Ex-dividend: Difference between revisions
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The date on which a {{eqderivprov|Share}} trade is priced to exclude a forthcoming {{eqderivprov|Dividend Amount}}, on account of the [[record date]] occurring before the trade can settle to the buyer’s account. A buyer of an [[ex-dividend]] {{eqderivprov|Share}} will not become the [[holder of record]] until after the [[record date]], and so won’t get the dividend payment, even though the {{eqderivprov|Dividend Payment Date}} may be after the buyer comes to hold the {{eqderivprov|Share}}. | The date on which a {{eqderivprov|Share}} trade is priced to exclude a forthcoming {{eqderivprov|Dividend Amount}}, on account of the [[record date]] occurring before the trade can settle to the buyer’s account. A buyer of an [[ex-dividend]] {{eqderivprov|Share}} will not become the [[holder of record]] until after the [[record date]], and so won’t get the dividend payment, even though the {{eqderivprov|Dividend Payment Date}} may be after the buyer comes to hold the {{eqderivprov|Share}}. | ||
Therefore, the buyer | Therefore, the buyer won’t want to pay for the implied cost of that pending dividend. Hence, it trades “[[ex-dividend]]”. | ||
See? | See? | ||
Interestingly, there is a SNAFU in the {{eqderivprov|Dividend Amount}} provisions of the {{eqdefs}} — there is a cacophony of cataclysmic SNAFUs there, truth be told, meaning that none of the payment triggers in that section — the Ex Amount, Record Amount or Paid Amount — make a great deal of sense. See {{eqderivprov|Dividend Amount}} for more on that riveting topic. | |||
{{sa}} | {{sa}} | ||
*{{eqderivprov|Dividend Amount}}, which goes into all of this in some really quite [[tedious]] detail. | *{{eqderivprov|Dividend Amount}}, which goes into all of this in some really quite [[tedious]], not to mention stupendously erroneous, detail. | ||
Revision as of 16:42, 25 February 2020
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Equity Derivatives Anatomy™
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The date on which a Share trade is priced to exclude a forthcoming Dividend Amount, on account of the record date occurring before the trade can settle to the buyer’s account. A buyer of an ex-dividend Share will not become the holder of record until after the record date, and so won’t get the dividend payment, even though the Dividend Payment Date may be after the buyer comes to hold the Share.
Therefore, the buyer won’t want to pay for the implied cost of that pending dividend. Hence, it trades “ex-dividend”.
See?
Interestingly, there is a SNAFU in the Dividend Amount provisions of the 2002 ISDA Equity Derivatives Definitions — there is a cacophony of cataclysmic SNAFUs there, truth be told, meaning that none of the payment triggers in that section — the Ex Amount, Record Amount or Paid Amount — make a great deal of sense. See Dividend Amount for more on that riveting topic.
See also
- Dividend Amount, which goes into all of this in some really quite tedious, not to mention stupendously erroneous, detail.