Cash Settlement of Equity Swap Transactions - Equity Derivatives Provision

Section 8.6 Cash Settlement of Equity Swap Transactions

8.6(a). Price Return

8.6(b). “Total Return” and “Re-investment of Dividends” is not applicable

8.6(c). “Total Return” and “Re-investment of Dividends” is applicable

Commentary

Equity Swap Transactions can be settled either by reference to Price Return or Total Return, but not Slight Return.

Price Return: The Price Return is simply a function of the price at the beginning and end, and takes no account of declared dividends or other income or distributions received off the underlier in the mean time. It is simply the subtraction of the Settlement Price from the Initial Price, and

• (if the underlier increases in value over the life of the Transaction) be a positive number; or
• (if the underlier decreases in value over the life of the Transaction) be a negative number.

If it's positive, the Equity Amount Payer pays it to the Equity Amount Receiver. If it's negative, the Equity Amount Receiver pays the absolute value to the Equity Amount Payer.

Total Return: is the Price Return, but adjusted for income. Template:Eqderivanatomy