|
2002 ISDA Equity Derivatives Definitions
A Jolly Contrarian owner’s manual™
Resources and navigation
Section 8 in a Nutshell™
Use at your own risk, campers!
Article 8 Cash Settlement
8.1. Cash Settlement of Option Transactions. For each Exercise Date under a Cash-settled Option Transaction Seller will pay to Buyer any Option Cash Settlement Amount on the Cash Settlement Payment Date for all Options exercised on that Exercise Date.
8.2. “Option Cash Settlement Amount” means, for each Valuation Date:
- (a) Index Option Transaction and Index Basket Option Transactions: For any Exercise Date, the number of exercised Options x Strike Price Differential x one unit of the Settlement Currency x any Multiplier; and
- (b) Share Option Transaction and Share Basket Option Transactions: for any Exercise Date, the number of exercised Options x Option Entitlement x Strike Price Differential.
8.3. “Strike Price Differential” means, for each Valuation Date, the greater of zero and
- (a) for a Call, Settlement Price - Strike Price; or
- (b) for a Put, Strike Price - Settlement Price.
8.4. Cash Settlement of Forward Transactions. For each Cash Settlement Payment Date under a Cash-settled Forward Transaction:
- (a) if “Prepayment” does not apply:
- (i) where the Forward Cash Settlement Amount is positive, Seller will pay it to Buyer on the Cash Settlement Payment Date; and
- (ii) if Forward Cash Settlement Amount is negative, then Buyer will pay its absolute value to Seller on the Cash Settlement Payment Date; and
- (b) if “Prepayment” applies, Seller will pay Buyer Forward Cash Settlement Amount + any Excess Dividend Amount on the Cash Settlement Payment Date.
8.5. Forward Cash Settlement Amount. “Forward Cash Settlement Amount” means, for each Valuation Date:
- (a) Index Forward Transaction or Index Basket Forward Transactions:
- (i) where “Prepayment” does not apply: Settlement Price - Forward Price x 1 unit of Settlement Currency x Multiplier;
- (ii) where “Prepayment” applies: Settlement Price x 1 unit of Settlement Currency x Multiplier;
- (b) Share Forward Transaction or Share Basket Forward Transactions:
- (i) where neither “Prepayment” or “Variable Obligation” applies: Number of Shares (or Baskets) x Settlement Price - Forward Price;
- (ii) where “Prepayment” applies but “Variable Obligation” does not: Number of Shares or Baskets x Settlement Price;
- (iii) where “Prepayment” does not apply but “Variable Obligation” does:
- (A) where Settlement Price ≤ Forward Floor Price: Number of Shares or Baskets x Settlement Price - Forward Floor Price;
- (B) where Forward Cap Price ≥ Settlement Price > Forward Floor Price: Number of Shares or Baskets x zero; and
- (C) where Settlement Price > Forward Cap Price: Number of Shares or Baskets x Settlement Price - Forward Cap Price; and
- (iv) where both “Prepayment” and “Variable Obligation” apply: Number of Shares or Baskets (without rounding) x Settlement Price.
8.6. Cash Settlement of Equity Swap Transactions. Where Cash Settlement applies for each Cash Settlement Payment Date under an Equity Swap Transaction, if the Type of Return is:
- 8.6(a) “Price Return”:
- (i) if the Equity Amount is positive then the Equity Amount Payer will pay it (with any other amounts it owes) to the Equity Amount Receiver on the relevant Cash Settlement Payment Date; and
- (ii) if the Equity Amount is negative then the Equity Amount Receiver will pay its absolute value (with any other amounts it owes) to the Equity Amount Payer on the relevant Cash Settlement Payment Date;
- 8.6(b) “Total Return” and “Re-investment of Dividends” does not apply, then Price Return will apply, only on each Dividend Payment Date, the Equity Amount Payer will pay any due Dividend Amount to the Equity Amount Receiver on the Dividend Payment Date; and
- 8.6(c) “Total Return” and “Re-investment of Dividends” applies, then Price Return will apply, only when determining each the Equity Amount on each later Cash Settlement Payment Date the Calculation Agent must adjust the Equity Notional Amount as described in Section 10.4.
