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Equity derivative: Difference between revisions
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*{{eqderivprov|Forward}} contracts | *{{eqderivprov|Forward}} contracts | ||
====Features==== | |||
Equity derivatives generally reference the performance of the [[underlier]] over the life of the transaction, most commonly represented as a fraction whereby {{eqderivprov|Settlement Price}} (also known as "[[Final Price]]") is divided by "{{eqderivprov|Strike Price}}" (also known as "[[Initial Price]]") to yield a percentage - anything greater than 100% implies a positive return over the life of the transaction; a figure of less than 100% implies a negative return. | |||
*'''{{eqderivprov|Strike Price}}''': generally the price of the underlier at the inception of the trade | |||
*'''{{eqderivprov|Settlement Price}}''': generally the price of the underlier at the scheduled maturity of the trade | |||
*'''[[Barrier]]s: above or below which the trade may knock in, knock out, or the settlement formula may adjust; | |||
*'''{{eqderivprov|Valuation}}''': on the Settlement Date, the settlement Price will be determined by reference to one or more Valuation dates, (if more than one Averaging may be applied) | |||
====Market and Hedging disruption==== | |||
*'''{{eqderivprov|Market Disruption}}''': Contingency plans need to be made for what to do where it is not possible to make a valuation on any day on which one might be required (these may occur periodically through the transaction, and may be daily). | |||
*'''{{eqderivprov|Hedging Disruption}}''': where the market is finctioning, but for some reason there are impediments to efficiently or legally hedging an exposure under an equity derivative. | |||
{{eqderivanatomy}} | {{eqderivanatomy}} | ||