Template:Cashsettlement: Difference between revisions

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Section {{eqderivprov|8.6}}, {{eqderivprov|Cash Settlement of Equity Swap Transactions}}, provides, more or less, that where “{{eqderivprov|Cash Settlement}}” applies, a payment is made on each {{eqderivprov|Cash Settlement Payment Date}} depending on the {{eqderivprov|Type of Return}} specified.
Under Section {{eqderivprov|8.6}} ({{eqderivprov|Cash Settlement of Equity Swap Transactions}}) where “{{eqderivprov|Cash Settlement}}” applies, a payment is made on each {{eqderivprov|Cash Settlement Payment Date}} depending on the {{eqderivprov|Type of Return}} specified as follows:
*'''{{eqderivprov|Price Return}}''' is simply a function of the price at the beginning and end, and takes no account of declared dividends or other income or distributions received off the underlier in the mean time. It is simply the the {{eqderivprov|Equity Notional Amount}} * {{eqderivprov|Rate of Return}} (where {{eqderivprov|Rate of Return}} is (({{eqderivprov|Final Price}} - {{eqderivprov|Initial Price}})/{{eqderivprov|Initial Price}}) * {{eqderivprov|Multiplier}} (if any)); the {{eqderivprov|Equity Amount}}, paid one way or the other depending on whether it is positive or negative)
=====Price Return=====
*'''{{eqderivprov|Total Return}}''' is the {{eqderivprov|Price Return}}, but adjusted for income:
{{eqderivprov|Price Return}} is simply a function of the price at the beginning and end, and takes no account of declared dividends or other income or distributions received off the underlier in the meantime. It is simply  
** if {{eqderivprov|Re-investment of Dividends}} does not apply, applicable {{eqderivprov|Dividend Amount}}s will also be paid  by the {{eqderivprov|Equity Amount Payer}} (along with the {{eqderivprov|Equity Amount}}, whichever way it might be paid, as per {{eqderivprov|Price Return}});
{{quote|{{eqderivprov|Equity Notional Amount}} * {{eqderivprov|Rate of Return}}}}
** if {{eqderivprov|Re-investment of Dividends}} '''does''' apply, then {{eqderivprov|Equity Amount}}s will be adjusted as per the “{{eqderivprov|Re-investment of Dividends}}” provision.
Where “{{eqderivprov|Rate of Return}}” is  
*'''[[Slight return]]''' takes you to a whole different world altogether. The next one, in fact. Don’t be late!
{{quote|(({{eqderivprov|Final Price}} - {{eqderivprov|Initial Price}})/{{eqderivprov|Initial Price}}) * any {{eqderivprov|Multiplier}}}}
The {{eqderivprov|Equity Amount}} is paid one way or the other depending on whether it is positive or negative.
=====Total Return=====
{{eqderivprov|Total Return}} is the {{eqderivprov|Price Return}}, but adjusted for income.
 
Where {{eqderivprov|Re-investment of Dividends}} does ''not'' apply, the {{eqderivprov|Equity Amount Payer}} must pay {{eqderivprov|Dividend Amount}}s along with the {{eqderivprov|Equity Amount}}, whichever way it might be paid, as per {{eqderivprov|Price Return}}.
 
Where {{eqderivprov|Re-investment of Dividends}} ''does'' apply, then {{eqderivprov|Equity Amount}}s will be adjusted as per the “{{eqderivprov|Re-investment of Dividends}}” provision.

Latest revision as of 17:22, 1 November 2024

Under Section 8.6 (Cash Settlement of Equity Swap Transactions) where “Cash Settlement” applies, a payment is made on each Cash Settlement Payment Date depending on the Type of Return specified as follows:

Price Return

Price Return is simply a function of the price at the beginning and end, and takes no account of declared dividends or other income or distributions received off the underlier in the meantime. It is simply

Equity Notional Amount * Rate of Return

Where “Rate of Return” is

((Final Price - Initial Price)/Initial Price) * any Multiplier

The Equity Amount is paid one way or the other depending on whether it is positive or negative.

Total Return

Total Return is the Price Return, but adjusted for income.

Where Re-investment of Dividends does not apply, the Equity Amount Payer must pay Dividend Amounts along with the Equity Amount, whichever way it might be paid, as per Price Return.

Where Re-investment of Dividends does apply, then Equity Amounts will be adjusted as per the “Re-investment of Dividends” provision.

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