Template:Nutshell Equity Derivatives 12.7: Difference between revisions

From The Jolly Contrarian
Jump to navigation Jump to search
VisualWikitext
Created page with "{{subst:2002 ISDA Equity Derivatives Definitions 12.7(a)}} {{subst:2002 ISDA Equity Derivatives Definitions 12.7(b)}} {{subst:2002 ISDA Equity Derivatives Definitions 12.7(c)}}"
 
No edit summary
 
(5 intermediate revisions by the same user not shown)
Line 1: Line 1:
{{eqderivprov|12.7(a)}} If, in respect of an {{eqderivprov|Extraordinary Event}}, “'''{{eqderivprov|Cancellation and Payment}}'''” or “'''{{eqderivprov|Partial Cancellation and Payment}}'''” applies or is deemed to apply to the relevant {{eqderivprov|Transaction}} (or a portion thereof), then an amount will be paid by one party to the other determined as provided in clause (b) or (c) below, such payment to be made not later than three {{eqderivprov|Currency Business Days}} following the date that notice of the determination by the {{eqderivprov|Calculation Agent}} or the {{eqderivprov|Determining Party}}, as the case may be, of such amount (denominated in the currency for settlement of the {{eqderivprov|Transaction}} as determined by the {{eqderivprov|Calculation Agent}} or the {{eqderivprov|Determining Party}}, as the case may be) and which party shall pay such amount is effective, which notice shall be provided promptly following such determination. <br>
{{eqderivprov|12.7}} '''{{eqderivprov|Payment upon Certain Extraordinary Events}}'''<br>
{{eqderivprov|12.7(b)}} In respect of an {{eqderivprov|Option Transaction}}, the amount to be paid by {{eqderivprov|Seller}} to {{eqderivprov|Buyer}} will be as agreed promptly (and in any event within five {{eqderivprov|Exchange Business Days}}) by the parties after the Merger Date, the {{eqderivprov|Tender Offer Date}}, the date of cancellation in respect of an {{eqderivprov|Index Adjustment Event}} or the date of occurrence of any event described in Section {{eqderivprov|12.6}}, as the case may be (each such date, the “{{eqderivprov|Closing Date}}”). If the parties are unable to agree on the amount, then: <br>  
{{eqderivprov|12.7(a)}} If “'''{{eqderivprov|Cancellation and Payment}}'''” or “'''{{eqderivprov|Partial Cancellation and Payment}}'''” applies, then one party will pay the other the amounts described below no later than three {{eqderivprov|Currency Business Days}} after notice of the determination, which must be given promptly, is effective. <br>
:{{eqderivprov|12.7(b)(i)}} if “'''{{eqderivprov|Agreed Model}}'''” is specified in the related {{eqderivprov|Confirmation}} to be applicable to such {{eqderivprov|Transaction}}, then the amount will be determined by the {{eqderivprov|Calculation Agent}} as the sum of the {{eqderivprov|Unadjusted Value}} and the {{eqderivprov|Adjustment Value}}. For the avoidance of doubt, the {{eqderivprov|Buyer}} shall not be required to pay any amount to the {{eqderivprov|Seller}} as a result of the cancellation of the {{eqderivprov|Option Transaction}} other than any unpaid {{eqderivprov|Premium}} which {{eqderivprov|Buyer}} will be obliged to pay to {{eqderivprov|Seller}} as of the date that the amount determined in this Section {{eqderivprov|12.7(b)(i)}} is paid. <br>
{{eqderivprov|12.7(b)}} '''{{eqderivprov|Option Transaction}}s''': The parties must promptly agree within five {{eqderivprov|Exchange Business Days}} of the relevant event (the “'''{{eqderivprov|Closing Date}}'''”) the amount {{eqderivprov|Seller}} must pay {{eqderivprov|Buyer}}. If they cannot: <br>  
::(A) “'''{{eqderivprov|Unadjusted Value}}'''” means an amount determined by the Calculation Agent as the value of the {{eqderivprov|Option Transaction}} (or portion thereof) on the {{eqderivprov|Closing Date}} based on: <br>
:{{eqderivprov|12.7(b)(i)}} if “'''{{eqderivprov|Agreed Model}}'''” applies, the {{eqderivprov|Calculation Agent}} will determine the sum of the {{eqderivprov|Unadjusted Value}} and the {{eqderivprov|Adjustment Value}}, (noting that the {{eqderivprov|Buyer}} will not have to pay the {{eqderivprov|Seller}} anything on cancellation of an {{eqderivprov|Option Transaction}} other than unpaid {{eqderivprov|Premium}}). <br>
:::(1) a volatility equal to the average of the {{eqderivprov|Implied Volatilities}} of the relevant {{eqderivprov|Shares}} on each of the 15 {{eqderivprov|Exchange Business Days}} ending on and including the {{eqderivprov|Closing Date}}; <br>
::(A) the Calculation Agent will determine the “'''{{eqderivprov|Unadjusted Value}}'''” as the value of the relevant portion of the {{eqderivprov|Option Transaction}} on the {{eqderivprov|Closing Date}} based on: <br>
