Transaction - Equity Derivatives Provision
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2002 ISDA Equity Derivatives Definitions
A Jolly Contrarian owner’s manual™ Transactions in a Nutshell™
Original text
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Comparisons
A JC-curated sub-division of the General Definitions section. We sub-group the Section 1 definitions into the following subgroups:
- Transactions — Sections 1.1 - 1.12
- Underliers — Sections 1.13 - 1.16
- Trade Details — Sections 1.17 - 1.24
- Exchanges, Clearing Systems and Currencies — Sections 1.25 - 1.37
- Trade Features — Sections 1.38 - 1.41
- Calculation Agent and Determination Agent - Section 1.40 and 12.8(f)
- Knock-ins and Knock-outs — Sections 1.42 - 1.51
Basics
The basic nuts and bolts of an equity derivative: the Equity Derivatives Definitions handles the “equity” side of the Transaction; the 2006 ISDA Definitions (or the 2021 ISDA Interest Rate Derivatives Definitions if you’re an early-adopter type) handles the “floating” side, which is what the customer pays to its swap dealer for its exposure: basically, the financing rate.
Financing rate ... you mean like, loan?
Sure. An equity swap bears the same relation to a margin loan as does a Pringle to a crisp.
So do not let anyone tell you that an equity derivative is not a financing tool. It is.
Transaction types
This is the Transactions section: the first eleven paragraphs of the Equity Derivatives Definitions — twelve, if you include the Confirmations definition which doesn’t really belong anywhere else —set out all the types of Transaction you can have. These break down into:
And can be on a single Index or Share or a Basket of Indices or Shares. All are documented under Confirmations, though with the onset of Master Confirmation Agreements, synthetic prime brokerage and so on, these are no longer the old-fashioned epistles they once were.
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