i sold credit protection on something (corp names) to Lehman. when Lehman defaults, the MTM contract is negative (my side), so if how to settle now? do i need to pay back that MTM loss? which point are they using?

did you have ISDAs and CSAs with Lehman in place?

only ISDA......so?

Well, i was wondering whether Lehman held any collateral for this trade. I think what ISDA says is that unwind of the deal should happen based on a price that is either based on 4 independent quotes or based on the price of a new deal you put in place with a different CP to replace the deal with Lehman. I think what should have happened is that at the time Lehman defaulted you send notice to Lehman that according to your ISDA with them the deal needs to unwound. Price should be based on what I described above at the time you send the notice to Lehman regarding the unwind. please note that I wrote I think this is what the process is rather than I know that this is the process....