:::(2) expected dividends for the time period from the {{eqderivprov|Closing Date}} until the {{eqderivprov|Expiration Date}} based on, and payable on the same dates as, (a) amounts to have been paid in respect of gross ordinary cash dividends on the relevant {{eqderivprov|Shares}} in the one-year period ending on the {{eqderivprov|Closing Date}} or (b) in the event of an {{subst:Issuer}} published change to dividend policies on the relevant {{eqderivprov|Shares}} (as determined by the {{eqderivprov|Calculation Agent}}) prior to the {{eqderivprov|Closing Date}}, the expected dividends determined in accordance with such published change, in each case excluding {{eqderivprov|Extraordinary Dividends}}; <br>
:::(1) the average {{eqderivprov|Implied Volatility}} of the relevant {{eqderivprov|Shares}} over  the 15 {{eqderivprov|Exchange Business Days}} up to the {{eqderivprov|Closing Date}}; <br>
:::(3) a value ascribed to the relevant {{eqderivprov|Shares}} as determined by the {{eqderivprov|Calculation Agent}} and, if applicable, equal to the value of the consideration, if any, paid or delivered in respect of such {{eqderivprov|Shares}} to holders of such {{eqderivprov|Shares}} at the time of the {{eqderivprov|Extraordinary Event}}; <br>
:::(2) expected [[dividend]]s between the {{eqderivprov|Closing Date}} and the {{eqderivprov|Expiration Date}} based on, and payable on the same dates as:
:::(4) a combined interest rate and stock loan rate as specified in the related {{eqderivprov|Confirmation}} for the period from, and including, the {{eqderivprov|Closing Date}} to, but excluding, the {{eqderivprov|Expiration Date}}; and <br>
::::(a) gross ordinary cash dividends due on the relevant {{eqderivprov|Shares}} in the one-year period ending on the {{eqderivprov|Closing Date}} or  
::::(b) if the {{eqderivprov|Calculation Agent}} determines the {{eqderivprov|Issuer}} has changed its dividend policies before the {{eqderivprov|Closing Date}}, the expected dividends per the changed policy
:::in each case excluding {{eqderivprov|Extraordinary Dividends}}; <br>
:::(3) the {{eqderivprov|Calculation Agent}}’s valuation of the {{eqderivprov|Shares}} and any consideration provided for the {{eqderivprov|Shares}} to holders at the time of the {{eqderivprov|Extraordinary Event}}; <br>
:::(4) a combined interest rate and stock loan rate as specified in the related {{eqderivprov|Confirmation}} from the {{eqderivprov|Closing Date}} to the {{eqderivprov|Expiration Date}}; and <br>
:::(5) a term of the {{eqderivprov|Option Transaction}} from the {{eqderivprov|Closing Date}} to the {{eqderivprov|Expiration Date}}. <br>
:::(5) a term of the {{eqderivprov|Option Transaction}} from the {{eqderivprov|Closing Date}} to the {{eqderivprov|Expiration Date}}. <br>
::(B) “'''{{eqderivprov|Adjustment Value}}'''” means the difference between the amounts determined pursuant to (B)(1) and (B)(2) below: <br>
::(B) “'''{{eqderivprov|Adjustment Value}}'''” means the difference between the amounts determined pursuant to (B)(1) and (B)(2) below: <br>
:::(1) a value of the {{eqderivprov|Option Transaction}} (or portion thereof) determined by the {{eqderivprov|Calculation Agent}} based on: <br>
:::(1) the {{eqderivprov|Calculation Agent}}’s valuation of the relevant portion of the {{eqderivprov|Option Transaction}} based on: <br>
::::(a) a volatility equal to the average of the Implied Volatilities of the relevant {{isdaprov|Shares}} on each of the 15 Exchange Business Days ending on but excluding the {{eqderivprov|Announcement Date}}; <br>
::::(a) the average {{eqderivprov|Implied Volatility}} of the relevant {{eqderivprov|Shares}} over the 15 {{eqderivprov|Exchange Business Days}} up to the {{eqderivprov|Announcement Date}}; <br>
::::(b) expected dividends for the time period from the {{eqderivprov|Announcement Date}} until the {{eqderivprov|Expiration Date}} based on, and payable on the same dates as, (x) amounts to have been paid in respect of gross ordinary cash dividends on the relevant {{eqderivprov|Shares}} in the one-year period ending on the {{eqderivprov|Announcement Date}} or (y) in the event of an {{eqderivprov|Issuer}} published change to dividend policies on the relevant {{eqderivprov|Shares}} (as determined by the {{eqderivprov|Calculation Agent}}) prior to the {{eqderivprov|Announcement Date}}, the expected dividends determined in accordance with such published change, in each case excluding {{eqderivprov|Extraordinary Dividends}}; <br>
::::(b) expected dividends between the {{eqderivprov|Announcement Date}} and the {{eqderivprov|Expiration Date}} based on, and payable on the same dates as:
