Valuation Date - Equity Derivatives Provision

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2002 ISDA Equity Derivatives Definitions

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6.2 in a Nutshell

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6.2 in all its glory

Section 6.2. Valuation Date. “Valuation Date” means, in respect of an Option Transaction, each Exercise Date and, in respect of a Forward Transaction or an Equity Swap Transaction, each date specified as such or otherwise determined as provided in the related Confirmation (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day), in each case, subject to the provisions of Section 6.6 below.

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Article 6. Valuation

Section 6.1. Valuation Time
Section 6.2. Valuation Date
Section 6.3. General Terms Relating to Market Disruption Events

6.3(a) Market Disruption Event
6.3(b) Trading Disruption
6.3(c) Exchange Disruption
6.3(d) Early Closure

Section 6.4. Disrupted Day
Section 6.5. Scheduled Valuation Date
Section 6.6. Consequences of Disrupted Days
Section 6.7. Averaging

6.7(a). Averaging Date
6.7(b). Settlement Price and Final Price
6.7(c). Averaging Date Disruption
6.7(d). Adjustments of the Exchange-traded Contract
6.7(e). Adjustments to Indices (Averaging)

Section 6.8. Futures Price Valuation

6.8(a) Valuation Date (Futures Price Valuation)
6.8(b) Additional definitions (Futures Price Valuation)
6.8(c) Settlement Price and Final Price (Futures Price Valuation)
6.8(d) Adjustments of the Exchange-traded Contract (Futures Price Valuation)
6.8(e) Non-Commencement or Discontinuance of the Exchange-traded Contract
6.8(f) Corrections of the Official Settlement Price



Final Valuation Date

The Valuation Date concept assumes you have a Transaction that will run to its term. For you cheeky synthetic prime brokerage types who write your Equity Swaps as if they were undated delta-one exposures — which, unless the Master in Charge of Tax is looking, they are — your master confirmation will need to create an extra, bonus, final Valuation Date as of the Optional Early Termination Date, otherwise on closing out a position you might find yourselves harking back to a Valuation Date that happened in that happier, gentler time that was two or three weeks ago.

The Calculation Period that didn’t bark in the night-time

Where, oh where, are the Calculation Periods 2002 ISDA Equity Derivatives Definitions? Ok so this is a bit of a trick question. There are noCalculation Periods” — that is instead defined in the 2006 ISDA Definitions. In the 2002 ISDA Equity Derivatives Definitions, the periods for Equity calculations are handled by the “Valuation Date” concept.

That in turn determines the “Cash Settlement Payment Date” (for cash-settled Equity Swap Transactions) and “Settlement Date” (for physically settled ones).

You may see a Calculation Period on the Floating leg of an equity swap though - that will be a reference to the 2006 ISDA Definitions.

Bullet swaps

Some times you will trade “bullet swaps” which do not have a Valuation Date. Being the tortured language of ISDA’s crack drafting squad™, there is no straightforward concept in the definitions of a swap which has no Valuation Dates other than the Termination Date, so expect wildly ungainly language in confirms to express that fairly simple idea.

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