Mizuho Capital Markets LLC (“we” or “Mizuho”), as a registered swap dealer and as a registered security-based swap dealer, as applicable, is required to provide you a daily mid-market mark (the “Daily Mark”) for each uncleared swap or security-based swap transaction, as applicable (each a “covered product”), that we enter into with you. Mizuho is required to disclose the methodology used to prepare this regulatory Daily Mark. The methodologies and assumptions described below are solely for the purpose of satisfying Mizuho’s obligations to you under 17 CFR § 23.431(d) and 17 CFR § 240.15Fh-3(c)(2) with respect to the transactions identified below. The information presented in this document is based on assumptions, historical information and pricing data that Mizuho, in its discretion, considers appropriate. Mizuho does not represent that this information is accurate, complete or current, and Mizuho has no liability with respect thereto. This information is intended only as a reference and should not be relied upon without further evaluation by you, in consultation with your professional advisors, for the maintenance of your books and records or for tax, accounting, financial reporting, disclosure or other purposes.
Please note that any Daily Mark we provide to you may not necessarily, and would often not be expected to be, a price at which either we or you would agree to replace or terminate a covered product; include adjustments you need to make internally to account for your credit reserves, funding or liquidity costs; unless otherwise expressly agreed, be the basis for margin calls and maintenance of collateral; or be the value of the covered product that is marked on our books and records. Rather, it will represent a mathematical approximation of a market value as of a given date derived from proprietary models and methodologies based on certain assumptions regarding past, present and future market conditions or other factors, or from other sources of pricing information (e.g., third party quotes, prices on trading venues, or clearinghouse marks for comparable or interpolated Transactions) or a market value that is defined in the related ISDA Agreement or confirmation between you and Mizuho (the “Applicable Agreement”). Unless specifically provided otherwise in the Applicable Agreement, we may, in our sole discretion, use a variety of models, methodologies and assumptions to prepare our Daily Mark, depending upon the type of Transaction, its characteristics, whether there is a liquid market, and other factors.
Generally, unless the Applicable Agreement provides for a different formula or methodology to determine the market value of the covered product(s) covered thereunder, a Daily Mark for a covered product is prepared by discounting future cashflows of the covered product to arrive at a current value and, to the extent applicable, the index, interest rate curves, and, where necessary, volatilities, are determined on the basis of observable market inputs, when available, and on the basis of estimates when observable market inputs are not available. Such interest rate curves and volatility levels are used to estimate future cashflows that are not certain (for example floating interest rates or embedded optionality features). In some cases, we may use probabilistic models to determine the expected value of future cashflows. Where such determination of a Daily Mark is made, such estimated cashflows, along with future cashflows that are known with certainty, are then discounted to their present value using discount factors derived from relevant market inputs. With respect to certain total return swaps that constitute security-based swaps, The Applicable Agreement may generally provide for market value to be determined on the basis of a pre-agreed base price of the related reference obligation and the value of the reference obligation at the time of determination (which, in turn, may be determined pursuant to bids to be obtained from relevant dealers). Unless otherwise specified in the Applicable Agreement, the USD leg of FX swaps and multi-currency interest rate swaps and the discounting rate used for U.S. dollar (“USD”) denominated covered products will be the secured overnight financing rate (“SOFR”). Unless otherwise specified in the Applicable Agreement, the discounting rate used for non-USD denominated single currency cross currency swaps will be the relevant OIS rate and the discounting rate for the non-USD legs of FX swaps, and multi-currency interest rate swaps and for interest rate swaps in currencies determined to have insufficient liquidity will be basis-adjusted curves. Unless otherwise specified in the Applicable Agreement SOFR will be the applicable discounting rate for all other covered products.
In our sole discretion, we may use a variety of methodologies to prepare the estimated cashflows described above, including without limitation, Monte Carlo simulations or other mathematical pricing models. In our sole discretion, we may vary the inputs used in such simulations and modelling, and we are under no obligation to disclose to you the methodology used or the inputs thereto.
With respect to single name equity security-based swaps, the Daily Mark is calculated based on the assumptions that the transaction will be terminated on the earliest possible termination date following a calculation date and that the closing level or settlement price and any relevant rate of exchange between the currency in which the underlier is denominated and the settlement currency of the transaction, as applicable, of each applicable underlier on the relevant valuation date will be equal to its most recent closing level, settlement price or applicable exchange rate as of the relevant calculation time. The Daily Mark will reflect an accrued amount denominated in the settlement currency, including accrued interest, excluding the assumed termination date.
Mizuho provides the regulatory Daily Marks to you only in respect of uncleared covered products. For cleared covered products originally executed by you with us, you have the right to receive the daily mark from the relevant designated clearing organization upon request.
Daily Marks take into account unsettled cash payments due from one party to the other and are provided only in respect of covered product transactions which have not terminated or been novated or otherwise transferred to a third party, notwithstanding any unsettled cash payments that may remain in respect of such a terminated, novated or otherwise transferred covered product transaction.