Cash Settlement of Equity Swap Transactions - Equity Derivatives Provision: Difference between revisions

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Equity Swap Transactions can be settled either by reference to {{eqderivprov|Price Return}} or {{eqderivprov|Total Return}}, but not [http://en.wikipedia.org/wiki/Voodoo_Child_(Slight_Return) Slight Return].  
Equity Swap Transactions can be settled either by reference to {{eqderivprov|Price Return}} or {{eqderivprov|Total Return}}, but not [http://en.wikipedia.org/wiki/Voodoo_Child_(Slight_Return) Slight Return].  


'''{{eqderivprov|Price Return}}''': The {{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 subtraction of the {{eqderivprov|Settlement Price}} from the {{eqderivprov|Initial Price}}, and
'''{{eqderivprov|Price Return}}''': The {{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 Rate of Return is (({{eqderivprov|Final Price}} - {{eqderivprov|Initial Price}})/{{eqderivprov|Initial Price}}) * {{eqderivprov|Multiplier}} (if any)
*(if the underlier ''increases'' in value over the life of the Transaction) be a '''positive''' number; or
*(if the underlier ''decreases'' in value over the life of the Transaction) be a '''negative''' number.
 
If it's positive, the {{eqderivprov|Equity Amount Payer}} pays it to the {{eqderivprov|Equity Amount Receiver}}. If it's negative, the {{eqderivprov|Equity Amount Receiver}} pays the absolute value to the {{eqderivprov|Equity Amount Payer}}.


'''{{eqderivprov|Total Return}}''': is the {{eqderivprov|Price Return}}, but adjusted for income.
'''{{eqderivprov|Total Return}}''': is the {{eqderivprov|Price Return}}, but adjusted for income.
{{eqderivanatomy}}
{{eqderivanatomy}}
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