A reduction in the notional principal of a derivative contract, like a swap. For example, a party to an interest rate swap with a $10 million notional principal may negotiate with the other party a reduction of 40% of its notional principal for the remaining fixing dates. This means the notional principal would be changed into $6 million from the effective date onwards. A partial termination may result in realized gain/loss that has to be accounted for in a given party’s books.
A partial termination may be caused by an early termination of the trade.
