable if commercially reasonable. |
| Quality of Quoters | Must be of the “highest credit standing.” | No prescribed credit standard for quote providers. |
| Treatment of Credit Risk | Generally assumes a “clean” valuation, ignoring counterparty credit risk. | Allows for the inclusion of credit valuation adjustments (CVA). |
| Handling of Illiquidity | Methodology can fail or produce skewed results in illiquid markets. | Specifically designed to be flexible and function during periods of market stress. |
| Governing Philosophy | Prescriptive and rule-based. | Principles-based and flexible. |

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## Execution

The execution of a close-out valuation is a high-stakes process where operational precision is paramount. The procedural differences between Market Quotation and Close-Out Amount are stark, demanding distinct operational playbooks, risk management protocols, and documentation standards. Understanding these execution mechanics is critical for any institution managing a portfolio of [OTC derivatives](https://prime.greeks.live/area/otc-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

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## The Market Quotation Operational Playbook

Executing a valuation under the 1992 ISDA’s Market Quotation methodology is a highly structured, sequential process. The non-defaulting party must adhere to a rigid protocol to ensure the resulting valuation is contractually sound.

- **Identification of Reference Market Makers**
The first step is to consult the ISDA Schedule to identify the list of mutually agreed-upon Reference Market-Makers. These are typically major dealers in the specific type of derivative being terminated.

- **Solicitation of Firm Quotations**
The party must then formally request quotes from at least three of these dealers for a replacement transaction that is identical in all material respects to the terminated trade. This request must specify the exact terms and the deadline for response.

- **Receipt and Validation**
Upon receipt, the quotations must be validated to ensure they are firm, actionable prices. Any indicative or non-conforming quotes are typically discarded. If fewer than the required number of quotes are received, the methodology may fail, potentially forcing a fallback to the “Loss” calculation method.

- **Calculation of Settlement Amount**
Assuming a sufficient number of quotes are obtained, the settlement amount is calculated, often by taking the arithmetic mean of the qualifying quotes. The agreement may specify alternative calculations, such as discarding the highest and lowest quotes.

- **Meticulous Documentation**
Every step of the process ▴ from the initial list of dealers contacted to the time-stamped receipt of each quote and the final calculation ▴ must be rigorously documented to create an unassailable audit trail in case of a subsequent dispute.

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## Executing a Close out Amount Determination

The execution of a Close-Out Amount under the 2002 ISDA is a judgment-based process guided by the principle of commercial reasonableness. It requires a more sophisticated internal infrastructure, including robust modeling capabilities and a clear governance framework.

- **Internal Valuation Models**
The determining party will typically begin by running the terminated transaction through its own internal pricing models. These models should be well-documented, regularly calibrated to market data, and subject to independent validation.

- **Consideration of All Relevant Information**
The valuation team must gather and assess a wide range of data points. This includes, but is not limited to:

<li>Observable market inputs (e.g. interest rate curves, volatility surfaces).

- Indicative quotes from market participants (which need not be firm or from top-tier dealers).

- Information on the costs of unwinding any related hedges.

- Adjustments for funding costs (FVA) and the counterparty’s credit risk (CVA).

</li>
- **Good Faith and Commercial Reasonableness**
The entire process must be conducted in good faith. The final Close-Out Amount should represent a commercially reasonable determination of the economic value of the terminated transaction as of the early termination date.

- **Comprehensive Reporting**
While the process is flexible, the documentation must be even more robust than under Market Quotation. The report should detail all information considered, the valuation methodologies used, the inputs for any models, and a clear justification for the final amount.

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## How Does This Affect Valuation in a Stressed Market?

The true operational divergence appears in a crisis. Imagine a counterparty defaults on a complex 10-year interest rate swap during a severe market downturn.

> In a crisis, the rigid procedural requirements of Market Quotation can lead to a valuation failure, whereas the flexibility of Close-Out Amount allows for a more resilient and economically sound determination.

The following table illustrates the potential outcomes under each methodology in such a scenario.

