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| {{2002 ISDA Equity Derivatives Definitions Section 8.6 TOC}}
| | #redirect[[Cash Settlement - Equity Derivatives Provision]] |
| {{eqderivsnap|8.6}}
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| ====Commentary====
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| Equity Swap Transactions can be settled either by reference to {{eqderivprov|Price Return}} or {{eqderivprov|Total Return}}, but not [http://en.wikipedia.org/wiki/Voodoo_Child_(Slight_Return) Slight Return].
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| '''{{eqderivprov|Price Return}}''': The {{eqderivprov|Price Return}} is the subtraction of the {{eqderivprov|Settlement Price}} from the {{eqderivprov|Initial Price}}, and
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| *(if the underlier ''increases'' in value over the life of the Transaction) be a '''positive''' number; or
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| *(if the underlier ''decreases'' in value over the life of the Transaction) be a '''negative''' number.
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| If it's positive, the {{eqderivprov|Equity Amount Payer}} pays it tot he {{eqderivprov|Equity Amount Receiver}}. If it's negative, the {{eqderivprov|Equity Amount Receiver}} pays the absolute value to the {{eqderivprov|Equity Amount Payer}}.
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| '''{{eqderivprov|Total Return}}''': The {{eqderivprov|Total Return}} formulation is:
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| {{eqderivprov|Equity Notional Amount}} * ({{eqderivprov|Settlement Price}}/{{eqderivprov|Initial Price}})
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| Since both numerator and denominator must be positive the Total Return cannot be negative, but may be greater or less than 100% (and so can be converted into a positive or negative number by subtracing from 1).
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| {{eqderivanatomy}}
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