The risk that closeout proceedings pose to either party, in a set of bilateral transactions and in the event of a default in one of the parties. Closeout risk can consist of a variety of factors, including market risk (e.g., the residual contract value, value of collateral), liquidity risk (e.g., the risk that bilateral contracts cannot be replaced during close-out) and correlation risk (e.g., depending on whether the residual contract is valued at replacement cost or risk-free cost, the correlation between exposure and undefaulted party can impact the contract value determined at close-out).