Index Transaction - Equity Derivatives Provision

From The Jolly Contrarian
Jump to navigation Jump to search

2002 ISDA Equity Derivatives Definitions
A Jolly Contrarian owner’s manual™

Resources and navigation

Resources About the Equity Derivatives Definitions | (full wikitext) | (nutshell wikitext) | Equity v credit derivatives showdown

Hot topics Synthetic Prime Brokerage Anatomy | The Triple Cocktail | Cancellation and Payment | Calculation Agent
Resources About the Equity Derivatives Definitions | (full wikitext) | (nutshell wikitext) | Equity v credit derivatives showdown
Hot topics Synthetic Prime Brokerage Anatomy | The Triple Cocktail | Cancellation and Payment | Calculation Agent
TOC | 1 General Definitions | 2 Option Transactions | 3 Exercise of Options | 4 Forward Transactions | 5 Equity Swap Transactions | 6 Valuation | 7 Settlement | 8 Cash Settlement | 9 Physical Settlement | 10 Dividends | 11 Adjustments and Modifications | 12 Extraordinary Events · 12.8 Cancellation Amount · 12.9 Additional Disruption Events · 12.9 List of ADEs · 12.9(b) Consequences of ADEs | 13 Miscellaneous

Index: Click to expand:

Section 1.5 in a Nutshell

Use at your own risk, campers!

Full text of Section 1.5


Tell me more
Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Content and comparisons

Template:M comp disc Equity Derivatives 1.5

Template

Summary

Section 1.5 Index Transactions

Index Transactions are, on one view, glorigied, big, dynamic share Basket Transactions, only where the rebalancing is carried out by an independent third party. In any case bear in mind you cannot exactly “buy” or, therefore, hedge an Index the way you can buy and directly hedge a Share, so you must hedge by: buying and then rebalancing all the underlying components of the Share, which means you are at the mercy of the market, and there is bound to be some kind of tracking error, or buying a future on the Index, in which case someone else is at the mercy of the market, or an exchange-traded fund which tracks the Index.

Our unscientific hypothesis is that most equity derivative dealers will hedge the Index Swaps they write with physical shares, or futures.

Template

General discussion

Template:M gen Equity Derivatives 1.5

Template

See also

Template:M sa Equity Derivatives 1.5

Template

References