Cliquet - Meaning

A structured trade where the payoff can be likened to that of a series of consecutive forward-starting options, the Strike Price of each being the Settlement Price of the previous. The profit from each period (being the Strike Price differential) can either be paid after each period, held to maturity and then paid or manipulated in a more exotic fashion at maturity. Also known as ��ratchet option�� or ��cliquet option.�� Close-Out Netting The process following the occurrence of a Termination Event or an Event of Default by one or both counterparties under an ISDA Master Agreement, resulting in the designation or occurrence of an Early Termination Date and the early termination of all affected transactions. The net exposure one party has to its counterparty in respect of the Terminated Transactions is determined to arrive at a net settlement amount owing from one party to the other.