### Table 2 ▴ Illustrative Valuation Outcome in a Stressed Market

| Valuation Component | Execution under Market Quotation | Execution under Close-Out Amount |
| --- | --- | --- |
| Dealer Quotes | Contacted 4 Reference Market-Makers. Received 1 firm quote; 3 dealers declined to quote due to market volatility. | Received 1 firm quote and 2 indicative quotes. All are considered in the analysis. |
| Valuation Basis | Methodology fails due to insufficient quotes. Forced to fall back to Loss calculation, creating potential for dispute. | Internal model price is used as the primary basis, adjusted by information from the received quotes. |
| Risk Adjustments | Standard calculation does not explicitly account for the heightened credit and funding risk in the market. | Explicit adjustments are made for CVA and FVA based on current market conditions, providing a more accurate loss figure. |
| Final Outcome | A potentially delayed and contentious valuation process with a high risk of litigation. | A documented, commercially reasonable valuation that reflects the true economic loss in the prevailing environment. |

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## References

- International Swaps and Derivatives Association. “1992 ISDA Master Agreement.” ISDA, 1992.

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

- Firth, John. “Derivatives ▴ Law and Practice.” Sweet & Maxwell, 2013.

- Hudson, Alastair. “The Law of Finance.” Sweet & Maxwell, 2nd Edition, 2013.

- Flavell, Antony. “Swaps and Other Derivatives.” John Wiley & Sons, 2nd Edition, 2002.

- Mengle, David. “The ISDA Master Agreement ▴ A Practical Guide.” Palgrave Macmillan, 2010.

- Brister, R. and G. W. L. Kay. “The Court of Appeal decision in Lomas v JFB Firth Rixson.” Butterworths Journal of International Banking and Financial Law, vol. 28, no. 5, 2013, pp. 275-277.

- “Lehman Brothers International (Europe) v Lehman Brothers Finance SA EWCA Civ 188.” Court of Appeal of England and Wales, 14 March 2013.

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## Reflection

The architectural shift from Market Quotation to Close-Out Amount is more than a legal technicality; it is a reflection of the market’s evolving understanding of risk itself. It compels us to look inward at our own operational frameworks. Is your institution’s risk architecture designed with the assumption of fair-weather markets, or is it engineered for resilience, capable of functioning effectively when liquidity vanishes and established benchmarks fail?

The knowledge of these methodologies is a component in a larger system of institutional intelligence. The ultimate strategic advantage lies in building a framework that is not only robust in process but also flexible in principle, prepared to navigate the complexities of markets as they are, not as we wish them to be.

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## Glossary

<a href="https://prime.greeks.live/question/how-does-the-close-out-amount-methodology-handle-illiquid-or-bespoke-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Close-Out Amount Methodology

The Close-Out Amount methodology uses a flexible, principles-based approach to value illiquid derivatives via commercially reasonable procedures. </a><a href="https://prime.greeks.live/area/market-quotation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Market Quotation

Meaning ▴ A market quotation represents the current executable bid and ask prices for a specific financial instrument, typically accompanied by the corresponding tradable sizes or market depth at various price levels. </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">
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## 1992 Isda Master Agreement

Meaning ▴ The 1992 ISDA Master Agreement is a standardized bilateral contract document published by the International Swaps and Derivatives Association, serving as the primary legal framework for over-the-counter derivative transactions between two parties. </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">
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## 2002 Isda Master Agreement

Meaning ▴ The 2002 ISDA Master Agreement represents a standardized bilateral contractual framework for over-the-counter (OTC) derivatives transactions. </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">
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## Commercially Reasonable

Meaning ▴ Commercially Reasonable refers to actions, terms, or conditions that a prudent party would undertake or accept in a similar business context, aiming to achieve a desired outcome efficiently and effectively while considering prevailing market conditions, industry practices, and available alternatives. </a><a href="https://prime.greeks.live/area/credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Credit Risk

Meaning ▴ Credit risk quantifies the potential financial loss arising from a counterparty's failure to fulfill its contractual obligations within a transaction. </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">
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## Firm Quotes

Meaning ▴ A Firm Quote represents a committed, executable price and size at which a market participant is obligated to trade for a specified duration. </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">
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## Close-Out Amount