8.7. The “Equity Amount” for any Cash Settlement Payment Date means Equity Notional Amount X Rate of Return as determined by the Calculation Agent at the Valuation Time on the Valuation Date.
8.8. “Cash Settlement Payment Date” means the date specified in Confirmation or, if none is specified, the date that is one Settlement Cycle following the Valuation Date, (or, in either case, the following Currency Business Day if the date in question isn’t one).
If, due to a Disrupted Day, there is more than one Valuation Date for the components of any Basket, the Cash Settlement Payment Date will be determined by reference to the last one. |
Full text of Section 8
Article 8 Cash Settlement
Section 8.1. Cash Settlement of Option Transactions. In respect of each Exercise Date under an Option Transaction for which “Cash Settlement” is applicable, Seller shall pay to Buyer the Option Cash Settlement Amount, if any, on the relevant Cash Settlement Payment Date for all Options exercised or deemed exercised on that Exercise Date.
Section 8.2. Option Cash Settlement Amount. “Option Cash Settlement Amount” means, unless otherwise provided in the related Confirmation, in respect of each Valuation Date:
- (a) under an Index Option Transaction or Index Basket Option Transaction, an amount equal to the number of Options exercised or deemed exercised on the relevant Exercise Date multiplied by the Strike Price Differential multiplied by one unit of the Settlement Currency multiplied by the Multiplier, if any; and
- (b) under a Share Option Transaction or Share Basket Option Transaction, an amount equal to the number of Options exercised or deemed exercised on the relevant Exercise Date multiplied by the Option Entitlement multiplied by the Strike Price Differential.
Section 8.3. Strike Price Differential. “Strike Price Differential” means, unless otherwise provided in the related Confirmation, in respect of each Valuation Date, an amount equal to the greater of (a) the excess of (i) in the case of a Call, the relevant Settlement Price over the Strike Price or (ii) in the case of a Put, the Strike Price over the relevant Settlement Price, and (b) zero.
Section 8.4. Cash Settlement of Forward Transactions. In respect of each Cash Settlement Payment Date under a Forward Transaction for which “Cash Settlement” is applicable:
- (a) if “Prepayment” is not applicable:
- (i) if the Forward Cash Settlement Amount is a positive number, then Seller shall pay to Buyer the Forward Cash Settlement Amount on the relevant Cash Settlement Payment Date; and
- (ii) if the Forward Cash Settlement Amount is a negative number, then Buyer shall pay to Seller the absolute value of the Forward Cash Settlement Amount on the relevant Cash Settlement Payment Date; and
- (b) if “Prepayment” is applicable, then Seller will pay to Buyer on the relevant Cash Settlement Payment Date the sum of the Forward Cash Settlement Amount and the Excess Dividend Amount, if any.
