Final Price - Equity Derivatives Provision: Difference between revisions
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 1: | Line 1: | ||
{{eqderivanat|5.9}} | {{eqderivanat|5.9}} | ||
Note that Final Price isn't necessary the ''final'' price - you determine them on every Valuation Date, as of the Valuation Time, and they feed into the Cash Settlement (or Equity Notional Reset) process, whereby you pay out any movements in the stock between valuation periods. Thus, Today’s Final Price becomes the Initial Price for the purposes of the next Valuation Date, and so on and so on. Only on the ''final'' {{eqderivprov|Final Price}} does the {{eqderivprov|Transaction}} terminate. | |||
{{Equity swaps versus forwards}} | {{Equity swaps versus forwards}} | ||
{{Seealso}} | {{Seealso}} | ||
*[[Volume Weighted Average Price]] ([[VWAP]]) | *[[Volume Weighted Average Price]] ([[VWAP]]) | ||
*{{eqderivprov|Relevant Price}} | *{{eqderivprov|Relevant Price}} | ||
Revision as of 14:43, 24 September 2019
Template:Eqderivanat Note that Final Price isn't necessary the final price - you determine them on every Valuation Date, as of the Valuation Time, and they feed into the Cash Settlement (or Equity Notional Reset) process, whereby you pay out any movements in the stock between valuation periods. Thus, Today’s Final Price becomes the Initial Price for the purposes of the next Valuation Date, and so on and so on. Only on the final Final Price does the Transaction terminate.
On the difference between Final Price and Relevant Price
Final Price is defined in Article 5 of the 2002 ISDA Equity Derivatives Definitions and is germane therefore to Equity Swap Transactions only and not, say, Forward Transactions (which, circuitously, rely instead on Relevant Price, albeit defined in a similar way).
The Final Price also has separately broken-out scenarios for Basket Transactions (being just the weighted sums of the individual components in the basket). Relevant Price doesn’t bother to break these out — whether that is because Share Basket Forwards behave differently to Basket Swaps, or just because ISDA’s crack drafting squad™ was losing the will to live, is a question to which we have yet to get to the bottom.
Don’t hold your breath.