Template:M summ Equity Derivatives 6.3: Difference between revisions

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==={{eqderivprov|Valuation Time}}===
[[6.1 - Equity Derivatives Provision|For]] run-of-the-mill valuations not related to the termination of a {{eqderivprov|Transaction}}, the fall-back {{eqderivprov|Scheduled Closing Time}} regime is fine.


The effect of the {{eqderivprov|Valuation Date}} is to re-strike the {{eqderivprov|Equity Notional Amount}} (or cash settle the movement in the underlier since the last {{eqderivprov|Valuation Date}}<ref>I.e., ''{{eqderivprov|Final Price}} - {{eqderivprov|Initial Price}}''.</ref> which is economically similar to a [[variation margin]] payment.  
{{eqderivprov|Market Disruption Event}}s is part of Section {{eqderivprov|6}} ({{eqderivprov|Valuation}}) in the {{eqdefs}}, so this isn’t really about catastrophic, end-of-days events that might bring your {{eqderivprov|Transaction}} to an unexpected, premature end. For that you should look to Section {{eqderivprov|12}}, and especially {{eqderivprov|12.8}} and {{eqderivprov|12.9}}.


For the final {{eqderivprov|Valuation Date}}, on the other hand - which feeds into the actual termination price for the {{eqderivprov|Transaction}}, expect the [[broker]] to be more exercised about the timing matching the point at which it liquidates its actual {{eqderivprov|Hedge Position}}. Expect jumpier US tax folk to start rabbiting on about [[hypothetical broker-dealer]]s liquidating [[hypothetical]] hedges, but have no truck with that sort of talk.
===Valuation Date===
====''Final'' {{eqderivprov|Valuation Date}}====
The {{eqderivprov|Valuation Date}} concept assumes you have a {{isdaprov|Transaction}} that will run to its term. For you cheeky [[synthetic prime brokerage]] types who write your [[Equity Swaps - Equity Derivatives Provision|Equity Swaps]] as if they were undated [[delta-one]] exposures — which, unless the [[Tax attorney|Master in Charge of Tax]] is looking, they ''are'' — your [[master confirmation]] will need to create an extra, bonus, ''final'' {{eqderivprov|Valuation Date}} as of the {{eqderivprov|Optional Early Termination Date}}, otherwise on closing out a position you might find yourselves harking back to a {{eqderivprov|Valuation Date}} that happened in that happier, gentler time that was two or three weeks ago.
====The {{eqderivprov|Calculation Period}} that didn’t bark in the night-time====
Where, oh where, are the {{eqderivprov|Calculation Period}}s {{eqderivdefs}}? Ok so this is a bit of a trick question. There are ''no'' “{{eqderivprov|Calculation Period}}s” — that is instead defined in the [[2006 ISDA Definitions]]. In the {{eqderivdefs}}, the periods for Equity calculations are handled by the “{{eqderivprov|Valuation Date}}” concept.
That in turn determines the “{{eqderivprov|Cash Settlement Payment Date}}” (for cash-settled {{eqderivprov|Equity Swap Transaction}}s) and “{{eqderivprov|Settlement Date}}” (for [[Physical settlement|physically settled]] ones).
You may see a {{eqderivprov|Calculation Period}} on the [[Floating leg|Floating]] leg of an [[equity swap]] though - that will be a reference to the [[2006 ISDA Definitions]].
====[[Bullet swap]]s====
Some times you will trade “[[bullet swap|bullet swaps]]” which do not have a {{eqderivprov|Valuation Date}}. Being the tortured language of {{icds}}, there is no straightforward concept in the definitions of a swap which has no {{eqderivprov|Valuation Date}}s other than the {{eqderivprov|Termination Date}}, so expect wildly ungainly language in confirms to express that fairly simple idea.
==={{eqderivprov|Market Disruption Events}}===
A {{eqderivprov|Market Disruption Event}} is a {{eqderivprov|Trading Disruption}} or {{eqderivprov|Exchange Disruption}} that exists during the hour before any {{eqderivprov|Valuation Time}} or {{eqderivprov|Exercise Time}} — it keys off the ''occurrence'' or ''existence'' of the event, not the point when the {{eqderivprov|Calculation Agent}} determined it — or {{eqderivprov|Early Closure}}.  
A {{eqderivprov|Market Disruption Event}} is a {{eqderivprov|Trading Disruption}} or {{eqderivprov|Exchange Disruption}} that exists during the hour before any {{eqderivprov|Valuation Time}} or {{eqderivprov|Exercise Time}} — it keys off the ''occurrence'' or ''existence'' of the event, not the point when the {{eqderivprov|Calculation Agent}} determined it — or {{eqderivprov|Early Closure}}.  


Latest revision as of 13:38, 11 May 2022

Market Disruption Events is part of Section 6 (Valuation) in the 2002 ISDA Equity Derivatives Definitions, so this isn’t really about catastrophic, end-of-days events that might bring your Transaction to an unexpected, premature end. For that you should look to Section 12, and especially 12.8 and 12.9.

A Market Disruption Event is a Trading Disruption or Exchange Disruption that exists during the hour before any Valuation Time or Exercise Time — it keys off the occurrence or existence of the event, not the point when the Calculation Agent determined it — or Early Closure.

The point is to capture material disruptions around the close of the market. If there was a disruption, earlier in the day but, say, it cleared up by lunchtime, then — as far as valuing equity derivatives is concerned — all is Kool and the Gang. The kinds of disruptions are:

Additionally a day is “Disrupted Day” if an Exchange/Related Exchange fails to open for trading during a regular trading session.

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