Section 8.5. Forward Cash Settlement Amount. “Forward Cash Settlement Amount” means, unless otherwise provided in the related Confirmation, in respect of each Valuation Date:
- (a) under an Index Forward Transaction or Index Basket Forward Transaction to which “Prepayment” is not applicable, an amount equal to the Settlement Price minus the Forward Price multiplied by one unit of the Settlement Currency multiplied by the Multiplier, if any;
- (b) under an Index Forward Transaction or Index Basket Forward Transaction to which “Prepayment” is applicable, an amount equal to the Settlement Price multiplied by one unit of the Settlement Currency multiplied by the Multiplier, if any;
- (c) under a Share Forward Transaction or Share Basket Forward Transaction to which “Prepayment” is not applicable and “Variable Obligation” is not applicable, an amount equal to the Number of Shares or the Number of Baskets, as the case may be, multiplied by an amount equal to the Settlement Price minus the Forward Price;
- (d) under a Share Forward Transaction or Share Basket Forward Transaction to which “Prepayment” is applicable and “Variable Obligation” is not applicable, an amount equal to the Number of Shares or the Number of Baskets, as the case may be, multiplied by the Settlement Price;
- (e) under a Share Forward Transaction or Share Basket Forward Transaction to which “Prepayment” is not applicable and “Variable Obligation” is applicable, an amount equal to the Number of Shares or the Number of Baskets, as the case may be, multiplied by:
- (i) if the Settlement Price is less than or equal to the Forward Floor Price, an amount equal to the Settlement Price minus the Forward Floor Price;
- (ii) if the Settlement Price is greater than the Forward Floor Price but less than or equal to the Forward Cap Price, zero; and
- (iii) if the Settlement Price is greater than the Forward Cap Price, an amount equal to the Settlement Price minus the Forward Cap Price; and
- (f) under a Share Forward Transaction or Share Basket Forward Transaction to which both “Prepayment” and “Variable Obligation” are applicable, an amount equal to the Number of Shares to be Delivered or the Number of Baskets to be Delivered, as the case may be and in either case determined without regard to rounding, multiplied by the Settlement Price.
Section 8.6. Cash Settlement of Equity Swap Transactions. In respect of each Cash Settlement Payment Date for an Equity Amount Payer under an Equity Swap Transaction for which "Cash Settlement” is applicable:
- 8.6(a) if the Type of Return specified in the related Confirmation is “Price Return”, then:
- (i) if the Equity Amount determined by the Calculation Agent in relation to that Equity Amount Payer is a positive number, then that Equity Amount Payer will pay (in addition to any other amounts payable by that Equity Amount Payer) to the Equity Amount Receiver the Equity Amount on the relevant Cash Settlement Payment Date; and
- (ii) if the Equity Amount determined by the Calculation Agent in relation to that Equity Amount Payer is a negative number, then the Equity Amount Receiver will pay (in addition to any other amounts payable by that Equity Amount Receiver) to the Equity Amount Payer the absolute value of the Equity Amount on the relevant Cash Settlement Payment Date;
- 8.6(b) if the Type of Return specified in the related Confirmation is “Total Return” and “Re-investment of Dividends” is not applicable, then Section 8.6(a) will apply as though Price Return were the applicable Type of Return and, in addition, on each Dividend Payment Date, the relevant Equity Amount Payer will pay to the Equity Amount Receiver the relevant Dividend Amount (if any) owed by such Equity Amount Payer on that Dividend Payment Date; and
- 8.6(c) if the Type of Return specified in the related Confirmation is “Total Return” and “Re-investment of Dividends” is applicable, then Section 8.6(a) will apply as though Price Return were the applicable Type of Return, provided that for purposes of determining the relevant Equity Amount for each subsequent Cash Settlement Payment Date the Calculation Agent shall make the adjustment provided for in Section 10.4.
Section 8.7. Equity Amount. “Equity Amount” means, in respect of each Cash Settlement Payment Date and an Equity Amount Payer, an amount, determined by the Calculation Agent as of the Valuation Time on the Valuation Date to which the Cash Settlement Payment Date relates, equal to the product of the Equity Notional Amount and the Rate of Return.
Section 8.8. Cash Settlement Payment Date. “ Cash Settlement Payment Date” means any date specified or otherwise determined as provided in the related Confirmation or, if any such date is not a Currency Business Day, the next following Currency Business Day. If no such date is specified in the related Confirmation, the Cash Settlement Payment Date will fall on the date that is one Settlement Cycle following the Valuation Date, or if such date is not a Currency Business Day, the next following Currency Business Day. In the case of an Index Basket Transaction or Share Basket Transaction, if as a result of the occurrence of a Disrupted Day there is more than one Valuation Date with respect to Indices or Shares comprised in the Basket, then the relevant Cash Settlement Payment Date shall be determined by reference to the Valuation Date which is the last to occur.
|
|