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[[Close-out netting]] is the process of doing that under a [[master agreement]] such as the {{isdama}} when one party defaults. Because an {{isdama}} may have many {{isdaprov|Transaction}}s under it, some with positive and some with negative [[mark-to-market]] exposures, the ability to “net down” all these exposures to a single net sum is important when calculating risk weighting. | [[Close-out netting]] is the process of doing that under a [[master agreement]] such as the {{isdama}} when one party defaults. Because an {{isdama}} may have many {{isdaprov|Transaction}}s under it, some with positive and some with negative [[mark-to-market]] exposures, the ability to “net down” all these exposures to a single net sum is important when calculating risk weighting. | ||
In order to achieve that "net" treatment under relevant regulations — there are a lot of them; locally, regionally, and under Basel etc | In order to achieve that "net" treatment under relevant regulations — there are a lot of them; locally, regionally, and under the [[Basel Accords|Basel banking accords]] etc — one must have [[legal opinion|legal opinions]] from all relevant jurisdictions that the "[[close out netting]]" would be effective in the [[insolvency]] of the counterparty. | ||
{{set-off and netting}} | {{set-off and netting}} |