# What Is the Evidentiary Burden for Proving a Close out Calculation Was Commercially Reasonable? ▴ Question

**Published:** 2025-08-19
**Categories:** Question

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## The Objective Standard of Proof

In the architecture of financial markets, the failure of a counterparty represents a critical stress test for the system’s integrity. When such a default occurs under a master agreement, like the widely used ISDA Master Agreement, the non-defaulting party is tasked with a procedure of immense consequence ▴ the close-out calculation. This process involves terminating all outstanding transactions and determining a single net figure that crystallizes the financial exposure between the two entities. The central pillar supporting the legitimacy of this calculation is the principle of “[commercial reasonableness](https://prime.greeks.live/question/how-does-the-concept-of-commercial-reasonableness-apply-to-selecting-valuation-dates/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).” Proving that a close-out was conducted in a [commercially reasonable](https://prime.greeks.live/area/commercially-reasonable/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) manner requires the assembly of a robust evidentiary file demonstrating that the procedures used and the results obtained were objective, transparent, and reflective of market realities at the time of the default.

The [evidentiary burden](https://prime.greeks.live/area/evidentiary-burden/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) falls squarely on the “[Determining Party](https://prime.greeks.live/question/what-is-the-role-of-the-calculating-party-in-determining-the-final-settlement-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” ▴ the entity performing the calculation. This party must construct a compelling narrative, supported by concrete data, that its actions were not merely convenient or self-serving, but were aligned with how a rational market participant would act under similar, often turbulent, circumstances. The standard is objective, meaning a court or tribunal will assess the actions against prevailing market practices and available data, rather than the subjective belief of the calculating party.

This distinction is critical; it moves the evaluation from a question of good faith alone to a rigorous, fact-based inquiry. The evidence must show a disciplined process aimed at achieving a fair market valuation, whether through obtaining quotes for replacement transactions, consulting independent [market data](https://prime.greeks.live/area/market-data/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) sources, or applying consistent and well-documented internal valuation models.

> The core of the evidentiary challenge lies in demonstrating that the close-out calculation was an objective, verifiable process designed to replicate the economic equivalent of the terminated transactions at a specific moment in time.

Understanding this burden is fundamental to robust counterparty [risk management](https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). A failure to adequately document and justify a [close-out calculation](https://prime.greeks.live/area/close-out-calculation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) can expose an institution to protracted legal challenges, potentially leading to the recalculation of the close-out amount by a court and significant financial loss. Therefore, the process of evidence gathering is not an afterthought but an integral part of the close-out protocol itself. It is a systematic assembly of proof designed to withstand intense scrutiny, ensuring that in the event of a dispute, the commercial reasonableness of the actions taken is not just asserted, but demonstrably proven.

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## A Framework for Defensible Valuation

Successfully meeting the evidentiary burden for a commercially reasonable close-out hinges on a strategic approach to valuation and documentation. The objective is to create a clear, auditable trail that validates both the procedures followed and the final calculated amount. This framework rests on two foundational pillars ▴ [procedural integrity](https://prime.greeks.live/area/procedural-integrity/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and valuation objectivity. Procedural integrity concerns the “how” of the calculation, while valuation objectivity focuses on the “what” ▴ the market data and methodologies used to arrive at a number.

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## Procedural Integrity the Blueprint of Action

A defensible close-out process begins long before a counterparty defaults. It is embedded in an institution’s internal policies and risk management framework. When a close-out is triggered, adherence to a pre-defined, systematic process is the first layer of evidence.

- **Timeliness** ▴ The calculation should be performed as of the [Early Termination Date](https://prime.greeks.live/area/early-termination-date/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), or as soon as commercially reasonable thereafter. Unexplained delays can be viewed as an attempt to game the market, and the rationale for the chosen valuation date must be documented, especially in volatile conditions.

- **Internal Communication** ▴ Records of internal discussions, meeting minutes, and decisions made by the relevant risk or trading desks are vital. This documentation should outline the steps taken, the options considered, and the justification for the chosen [valuation methodology](https://prime.greeks.live/area/valuation-methodology/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

- **Consistent Application** ▴ The procedures applied should be consistent with the firm’s past practices in similar situations. Any deviation from established policy must be documented with a clear and commercially sound reason.

