Template:M gen Equity Derivatives 10.1(c): Difference between revisions
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=== Fixing the {{eqderivprov|Paid Amount}} concept === | === Fixing the {{eqderivprov|Paid Amount}} concept === | ||
So we have two problems: what to do if the [[record date]] for a {{eqderivprov|Dividend Amount}} | So we have two problems: what to do if the [[record date]] for a {{eqderivprov|Dividend Amount}} falls ''before'' the [[trade date]] for a {{eqderivprov|Transaction}}, and what to do if the [[dividend payment date]] falls ''after'' the {{eqderivprov|Transaction}} terminates. | ||
Neither of these contingencies, predictable though they seem to be, is addressed in the {{eqdefs}}. But help is at hand: the [[JC]] — errors and omissions excepted, all usual [[disclaimer]]s applying — humbly offers the following corrective for your [[Master Confirmation Agreement]]: | |||
:“{{eqderivprov|Paid Amount}}” will apply, provided that: | :“{{eqderivprov|Paid Amount}}” will apply, provided that: | ||
::(a) where the {{eqderivprov|Share}} commenced trading “[[ex-dividend]]” ''before'' the {{isdadefsprov|Effective Date}} the {{eqderivprov|Paid Amount}} will be zero; and | ::(a) where the {{eqderivprov|Share}} commenced trading “[[ex-dividend]]” ''before'' the {{isdadefsprov|Effective Date}} the {{eqderivprov|Paid Amount}} will be zero; and | ||
::(b) where the {{isdaprov|Transaction}} terminates ''after'' the {{eqderivprov|Share}} commenced trading “[[ex-dividend]]” but ''before'' the scheduled [[dividend payment date]], the Equity Amount Payer will pay any {{eqderivprov|Paid Amount}} one [[settlement cycle]] following payment of the corresponding dividend by the {{eqderivprov|Issuer}} to holders of record of the {{eqderivprov|Share}}. | ::(b) where the {{isdaprov|Transaction}} terminates ''after'' the {{eqderivprov|Share}} commenced trading “[[ex-dividend]]” but ''before'' the scheduled [[dividend payment date]], the Equity Amount Payer will pay any {{eqderivprov|Paid Amount}} one [[settlement cycle]] following payment of the corresponding dividend by the {{eqderivprov|Issuer}} to holders of record of the {{eqderivprov|Share}}. | ||
Revision as of 17:54, 25 February 2020
Fixing the Paid Amount concept
So we have two problems: what to do if the record date for a Dividend Amount falls before the trade date for a Transaction, and what to do if the dividend payment date falls after the Transaction terminates.
Neither of these contingencies, predictable though they seem to be, is addressed in the 2002 ISDA Equity Derivatives Definitions. But help is at hand: the JC — errors and omissions excepted, all usual disclaimers applying — humbly offers the following corrective for your Master Confirmation Agreement:
- “Paid Amount” will apply, provided that:
- (a) where the Share commenced trading “ex-dividend” before the Effective Date the Paid Amount will be zero; and
- (b) where the Transaction terminates after the Share commenced trading “ex-dividend” but before the scheduled dividend payment date, the Equity Amount Payer will pay any Paid Amount one settlement cycle following payment of the corresponding dividend by the Issuer to holders of record of the Share.