Template:Calculation agent dispute

Should you include a dispute right for determinations made by the calculation agent?

Recognising that “should you?”, and “will you have to”, are different questions, here — if you are doing synthetic equity style business — is how it rolls.

Client’s lawyer: we must have a dispute right so help me.

• The Dealer will be the Calculation Agent. (True.)
• The Dealer will be the Hedging Party. (True.)
• The Dealer will be the Determining Party. (True.)
• Dealers are bad, venal people. They have blackened hearts and will stop at nothing to rip their clients’ faces off. We need some check on their unfettered and sure-to-be outrageously exercised discretion. (A matter of debate and, to be sure, recent history has not looked kindly on the goings on in some dealers, but if that’s your starting point a far better question is “why are you doing business with such a vassal in the first place”?)

The Dealer’s lawyer: Look, dudes you seem to be missing the point. When we hedge, we are delta neutral. That means if our hedge pays 50, we pay you 50. So firstly, we can’t rip your face off.

• Secondly, we are owe you best execution
• Thirdly, because we delta-one]] hedge, we come up with our Determination Agent “determination” by actually selling the right number of shares. It isn’t like we confect some hypothetical valuation based on a model some geek in correlation trading built in excel. We don't go ask some stooge dealers for a soft estimate, and promise them champagne in the mail. We actually sell the stock. Our own money out the door. We can't get it back. What you are asking is to second guess that trade by you