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## Valuation Objectivity the Core of the Calculation

The selection of a valuation methodology is perhaps the most scrutinized aspect of a close-out. 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) provides a non-exhaustive list of sources that a Determining Party may consider, emphasizing an objective, market-based approach. The strategy is to use the most reliable and transparent method available under the prevailing market circumstances.

The primary methods for valuation each have their own strategic considerations and evidentiary requirements. A robust strategy often involves using more than one method to cross-validate the results, thereby strengthening the claim of commercial reasonableness.

### Comparison of Valuation Methodologies

| Valuation Method | Description | Evidentiary Requirements | Strategic Considerations |
| --- | --- | --- | --- |
| Replacement Transaction | Entering into an actual transaction with a third party to replace the economic substance of the terminated trades. | Executed trade confirmations, term sheets, and records of communication with the third party. | This is often considered strong evidence as it reflects an actual, arm’s-length market price. However, it may not be feasible for illiquid or complex portfolios, or in distressed markets. |
| Dealer Quotations | Soliciting firm or indicative quotes from several independent market makers for a replacement transaction. | A log of all dealers contacted, the quotes received (both written and verbal, with contemporaneous notes), and timestamps. Evidence of the criteria used to select the dealers is also important. | Using a pool of reputable, independent dealers demonstrates a good-faith effort to survey the market. The number of quotes should be sufficient to establish a representative market level. |
| Market Data Analysis | Using observable market data (e.g. prices, rates, volatilities from sources like Bloomberg or Reuters) to feed into an internal valuation model. | Screenshots of relevant market data pages, documentation of the valuation model’s methodology and assumptions, and proof of the model’s consistent application. | This method is useful for standardized products where reliable market data is readily available. The key is to prove the inputs were objective and the model is sound and consistently applied. |

> A multi-pronged valuation strategy, combining external quotes with internal model-based calculations, provides a powerful defense against claims of unreasonableness.

Ultimately, the strategy is one of transparency and diligence. The evidentiary file should tell a story of a rational, objective process undertaken in good faith. It must demonstrate that the Determining Party surveyed the available options, selected a reasonable methodology based on the [market conditions](https://prime.greeks.live/question/under-what-market-conditions-would-an-rfq-be-preferable-to-a-lit-market-execution-for-a-large-order/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), and executed that methodology with care. This proactive approach to evidence collection transforms the close-out from a mere calculation into a defensible and robust component of the firm’s risk management system.

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## Assembling the Evidentiary Record

The execution of a defensible close-out calculation culminates in the assembly of a comprehensive [evidentiary record](https://prime.greeks.live/question/what-is-the-evidentiary-threshold-for-a-successful-clearly-erroneous-trade-filing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This is the operational phase where strategic principles are translated into a tangible file of proof. The objective is to construct a dossier that can be handed to legal counsel or presented in a dispute, leaving no doubt as to the commercial reasonableness of the actions taken. This process requires meticulous attention to detail and a systematic approach to data capture and preservation.

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## The Chronological Dossier a Step-By-Step Assembly

The evidentiary record should be organized chronologically, beginning from the moment the default event occurs. This narrative structure helps to contextualize the decisions made by the Determining Party in light of the information available at each stage.

- **The Default Event** ▴ The file must begin with clear evidence of the Event of Default. This includes the relevant notices sent and received, public announcements (e.g. bankruptcy filings), and any communications with the counterparty regarding the default.

- **Internal Mobilization** ▴ The record should include internal communications that initiated the close-out process. This demonstrates that the firm acted promptly upon learning of the default. Key documents include emails tasking the relevant teams and initial risk assessment reports.

- **Valuation Date Selection** ▴ A critical piece of evidence is the rationale for selecting the valuation date(s). This should be supported by a memo or meeting minutes explaining why the chosen date was commercially reasonable, referencing market conditions and the terms of the governing agreement.

- **Data Gathering and Valuation** ▴ This forms the core of the dossier. All data used in the valuation must be preserved in its original form. This includes screenshots, data downloads, and detailed logs of all communications.

- **Calculation and Verification** ▴ The final calculation should be presented in a clear, understandable format. The record must also include evidence of an internal review or verification process, showing that the calculation was checked for accuracy and adherence to the chosen methodology.

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## Executing the Dealer Poll a Practical Example

A [dealer poll](https://prime.greeks.live/area/dealer-poll/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a common method for establishing a fair market value, but its evidentiary strength depends entirely on how it is executed. A poorly managed poll can be dismissed as self-serving. A well-executed poll is powerful proof of objective market testing.

