Template:M summ 2002 ISDA Applicable Close-out Rate

Truly from the I’m sorry I asked file — almost in the shoot me file. You can sense the pragmatists in ISDA’s crack drafting squad™ — if there are any — had well and truly tuned out by the time they got to this definition.

You have the Default Rate, the Non-default Rate, the Applicable Deferral Rate, and the Termination Rate. Depending on how and why you have closed out the 2002 ISDA, and whether you were at fault, a different rate will apply.

The four rates are:

• “Default Rate” means the payee’s self-certified cost of funding plus 1% per annum.
  
• “Non-default Rate” means a rate obtained in good faith by the Non-defaulting Party from a major bank in the interbank market for overnight deposits to reasonably reflect prevailing market conditions.
  
• “Termination Rate” means each party’s self-certified average cost of funding.
  

All sensible enough, if not a little over-determined — and then the three “Applicable Deferral Rates”, which convert this from something that is merely tedious to the stuff of a Hieronymus Bosch nightmare.