If the borrower owes the bank due to a negative MTM, the bank will inflate the amount of the fraction due. When the bank owes a positive valuation to the borrower, the bank usually reduces the amount it is willing to pay. Below are the actual incidents in my firm where my clients were forced to pay swap contracts in advance and pay an unexpected early termination penalty. First step: what is the two-year exchange rate today (past three years ago)? Suppose it is 3%. While a manifest default of the swap contract immediately exempts the non-defaulting or non-defaulting party from other payment obligations, this is not a possible mitigation of the risks and benefits of future payments that are not yet due, nor the risks associated with replacing the injured party`s contract on similar terms. .