> The value of a dealer poll lies not just in the prices obtained, but in the documented fairness and rigor of the solicitation process itself.

The following table illustrates the level of detail required in a dealer poll log. This log is a critical piece of evidence, demonstrating the breadth and integrity of the market survey.

### Sample Dealer Poll Log ▴ Close-Out of USD/JPY Cross-Currency Swap

| Timestamp (UTC) | Dealer Contacted | Contact Person | Method of Contact | Quote Type | Quote Received (Mid-Market) | Notes |
| --- | --- | --- | --- | --- | --- | --- |
| 2025-08-19 10:05:15 | Global Bank A | John Doe | Recorded Phone Line | Firm | – $5,250,000 | Quote firm for 5 minutes. Dealer noted thin liquidity. |
| 2025-08-19 10:07:40 | International Bank B | Jane Smith | Bloomberg MSG | Indicative | – $5,100,000 | Provided for guidance only, not tradable. Market volatile. |
| 2025-08-19 10:08:22 | Investment House C | Peter Jones | Recorded Phone Line | Firm | – $5,310,000 | Quote firm for 5 minutes. Noted credit of determining party was a factor. |
| 2025-08-19 10:12:03 | Securities Firm D | Emily White | Email | Firm | – $5,280,000 | Response received via email with full terms attached. |
| 2025-08-19 10:15:50 | European Bank E | David Green | Recorded Phone Line | No Quote | N/A | Desk declined to quote due to internal risk limits on this currency pair. |

This log, when combined with the underlying communications (email archives, chat logs, call recordings), creates a powerful evidentiary package. It demonstrates a systematic effort to obtain multiple data points from a range of credible sources. It also transparently records instances where quotes were not provided, which itself is relevant information about market conditions. By executing the close-out with the discipline of someone who knows they may one day have to defend their actions in court, an institution transforms a procedural requirement into a strategic asset that protects its financial interests.

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## References

- Lehman Brothers Special Financing Inc. v National Power Corporation EWHC 487 (Comm).

- Fondazione Enasarco v Lehman Brothers Finance SA EWHC 1307 (Ch).

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

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

- Socimer International Bank Ltd (in liquidation) v Standard Bank London Ltd EWCA Civ 116.

- McKnight, Andrew, and Joanna Benjamin. The Law of International Finance. 2nd ed. Oxford University Press, 2020.

- Gregory, Jon. The Law and Practice of International Finance. Sweet & Maxwell, 2018.

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## The Systemic Value of Proof

The evidentiary burden for proving a commercially reasonable close-out is a powerful lens through which to view the architecture of counterparty risk management. The requirement for objective, verifiable proof elevates the close-out process from a simple administrative task to a disciplined, strategic protocol. It compels market participants to build systems and procedures that are not only efficient in normal market conditions but also resilient and defensible under stress. The quality of an institution’s evidentiary record is, in essence, a reflection of the quality of its risk management systems.

It reveals a commitment to transparency, objectivity, and procedural rigor that extends far beyond a single defaulted counterparty. This commitment forms the bedrock of trust in a market where certainty and predictability are the ultimate currency. How does your own operational framework measure up when viewed through this lens of ultimate defensibility?

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## Glossary

<a href="https://prime.greeks.live/question/how-does-the-concept-of-commercial-reasonableness-apply-to-selecting-valuation-dates/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Commercial Reasonableness

Commercial reasonableness is a validation protocol ensuring a valuation date is an objective, defensible snapshot of market reality. </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/evidentiary-burden/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Evidentiary Burden

Meaning ▴ The Evidentiary Burden, within the architecture of institutional digital asset derivatives, defines the systemic requirement for irrefutable, verifiable proof of transaction validity, asset ownership, or system state integrity. </a><a href="https://prime.greeks.live/question/what-is-the-role-of-the-calculating-party-in-determining-the-final-settlement-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Determining Party

The Calculating Party is the contractually designated entity that determines a derivative's value, ensuring precise financial settlement. </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">
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## Market Data

