A set of conditions that, if and when met, will trigger liquidation of the underlying asset of a swap and unwind the swap. This is meant to ensure the early termination/ redemption of the underlying asset (such as a bond) to prevent any loss of value in the underlying asset (due to price decline and market movement) that might not allow the swap seller to have the mark-to-market (MTM) value (if it does exist) maintained.
Unwind triggers could come in many forms including dynamic trigger, multiple triggers, etc. Multiple triggers might be needed to better mitigate the risk associated with riskier transactions. Moreover, illiquid assets may also require a number of triggers at the same time.
Unwind triggers are a counterparty risk mitigation tool.
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