::::(c) a value ascribed to the relevant {{eqderivprov|Shares}} equal to the {{eqderivprov|Settlement Price}} (assuming {{eqderivprov|Cash Settlement}} were applicable) of the relevant {{eqderivprov|Shares}} as of the {{eqderivprov|Valuation Time}} (for which purpose the {{eqderivprov|Valuation Date}} will be the {{eqderivprov|Announcement Date}}); <br>
:::::(x) gross ordinary cash dividends due on the relevant {{eqderivprov|Shares}} in the one-year period ending on the {{eqderivprov|Announcement Date}} or  
::::(d) a combined interest rate and stock loan rate as specified in the related {{eqderivprov|Confirmation}} for the period from, and including, the {{eqderivprov|Announcement Date}} to, but excluding, the {{eqderivprov|Expiration Date}}; and <br>
:::::(y) if the {{eqderivprov|Calculation Agent}} determines the {{eqderivprov|Issuer}} has changed its dividend policies before the {{eqderivprov|Announcement Date}}, the expected dividends per the changed policy
::::in each case excluding {{eqderivprov|Extraordinary Dividends}}; <br>
::::(c) its valuation (as of the {{eqderivprov|Announcement Date}}) of the {{eqderivprov|Settlement Price}} (assuming {{eqderivprov|Cash Settlement}}) of the relevant {{eqderivprov|Shares}} as of the {{eqderivprov|Valuation Time}}; <br>
::::(d) a combined interest rate and stock loan rate as specified in the related {{eqderivprov|Confirmation}} from the {{eqderivprov|Announcement Date}} to the {{eqderivprov|Expiration Date}}; and <br>
::::(e) a term of the {{eqderivprov|Option Transaction}} from the {{eqderivprov|Announcement Date}} to the {{eqderivprov|Expiration Date}}. <br>
::::(e) a term of the {{eqderivprov|Option Transaction}} from the {{eqderivprov|Announcement Date}} to the {{eqderivprov|Expiration Date}}. <br>
:::(2) a value for the {{eqderivprov|Option Transaction}} (or portion thereof) based on the factors listed in (1)(a)-(e) above, except with a volatility equal to the average of the {{eqderivprov|Implied Volatilities}} of the relevant {{eqderivprov|Shares}} on each of the 15 Exchange Business Days commencing on and including the {{eqderivprov|Announcement Date}}. <br>
:::(2) a value for the relevant portion of the {{eqderivprov|Option Transaction}} based on the factors listed in (1)(a)-(e) above, but with an average {{eqderivprov|Implied Volatility}} over the 15 {{eqderivprov|Exchange Business Day}}s from the {{eqderivprov|Announcement Date}}. <br>
:{{eqderivprov|12.7(b)(ii)}} If “'''{{eqderivprov|Calculation Agent Determination}}'''” is specified in the related {{eqderivprov|Confirmation}} to be applicable to such {{eqderivprov|Transaction}}, then the amount will be determined by the {{eqderivprov|Calculation Agent}}, which determination may, but need not, be based on the factors and adjustments set forth in paragraph (i) above. <br>
:{{eqderivprov|12.7(b)(ii)}} If “'''{{eqderivprov|Calculation Agent Determination}}'''” applies, then the {{eqderivprov|Calculation Agent}} will determine the amount. <br>
{{eqderivprov|12.7(c)}} For any {{eqderivprov|Forward Transaction}} or {{eqderivprov|Equity Swap Transaction}}, such {{eqderivprov|Transaction}} shall be cancelled and the relevant party or parties (as specified below) shall determine the {{eqderivprov|Cancellation Amount}} in respect of such cancelled {{eqderivprov|Transaction}}. <br>
{{eqderivprov|12.7(c)}} '''{{eqderivprov|Forward Transaction}}s and {{eqderivprov|Equity Swap Transaction}}s''': Any {{eqderivprov|Forward Transaction}} or {{eqderivprov|Equity Swap Transaction}}, will be cancelled and the {{eqderivprov|Cancellation Amount}} determined as follows: <br>
:(i) In respect of a cancelled {{eqderivprov|Transaction}} where there is one {{eqderivprov|Determining Party}}, the {{eqderivprov|Determining Party}} will calculate the {{eqderivprov|Cancellation Amount}} and will determine which party will pay such amount. <br>
:(i) where there is one {{eqderivprov|Determining Party}}, it will calculate the {{eqderivprov|Cancellation Amount}} and who has to pay it. <br>
:(ii) In respect of a cancelled {{eqderivprov|Transaction}} where there are two {{eqderivprov|Determining Parties}}, each party will calculate a {{eqderivprov|Cancellation Amount}} and an amount will be payable equal to one-half of the difference between the {{eqderivprov|Cancellation Amount}} of the party with the higher {{eqderivprov|Cancellation Amount}} (“X”) and the {{eqderivprov|Cancellation Amount}} of the party with the lower {{eqderivprov|Cancellation Amount}} (“Y”) and Y shall pay it to X. <br>
:(ii) where there are two {{eqderivprov|Determining Parties}}, each will calculate a {{eqderivprov|Cancellation Amount}} and they will split the difference.<br>