Meaning ▴ The Close-Out Amount represents the definitive financial value required to terminate a derivatives contract or position, typically calculated upon a default event or a pre-defined termination trigger. </a><a href="https://prime.greeks.live/area/2002-isda/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 2002 Isda

Meaning ▴ The 2002 ISDA Master Agreement constitutes a standardized contractual framework, widely adopted within the over-the-counter (OTC) derivatives market, establishing foundational terms for bilateral derivatives transactions. </a><a href="https://prime.greeks.live/area/reference-market-makers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Reference Market-Makers

Meaning ▴ Reference Market-Makers are designated entities that provide continuous, executable two-sided price quotes for specific financial instruments, serving as a primary source for valuation and liquidity within a defined market segment. </a><a href="https://prime.greeks.live/area/1992-isda/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## 1992 Isda

Meaning ▴ The 1992 ISDA Master Agreement represents a standardized contractual framework for privately negotiated over-the-counter (OTC) derivative transactions between two counterparties. </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">
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## Commercial Reasonableness

Meaning ▴ Commercial reasonableness refers to the standard by which a transaction or action is judged to be consistent with prevailing market practices, industry norms, and sound business judgment, particularly concerning pricing, terms, and execution methodology. </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">
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## Early Termination

Meaning ▴ A contractual provision or systemic mechanism enabling pre-scheduled cessation of a derivative instrument or financial agreement prior to its original maturity. </a><a href="https://prime.greeks.live/area/otc-derivatives/?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)

## Otc Derivatives

Meaning ▴ OTC Derivatives are bilateral financial contracts executed directly between two counterparties, outside the regulated environment of a centralized exchange. </a>

**Tags:** [ISDA Master Agreement](https://options.greeks.live/area/isda-master-agreement/), [Derivatives Settlement](https://options.greeks.live/area/derivatives-settlement/), [Reference Market-Makers](https://options.greeks.live/area/reference-market-makers/), [1992 ISDA Master Agreement](https://options.greeks.live/area/1992-isda-master-agreement/), [2002 ISDA Master Agreement](https://options.greeks.live/area/2002-isda-master-agreement/), [OTC Derivatives](https://options.greeks.live/area/otc-derivatives/)	

## Discover More

- 
### [What Are the Key Differences between the 1992 and 2002 Isda Agreements?](https://options.greeks.live/question/what-are-the-key-differences-between-the-1992-and-2002-isda-agreements/)
![Brushed metallic and colored modular components represent an institutional-grade Prime RFQ facilitating RFQ protocols for digital asset derivatives. The precise engineering signifies high-fidelity execution, atomic settlement, and capital efficiency within a sophisticated market microstructure for multi-leg spread trading.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-system.jpg)

The 2002 ISDA Agreement replaced the 1992 version's subjective "Loss" with an objective "Close-out Amount" for greater legal certainty.

- 
### [Why Was the “First Method” Payment System in the 1992 ISDA Considered Problematic?](https://options.greeks.live/question/why-was-the-first-method-payment-system-in-the-1992-isda-considered-problematic/)
![Robust metallic structures, one blue-tinted, one teal, intersect, covered in granular water droplets. This depicts a principal's institutional RFQ framework facilitating multi-leg spread execution, aggregating deep liquidity pools for optimal price discovery and high-fidelity atomic settlement of digital asset derivatives for enhanced capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-optimized-for-high-fidelity-execution.jpg)

The 1992 ISDA's "First Method" was problematic due to its one-way payment system, creating unfairness and systemic risk.

- 
### [What Are the Primary Legal and Operational Risks of Remaining on the 1992 ISDA Master Agreement?](https://options.greeks.live/question/what-are-the-primary-legal-and-operational-risks-of-remaining-on-the-1992-isda-master-agreement/)
![A central glowing blue mechanism with a precision reticle is encased by dark metallic panels. This symbolizes an institutional-grade Principal's operational framework for high-fidelity execution of digital asset derivatives. It embodies RFQ processing, enabling price discovery within a deep liquidity pool, optimizing market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/precision-core-enabling-institutional-digital-asset-derivatives-rfq-execution.jpg)

Reliance on the 1992 ISDA embeds legal ambiguity and operational friction into a firm's core risk architecture.

