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| {{isda92anat|6(e)(i)}} | | {{isda92manual|6(e)(i)}} |
| ''Compare with {{isdaprov|Close-out Amount}} under the {{2002ma}}''<br><br>
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| The ''' Second Method''' is a method of determining the {{isdaprov|Early Termination Amount}} due upon close out of an {{1992ma}}. It requires a payment to be made equal to the net value of the terminated transactions, even if this means a payment ''to'' the {{isdaprov|Defaulting Party}}.
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| In case of a termination event under the {{isdama}} it is good to have your payment and calculation methods well-defined. The section {{isdaprov|Payments on Early Termination}} ({{isdama}} Section {{isdaprov|6(e)}} and Schedule 1(f)) covers this.
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| *'''{{isdaprov|Market Quotation}}''' requires at least three arm's length quotations to value the transactions to be terminated, compared to {{isdaprov|Loss}} where the {{isdaprov|Non-defaulting party}} determines (in "[[good faith]]") the losses and costs (minus its gains) in potentially replacing {{isdaprov|Terminated Transactions}}.
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| *'''{{isdaprov|Second Method}}''': the net [[close-out]] amount is always paid out to the party to whom it is due, regardless whether it is the {{isdaprov|Defaulting Party}} or the {{isdaprov|Non-defaulting party}}.
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| ===Comparison with the {{isdaprov|First Method}}===
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| Not generally used, under the {{isdaprov|First Method}}, a payment is only ever made by the {{isdaprov|Defaulting Party}} to the {{isdaprov|Non-defaulting Party}}. Which is a bit rubbish, and plays havoc with capital adequacy calculations. The {{isdaprov|First Method}} is thus a back door to withhold payments due under the {{isdama}} and set those off with other (possible) defaulted payments and is therefore undesirable.
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| ===See also===
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| *{{isdaprov|General Conditions}} - the ominous subject of Section {{isdaprov|2(a)(iii)}} and the [[Metavante]] case.
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| *{{isdaprov|Close-out Amount}} - the {{2002ma}} equivalent.
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