Latest revision as of 21:21, 10 January 2022

12.7 Payment upon Certain Extraordinary Events
12.7(a) If “Cancellation and Payment” or “Partial Cancellation and Payment” applies, then one party will pay the other the amounts described below no later than three Currency Business Days after notice of the determination, which must be given promptly, is effective.
12.7(b) Option Transactions: The parties must promptly agree within five Exchange Business Days of the relevant event (the “Closing Date”) the amount Seller must pay Buyer. If they cannot:

12.7(b)(i) if “Agreed Model” applies, the Calculation Agent will determine the sum of the Unadjusted Value and the Adjustment Value, (noting that the Buyer will not have to pay the Seller anything on cancellation of an Option Transaction other than unpaid Premium).
(A) the Calculation Agent will determine the “Unadjusted Value” as the value of the relevant portion of the Option Transaction on the Closing Date based on:
(1) the average Implied Volatility of the relevant Shares over the 15 Exchange Business Days up to the Closing Date;
(2) expected dividends between the Closing Date and the Expiration Date based on, and payable on the same dates as:
(a) gross ordinary cash dividends due on the relevant Shares in the one-year period ending on the Closing Date or
(b) if the Calculation Agent determines the Issuer has changed its dividend policies before the Closing Date, the expected dividends per the changed policy
in each case excluding Extraordinary Dividends;
(3) the Calculation Agent’s valuation of the Shares and any consideration provided for the Shares to holders at the time of the Extraordinary Event;
(4) a combined interest rate and stock loan rate as specified in the related Confirmation from the Closing Date to the Expiration Date; and
(5) a term of the Option Transaction from the Closing Date to the Expiration Date.
(B) “Adjustment Value” means the difference between the amounts determined pursuant to (B)(1) and (B)(2) below:
(1) the Calculation Agent’s valuation of the relevant portion of the Option Transaction based on:
(a) the average Implied Volatility of the relevant Shares over the 15 Exchange Business Days up to the Announcement Date;
(b) expected dividends between the Announcement Date and the Expiration Date based on, and payable on the same dates as:
(x) gross ordinary cash dividends due on the relevant Shares in the one-year period ending on the Announcement Date or
(y) if the Calculation Agent determines the Issuer has changed its dividend policies before the Announcement Date, the expected dividends per the changed policy
in each case excluding Extraordinary Dividends;
(c) its valuation (as of the Announcement Date) of the Settlement Price (assuming Cash Settlement) of the relevant Shares as of the Valuation Time;
(d) a combined interest rate and stock loan rate as specified in the related Confirmation from the Announcement Date to the Expiration Date; and
(e) a term of the Option Transaction from the Announcement Date to the Expiration Date.
(2) a value for the relevant portion of the Option Transaction based on the factors listed in (1)(a)-(e) above, but with an average Implied Volatility over the 15 Exchange Business Days from the Announcement Date.
12.7(b)(ii) If “Calculation Agent Determination” applies, then the Calculation Agent will determine the amount.

12.7(c) Forward Transactions and Equity Swap Transactions: Any Forward Transaction or Equity Swap Transaction, will be cancelled and the Cancellation Amount determined as follows:

(i) where there is one Determining Party, it will calculate the Cancellation Amount and who has to pay it.
(ii) where there are two Determining Parties, each will calculate a Cancellation Amount and they will split the difference.
Retrieved from "https://jollycontrarian.com/index.php?title=Template:Nutshell_Equity_Derivatives_12.7&oldid=61467"