Increased Cost of Hedging - Equity Derivatives Provision

Template:EqderivanatTemplate:Eqderivanat Compare with Increased Cost of Stock Borrow, the equivalent provision where the Hedging Party is short.

Part of the famed “triple cocktail” of protections against unexpected problems hedging and risk managing Transactions, together with Hedging Disruption and Change in Law. Note also references to Hedging Party.

Excluding own credit deterioration

Increased Cost of Hedging excludes costs a Hedging Party incurs through the deterioration of its own credit — so it will tend to capture market wide cost increases, and exclude those that are personal to the Hedging Party. Assiduous sell-side brokers will try to cut out the “deterioration of own credit” wording. Muscular asset managers will tell them where to go.

See also

• Consequences of an Additional Disruption Event in particular 12.9(b)(vi).