Wat is Close-out amount?

The close-out amount is the amount the surviving party determines under the master agreement for the terminated netting set: broadly the cost of replacing the transactions, which may include the replacement counterparty’s view of the survivor’s own credit (a risky close-out) or not (a risk-free close-out). The choice changes the CVA formula: with a risky close-out, the surviving party’s DVA survives the counterparty’s default.