A practice in bankruptcy proceedings whereby a bankruptcy court may enforce contracts that are in the money to the bankrupt counterparty while abrogating contracts that are out of the money. Master swap agreements, which govern all swaps between the same counterparties, are generally formulated with the effect of netting reciprocal obligations, and as such preventing cherry picking. More specifically, cherry picking can be eliminated by a technique called “closeout netting” which is usually used to reduce pre-settlement risk in transactions where the counterparties have multiple offsetting obligations towards each other.

In the event of default by a counterparty, or the occurrence of a termination event, the outstanding contracts are all terminated by first marking them to market and then netting them.