The easiest way to terminate the contract is to hold it to maturity. However, if one or both parties in a swap contract wish to terminate, there are several methods:
· Enter into a separate and offsetting swap
· Cash settlement based on market value.
· Sell the swap to another party, usually requires permission from the other party and not commonly used in the market place.
· Use a swaption. A swaption gives the owner the right to enter into another swap at terms that are set in advance. By executing the swaption, the party can offset its current swap.
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