Meaning ▴ Market Data comprises the real-time or historical pricing and trading information for financial instruments, encompassing bid and ask quotes, last trade prices, cumulative volume, and order book depth. </a><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 ▴ The Close-Out Calculation is the precise algorithmic determination of a final net financial obligation or entitlement arising from the termination or liquidation of one or more derivative positions, typically triggered by a pre-defined event such as a margin breach or contract expiry. </a><a href="https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sharp, transparent, teal structures and a golden line intersect a dark void. This symbolizes market microstructure for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-execution-leveraging-granular-market-microstructure-intelligence.jpg)

## Risk Management

Meaning ▴ Risk Management is the systematic process of identifying, assessing, and mitigating potential financial exposures and operational vulnerabilities within an institutional trading framework. </a><a href="https://prime.greeks.live/area/procedural-integrity/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Procedural Integrity

Meaning ▴ Procedural Integrity defines the absolute adherence to predefined operational protocols and system rules, ensuring deterministic, auditable, and consistent outcomes in the execution and settlement of digital asset derivatives. </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">
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## Early Termination Date

Meaning ▴ The Early Termination Date specifies a pre-agreed date or a date triggered by specific events, upon which a derivative contract or financial agreement concludes prior to its originally scheduled maturity. </a><a href="https://prime.greeks.live/area/valuation-methodology/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Valuation Methodology

Meaning ▴ A structured computational framework or set of procedures employed to ascertain the current economic worth of a financial instrument, portfolio, or enterprise, typically utilizing established financial models and market data inputs. </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/question/under-what-market-conditions-would-an-rfq-be-preferable-to-a-lit-market-execution-for-a-large-order/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Market Conditions

An RFQ is preferable for large orders in illiquid or volatile markets to minimize price impact and ensure execution certainty. </a><a href="https://prime.greeks.live/question/what-is-the-evidentiary-threshold-for-a-successful-clearly-erroneous-trade-filing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Evidentiary Record

A successful clearly erroneous filing requires immediate, data-driven proof that a trade's price was a material deviation from the prevailing market. </a><a href="https://prime.greeks.live/area/dealer-poll/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A macro view reveals a robust metallic component, signifying a critical interface within a Prime RFQ. This secure mechanism facilitates precise RFQ protocol execution, enabling atomic settlement for institutional-grade digital asset derivatives, embodying high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/core-secure-institutional-digital-asset-derivatives-rfq-trade-system-element.jpg)

## Dealer Poll

Meaning ▴ A Dealer Poll represents a structured electronic mechanism for an institutional principal to solicit firm, executable two-way price quotes from a pre-selected group of liquidity providers for a specific digital asset derivative instrument. </a>

**Tags:** [Objective Standard](https://options.greeks.live/area/objective-standard/), [ISDA Master Agreement](https://options.greeks.live/area/isda-master-agreement/), [Counterparty Default](https://options.greeks.live/area/counterparty-default/), [Risk Management](https://options.greeks.live/area/risk-management/), [Financial Litigation](https://options.greeks.live/area/financial-litigation/), [Replacement Transaction](https://options.greeks.live/area/replacement-transaction/)	

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- 
### [How Do Courts Treat Close-Out Calculations in Illiquid Market Conditions?](https://options.greeks.live/question/how-do-courts-treat-close-out-calculations-in-illiquid-market-conditions/)
![A stylized spherical system, symbolizing an institutional digital asset derivative, rests on a robust Prime RFQ base. Its dark core represents a deep liquidity pool for algorithmic trading. A blue band signifies high-fidelity execution protocols, ensuring optimal price discovery and capital efficiency within market microstructure, enhancing alpha generation.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-rfq-protocol-engine-facilitating-best-execution-and-liquidity-aggregation-for-digital-asset-derivatives.jpg)

Courts require an objectively defensible process for derivative close-outs in illiquid markets, making your firm's valuation architecture the primary evidence.

- 
### [In What Ways Can the Valuation of Terminated Derivatives Be Disputed during a Default?](https://options.greeks.live/question/in-what-ways-can-the-valuation-of-terminated-derivatives-be-disputed-during-a-default/)
![A meticulously engineered mechanism showcases a blue and grey striped block, representing a structured digital asset derivative, precisely engaged by a metallic tool. This setup illustrates high-fidelity execution within a controlled RFQ environment, optimizing block trade settlement and managing counterparty risk through robust market microstructure. It highlights a Prime RFQ intelligence layer.](https://options.greeks.live/wp-content/uploads/2025/08/precision-engineered-institutional-digital-asset-derivatives-rfq-execution.jpg)

Disputing a terminated derivative's value involves a forensic audit of the close-out process and its commercial reasonableness.

