Bank One Corporation - Page 207

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          dealers for the replacement costs of the relevant terminated                
          transactions.  Neither of the ISDA form agreements provided                 
          specifically for the addition of a surcharge, or discount, for              
          administrative costs adjustments when computing the amount paid             
          on early termination due to the default of one party.                       
                    6.  Assignments and Buyouts of Swaps                              
               A party to a swap agreement seldom assigned its interest in            
          the swap.  In the rare case of an assignment, a third party was             
          substituted for one of the two original counterparties.  The                
          third party usually made or received an upfront payment                     
          approximately equal to the market value of the swap.  In these              
          cases, the market value of the swap generally equaled the                   
          difference in the present value of the anticipated net cashflow             
          from each of the swap’s legs.                                               
               If a swap counterparty wanted to withdraw from a                       
          transaction, it usually terminated the transaction through a                
          buyout.  In a buyout, one counterparty terminated the swap by               
          paying the other counterparty a lump-sum amount approximately               
          equal to the swap’s market value.  In these cases, the market               
          value of the swap generally equaled the difference in the present           
          value of the anticipated net cashflow from each of the swap’s               
          legs.                                                                       
               Buyouts of swaps were frequent during the relevant years,              
          and they occurred in the case of both interdealer and end-user              






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Last modified: May 25, 2011