Template:M summ Equity Derivatives 10

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Dividends on Index Transactions? No, sir.

We shouldn’t really need to say it, but we will: You don’t get Dividends on an Index Transaction. The Index calculation methodology will either factor the effect of dividends declared on index constituents, by re-weighting components when they pay dividends — in which case you will get the effect of those dividends, or it won’t, in which case you won’t get the effect of those dividends, BECAUSE YOU BOUGHT A DERIVATIVE OF AN INDEX THAT DOESN'T PAY ANY DIVIDENDS. either way, the dividend provisions of the 2002 ISDA Equity Derivatives Definitions aren’t relevant to Index and Index Basket Transactions.[1]

  1. ↑ There may be a half-hearted attempt in one of the MCAs to build in manufactured dividends to certain index products, but it is fiendishly complicated, not to mention wrong-headed, and no-one uses it as far as we know.
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