Potential Adjustment Event - Equity Derivatives Provision

Template:Eqderivanat Section 11.2. Adjustments to Share Transactions and Share Basket Transactions

11.2(a). Method of Adjustment

11.2(b). Options Exchange Adjustment

11.2(c). Calculation Agent Adjustment

11.2(d). Options Exchange

11.2(e). Potential Adjustment Event

Corporate adjustments that may dilute or concentrate the theoretical value of the Shares.

Retrospective adjustments

Now what might happen under a total return swap if such a 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 an Extraordinary Dividend to all holders of record on 1 March. It pays this dividend on 1 December.

See also

• Extraordinary Dividend