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Disclosure regarding Daily Marks
KBNA, as a registered Swap Dealer, is required to provide the Mid-Market Mark (the "Daily Mark") for all Swaps we have with you that are not cleared by a Central Clearing Counterparty, and to disclose the methodology and assumptions used to prepare the Daily Mark. Such Daily Marks are provided through Key Derivatives Online and/or Key2FX. This page includes the methodology and assumptions used to derive the Daily Mark for Swaps, and is being provided to you for informational purposes only and should be treated as confidential information. It should not be shared or reproduced in whole or in part.
The content of this disclosure does not represent legal, financial, tax, accounting or other advice. The Daily Mark is not intended to serve as a valuation or appraisal of a Swap, and we do not represent it as a basis for valuing a Swap in your financial statements, for tax or regulatory reporting, or otherwise.
The Daily Mark information is as of the close of business from the previous business day. The valuation of the Swaps is represented from your perspective. If the Daily Mark appears as a negative amount, you have a negative value in the Swap. If the Daily Mark appears as a positive amount, you have a positive value in the Swap.
Valuation Methodology and Assumptions
The Daily Mark for each Swap is a good-faith estimate of a mid-market price, as an actual price for a Swap is not observable in the market. The Daily Mark is derived using market standard internal models. The models used to calculate the Daily Mark vary depending on the type and terms of the Swap. The models use observable market data as input, when available, to calculate the Daily Mark. In a few instances where observable market data inputs are not available, estimates based on correlations with observable market factors are used. Inputs used in calculating the Daily Mark may include, but are not limited to, yield curves, index forward curves, foreign currency curves, discount curves, and volatility surfaces. Appropriate pricing data will vary depending on the type and terms of the Swap. Inputs are as of the close of business from the previous business day. The applicable inputs are used to estimate the future cash flows for each Swap. The cash flows are then discounted using discount rates based on observable market data that vary depending on the type of Swap and whether a Swap is collateralized or uncollateralized.
In our sole discretion, we may use a variety of methodologies to derive the Daily Marks, depending on the type of Swap, its characteristics, liquidity in the market, and other factors. We are under no obligation to disclose any confidential, proprietary information about the methodologies and assumptions used to prepare the Daily Mark. In our sole discretion, we may modify the pricing models or vary the inputs used based on changes in market or other conditions. Such changes may result in a different Daily Mark for any given Swap.
The Daily Mark is for general guidance only and does not include amounts related to certain Swap specific costs, such as credit spreads, market liquidity, position size, funding, hedging, profit, or other related costs or adjustments. Therefore, the Daily Mark information provided for each Swap may not necessarily:
- be a price at which either you or KeyBank would agree to replace or terminate a Swap,
- depending on certain agreement terms, be the basis for margin calls in connection with a Swap,
- be the value of a Swap recorded on KeyBank’s books and records, and
- be a price at which you could execute a Swap with another Swap dealer or counterparty.