AGREEMENT VALUE METHOD

The ordinary type of the three official methods for the calculation of the termination payments on an fast ended swap made by the International Swaps and Derivatives Association. The agreement value method. The basis of the agreement value method depends on the terms available for a substitute swap for the reason that the counterparty is not the cause of the premature termination may be forced to execute a replacement swap. The calculation of termination payments uses replacement swaps because alterations in market conditions since the first ( now-terminated ) swap were entered will imply that swap terms are unavailable. The replacement swap will most probably have different interest rates and different terms.