Termination Rate - ISDA Provision
2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™
Termination Rate in all its glory
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Just one of the four different defined terms relating to interest rate determinations in the ISDA Master Agreement. The weren’t going to leave anything to chance, those ninjas.
Ballast, in a word: Termination Rate is an expression which features but once in the ISDA Master Agreement — it is the fallback interest rate to apply to Early Termination Amounts, when all other methods haven’t worked, to accrue interest between determination and payment — and which, as you’ll see, amounts to the party’s own cross-my-heart-and-hope-to-die-but-I’m-still-not-going-to-justify-it cost of borrowing in the market.
Which scarcely would deserve a definition even if it was used repeatedly through the whole agreement.
In any case, since on your own theory of the game, your counterparty is almost certainly a dead parrot at this point, spending too much time agonising about how much interest you can claim from it on a Close-out Amount you are not going to get paid in any case is hardly one of the better uses of its — or your, for that matter — remaining time on this mortal coil.
- The JC’s famous Nutshell™ summary of this clause