Bankruptcy and Financial Distress Litigation

Valuation of Structured Products and Derivative Closeouts

Valuation of Structured Products and Derivative Closeouts

When a derivative counterparty declares bankruptcy, it triggers the termination of its derivative contracts. The derivatives counterparties to the bankrupt entity would make claims in bankruptcy courts based on the value of each derivative position as of the termination date. This process is referred to as derivative closeout. Although the International Swaps and Derivatives Association (ISDA) has prescribed standard processes for determining the value of derivatives in closeout situations, the implementation of these processes often yields results that are highly contested and require sophisticated analysis. This is especially true for illiquid or complex derivative contracts.

NERA has assisted clients in numerous derivative closeouts, including those that arise due to failure in meeting collateral calls. We have valued large derivative books that contained thousands of contracts, both vanilla and exotic in nature. Our valuations of complex financial instruments use real options, probability-weighted and dynamic cash flow models, the stock and debt approach to real property appraisal, and event studies to measure lost profits. Our experience with a variety of financial instruments, including structured products, credit default swaps, and other complex derivatives, allows us to quickly assess the impact of market conditions on the value of the derivatives.

Name Title Location Phone Email
Dr. Faten Sabry Managing Director
Chair of NERA's Global Securities and Finance Practice
Bankruptcy Practice Chair
New York City
London
+1 212 345 3285
+44 20 7659 8618
faten.sabry@nera.com
Jorge Baez Director Miami
New York City
Mexico City
+1 305 341 5060
+1 212 345 5753
+52 55 9628 7550
jorge.baez@nera.com
Dr. Airat Chanyshev Associate Director New York City +1 212 345 7336 airat.chanyshev@nera.com
William P. Hrycay Associate Director New York City +1 212 345 1518 william.hrycay@nera.com
Dr. Sharon Brown-Hruska Affiliated Consultant Washington, DC +1 202 466 3510 sharon.hruska.affiliate@nera.com
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