- 
### [How Did the Lehman Brothers Bankruptcy Influence the Adoption of the 2002 ISDA Close-Out Amount Protocol?](https://options.greeks.live/question/how-did-the-lehman-brothers-bankruptcy-influence-the-adoption-of-the-2002-isda-close-out-amount-protocol/)
![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)

The Lehman bankruptcy catalyzed the adoption of the 2002 ISDA Protocol by proving the systemic risk of subjective, crisis-unfit valuations.

- 
### [What Are the Practical Implications of the Close-Out Amount for a Derivatives Trading Desk?](https://options.greeks.live/question/what-are-the-practical-implications-of-the-close-out-amount-for-a-derivatives-trading-desk/)
![Sharp, intersecting elements, two light, two teal, on a reflective disc, centered by a precise mechanism. This visualizes institutional liquidity convergence for multi-leg options strategies in digital asset derivatives. It embodies high-fidelity execution via RFQ protocol within a Principal's operational framework, leveraging algorithmic trading engines for capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-block-trade-execution.jpg)

The close-out amount is a defensible, calculated value that crystallizes a portfolio's worth upon contract termination.

- 
### [Why Was the 1992 Isda’s Market Quotation Method Problematic in a Crisis?](https://options.greeks.live/question/why-was-the-1992-isdas-market-quotation-method-problematic-in-a-crisis/)
![A precision-engineered, multi-layered system component, symbolizing the intricate market microstructure of institutional digital asset derivatives. Two distinct probes represent RFQ protocols for price discovery and high-fidelity execution, integrating latent liquidity and pre-trade analytics within a robust Prime RFQ framework, ensuring best execution.](https://options.greeks.live/wp-content/uploads/2025/08/digital-asset-derivatives-rfq-protocols-high-fidelity-execution.jpg)

The 1992 ISDA Market Quotation method failed in a crisis due to its reliance on dealer quotes that vanished in illiquid, stressed markets.

- 
### [What Role Do Indicative Quotes Play in a Derivatives Close-Out Dispute under Illiquid Conditions?](https://options.greeks.live/question/what-role-do-indicative-quotes-play-in-a-derivatives-close-out-dispute-under-illiquid-conditions/)
![A precision probe, symbolizing Smart Order Routing, penetrates a multi-faceted teal crystal, representing Digital Asset Derivatives multi-leg spreads and volatility surface. Mounted on a Prime RFQ base, it illustrates RFQ protocols for high-fidelity execution within market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-digital-asset-derivatives-high-fidelity-execution-probe.jpg)

Indicative quotes provide essential, verifiable data inputs for constructing a commercially reasonable valuation in illiquid markets.

- 
### [How Does the 2002 ISDA Master Agreement Change Valuation Risk?](https://options.greeks.live/question/how-does-the-2002-isda-master-agreement-change-valuation-risk/)
![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)

The 2002 ISDA Agreement re-architects valuation risk by mandating an objective, evidence-based close-out process.

- 
### [How Do Courts Determine Rationality in an ISDA Loss Calculation?](https://options.greeks.live/question/how-do-courts-determine-rationality-in-an-isda-loss-calculation/)
![A transparent glass sphere rests precisely on a metallic rod, connecting a grey structural element and a dark teal engineered module with a clear lens. This symbolizes atomic settlement of digital asset derivatives via private quotation within a Prime RFQ, showcasing high-fidelity execution and capital efficiency for RFQ protocols and liquidity aggregation.](https://options.greeks.live/wp-content/uploads/2025/07/architecting-high-fidelity-execution-for-institutional-digital-asset-derivatives-rfq-protocols-and-systemic-liquidity-aggregation.jpg)

Courts assess ISDA loss calculation rationality by applying an objective standard of commercial reasonableness to both the process and the result.

---

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---

**Original URL:** https://options.greeks.live/question/how-does-the-close-out-amount-methodology-differ-from-market-quotation/