- 
### [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.

- 
### [What Constitutes a Defensible Process for Documenting Close out Calculations?](https://options.greeks.live/question/what-constitutes-a-defensible-process-for-documenting-close-out-calculations/)
![Intersecting translucent planes with central metallic nodes symbolize a robust Institutional RFQ framework for Digital Asset Derivatives. This architecture facilitates multi-leg spread execution, optimizing price discovery and capital efficiency within market microstructure. It ensures high-fidelity execution for Bitcoin Options and Ethereum Futures.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-framework.jpg)

A defensible close-out calculation is a systematically documented, objectively reasonable valuation process anchored in the ISDA framework.

- 
### [What Are the Strategic Implications of the Set off Provision in the 2002 Isda Agreement?](https://options.greeks.live/question/what-are-the-strategic-implications-of-the-set-off-provision-in-the-2002-isda-agreement/)
![A sophisticated metallic mechanism with a central pivoting component and parallel structural elements, indicative of a precision engineered RFQ engine. Polished surfaces and visible fasteners suggest robust algorithmic trading infrastructure for high-fidelity execution and latency optimization. Circular depressions imply aggregated inquiry points, facilitating price discovery for institutional digital asset derivatives within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-mechanism-for-institutional-digital-asset-derivatives-rfq-and-high-fidelity-execution.jpg)

The 2002 ISDA set-off provision is a critical credit defense mechanism, enabling a single net settlement upon counterparty default.

- 
### [In What Ways Does the 2002 ISDA Agreement Provide Greater Protection to a Non-Defaulting Party?](https://options.greeks.live/question/in-what-ways-does-the-2002-isda-agreement-provide-greater-protection-to-a-non-defaulting-party/)
![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. It signifies the robust Prime RFQ underpinning RFQ protocols for atomic settlement and best execution.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-infrastructure-precision.jpg)

The 2002 ISDA Agreement enhances non-defaulting party protection via objective close-out valuation and faster default response mechanisms.

- 
### [How Does the 2002 ISDA Agreement Alter Counterparty Risk Dynamics?](https://options.greeks.live/question/how-does-the-2002-isda-agreement-alter-counterparty-risk-dynamics/)
![A complex interplay of translucent teal and beige planes, signifying multi-asset RFQ protocol pathways and structured digital asset derivatives. Two spherical nodes represent atomic settlement points or critical price discovery mechanisms within a Prime RFQ. Water droplets indicate granular market microstructure data, enhancing high-fidelity execution and mitigating counterparty risk for institutional participants.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-for-optimal-liquidity-aggregation-and-high-fidelity-execution.jpg)

The 2002 ISDA Agreement enhances counterparty risk management by codifying a robust, enforceable protocol for netting exposures upon default.

- 
### [How Does the Close out Amount Calculation Differ from Market Quotation and Loss?](https://options.greeks.live/question/how-does-the-close-out-amount-calculation-differ-from-market-quotation-and-loss/)
![Abstract layers in grey, mint green, and deep blue visualize a Principal's operational framework for institutional digital asset derivatives. The textured grey signifies market microstructure, while the mint green layer with precise slots represents RFQ protocol parameters, enabling high-fidelity execution, private quotation, capital efficiency, and atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-layered-rfq-protocol-for-digital-asset-execution-system.jpg)

The Close-Out Amount calculation is a flexible, principles-based valuation system superseding the rigid Market Quotation and subjective Loss methods.

- 
### [What New Termination Events Were Introduced in the 2002 Isda Master Agreement and Why?](https://options.greeks.live/question/what-new-termination-events-were-introduced-in-the-2002-isda-master-agreement-and-why/)
![Robust institutional Prime RFQ core connects to a precise RFQ protocol engine. Multi-leg spread execution blades propel a digital asset derivative target, optimizing price discovery. This system ensures high-fidelity execution within complex market microstructure, managing latent liquidity and counterparty risk effectively.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-proto-insti-digital-asset-derivs-hi-fi-exec-capital-effi-risk-mgmt.jpg)

The 2002 ISDA Agreement introduced a Force Majeure Termination Event, creating a more resilient protocol for managing systemic risk.

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---

**Original URL:** https://options.greeks.live/question/what-is-the-evidentiary-burden-for-proving-a-close-out-calculation-was-commercially-reasonable/
