Template:M summ Equity Derivatives 12.9(b): Difference between revisions
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*'''{{eqderivprov|Increased Cost of Hedging}}''': {{eqderivprov|Hedging Party}} can present the other guy with a proposed {{eqderivprov|Price Adjustment}}. Other guy, within 2 {{eqderivprov|Scheduled Trading Day}}s, either accepts the {{eqderivprov|Price Adjustment}} in an amended trade, pays the [[PV]] of the {{eqderivprov|Price Adjustment}} in full, or the Hedging Party can terminate the trade on the second {{eqderivprov|Scheduled Trading Day}}, at the {{eqderivprov|Cancellation Amount}}. | *'''{{eqderivprov|Increased Cost of Hedging}}''': {{eqderivprov|Hedging Party}} can present the other guy with a proposed {{eqderivprov|Price Adjustment}}. Other guy, within 2 {{eqderivprov|Scheduled Trading Day}}s, either accepts the {{eqderivprov|Price Adjustment}} in an amended trade, pays the [[PV]] of the {{eqderivprov|Price Adjustment}} in full, or the Hedging Party can terminate the trade on the second {{eqderivprov|Scheduled Trading Day}}, at the {{eqderivprov|Cancellation Amount}}. | ||
Okay, okay, I hear you — [[LOSB - Equity Derivatives Provision|LOSB]] and {{eqderivprov|ICOSB}} are important too. For those: | |||
*'''{{eqderivprov|Loss of Stock Borrow}}''': {{eqderivprov|Hedging Party}} gives 2 {{eqderivprov|Scheduled Trading Day}}’s notice of the {{eqderivprov|LOSB}}. Other guy can either lend the shares itself at the {{eqderivprov|Maximum Stock Loan Rate}} or lower, or if it doesn’t the {{eqderivprov|Hedging Party}} can terminate the trade at the {{eqderivprov|Cancellation Amount}}. | *'''{{eqderivprov|Loss of Stock Borrow}}''': {{eqderivprov|Hedging Party}} gives 2 {{eqderivprov|Scheduled Trading Day}}’s notice of the {{eqderivprov|LOSB}}. Other guy can either lend the shares itself at the {{eqderivprov|Maximum Stock Loan Rate}} or lower, or if it doesn’t the {{eqderivprov|Hedging Party}} can terminate the trade at the {{eqderivprov|Cancellation Amount}}. | ||
*'''{{eqderivprov|Increased Cost of Stock Borrow}}''': {{eqderivprov|Hedging Party}} can present the other guy with a proposed {{eqderivprov|Price Adjustment}}. Other guy, within 2 {{eqderivprov|Scheduled Trading Day}}s, either accepts the {{eqderivprov|Price Adjustment}} in an amended trade, pays the [[PV]] of the {{eqderivprov|Price Adjustment}} in full, or lend the {{eqderivprov|Hedging Party}} the necessary {{eqderivprov|Shares}}, Failing this, the {{eqderivprov|Hedging Party}} can terminate the trade on the second {{eqderivprov|Scheduled Trading Day}}, at the {{eqderivprov|Cancellation Amount}}. | *'''{{eqderivprov|Increased Cost of Stock Borrow}}''': {{eqderivprov|Hedging Party}} can present the other guy with a proposed {{eqderivprov|Price Adjustment}}. Other guy, within 2 {{eqderivprov|Scheduled Trading Day}}s, either accepts the {{eqderivprov|Price Adjustment}} in an amended trade, pays the [[PV]] of the {{eqderivprov|Price Adjustment}} in full, or lend the {{eqderivprov|Hedging Party}} the necessary {{eqderivprov|Shares}}, Failing this, the {{eqderivprov|Hedging Party}} can terminate the trade on the second {{eqderivprov|Scheduled Trading Day}}, at the {{eqderivprov|Cancellation Amount}}. | ||
{{eqderivprov|Insolvency Filing}} and {{eqderivprov|Failure to Deliver}} ... well — are they even ''applied'' in your confirm? | {{eqderivprov|Insolvency Filing}} and {{eqderivprov|Failure to Deliver}} ... well — are they even ''applied'' in your confirm? | ||
Revision as of 17:21, 27 March 2020
The important ones are the Triple Cocktail: Change in Law, Hedging Disruption and Increased Cost of Hedging. They have marginally different play-out rights:
- Change in Law: Either party can terminate on 2 Scheduled Trading Day’s notice, at the Cancellation Amount.
- Hedging Disruption: Hedging Party can terminate on 2 Scheduled Trading Day’s notice, at the Cancellation Amount.
- Increased Cost of Hedging: Hedging Party can present the other guy with a proposed Price Adjustment. Other guy, within 2 Scheduled Trading Days, either accepts the Price Adjustment in an amended trade, pays the PV of the Price Adjustment in full, or the Hedging Party can terminate the trade on the second Scheduled Trading Day, at the Cancellation Amount.
Okay, okay, I hear you — LOSB and ICOSB are important too. For those:
- Loss of Stock Borrow: Hedging Party gives 2 Scheduled Trading Day’s notice of the LOSB. Other guy can either lend the shares itself at the Maximum Stock Loan Rate or lower, or if it doesn’t the Hedging Party can terminate the trade at the Cancellation Amount.
- Increased Cost of Stock Borrow: Hedging Party can present the other guy with a proposed Price Adjustment. Other guy, within 2 Scheduled Trading Days, either accepts the Price Adjustment in an amended trade, pays the PV of the Price Adjustment in full, or lend the Hedging Party the necessary Shares, Failing this, the Hedging Party can terminate the trade on the second Scheduled Trading Day, at the Cancellation Amount.
Insolvency Filing and Failure to Deliver ... well — are they even applied in your confirm?