Definitions for "Bilateral Netting"
A legally enforceable arrangement between a bank and a counterparty that creates a single legal obligation covering all included individual contracts. This means that a bank's obligation, in the event of the default or insolvency of one of the parties, would be the net sum of all positive and negative fair values of contracts included in the bilateral netting arrangement.
An agreement between two counterparties whereby the value of all in-the-money contracts is offset by the value of all out-of-the-money contracts, resulting in a single net exposure amount owed by one counterparty to the other.
The process whereby all trades executed on the same day in the same security are netted between two counter parties at the end of the day and one movement of securities and cash is conducted.