Template:M summ Equity Derivatives 11.2: Difference between revisions

Template:M summ Equity Derivatives 11.2 (view source)

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 {{capsule potential adjustment events}}
 {{Capsule options exchange adjustment}}
+===Retrospective adjustments===
+Now what might happen under a [[total return swap]] if such a {{eqderivprov|Potential Adjustment Event}} happens retrospectively, after a Transaction has been terminated (or has matured)? This does happen from time to time. For example:
+:''A total return swap transaction is traded on 1 January. It matures and is settled on 1 June. On 1 September, following an accounting error coming to light, the Issuer declares a bonus share issue to all holders of record on 1 March. which it pays out on 1 December.
+First thing: just because the {{isdaprov|Transaction}} has passed its term, doesn't mean it winks out of existence, white rabbits and no returns. Payment obligations which were due under the term remain due and payable afterward - see the commentary to {{isdadefsprov|Termination Date}} in the [[2006 ISDA Definitions]].
+So the question is ''which is the material date'' the date on which the {{eqderivprov|Potential Adjustment Event}} happened (in the above, 1 September, outside the term of the trade), the date on which it was settled (1 December, also outside the term of the trade) or the date on which was deemed to be effective (being 1 March, during the transaction)?