Liquidation of hedges - Equity Derivatives Provision
12.8(e) in a Nutshell™ (Equity Derivatives edition)
- 12.8(e): Without duplication and when it is commercially reasonable to do so, when calculating a Cancellation Amount the Determining Party may consider any loss or cost (or gain) incurred in terminating, liquidating or re-establishing any hedge.
This makes it clear that on a Hedging Disruption, for example, the Determining Party can pass on at least the market risk of replacing any disrupted hedge. (And probably the credit risk too, though where the hedge is a cash trade settling DVP there would be no credit exposure).
Section 12.8. Cancellation Amount
- 12.8(a) “Cancellation Amount”
- 12.8(b) “Means of determination”
- 12.8(c) “Determination”
- 12.8(d) “Quotations”
- 12.8(e) “Liquidation of hedges”
- 12.8(f) “Determining Party”
- 12.8(g) “Commercially reasonable procedures”