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| {{eqderivsnap|12.6}} | | {{eqdmanual|12.6}} |
| ====Commentary====
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| Upon the occurrence of these {{eqderivprov|Extraordinary Events}} ({{eqderivprov|Nationalization}}, {{eqderivprov|Insolvency}} and {{eqderivprov|Delisting}}) the parties may elect to terminate (if they choose {{eqderivprov|Negotiated Close-out}}), or the transaction will automatically terminate (if {{eqderivprov|Cancellation and Payment (Extraordinary Events)}} or {{eqderivprov|Partial Cancellation and Payment (Extraordinary Events)}} are selected).
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| * '''[[Cancellation and Payment (Extraordinary Events) - Equity Derivatives Provision|Cancellation and Payment]]''' means that on one of these {{eqderivprov|Extraordinary Events}} occurring, the trade is terminated immediately and valued by the {{eqderivprov|Calculation Agent}} or the {{eqderivprov|Determining Party}} (important to check who this is!). This gives certainty and would be important in the case of a delta-1 derivative exposure with no defined termination (or where the defined termination is extremely long-dated).
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| * '''[[Negotiated Close-out (Extraordinary Events) - Equity Derivatives Provision|Negotiated Close-out]]''' requires the parties to agree on the termination value, with a fall back to the trade continuing until the scheduled termination date, whereupon it would be valued by the {{eqderivprov|Calculation Agent}} in good faith (and ignoring the {{eqderivprov|Disruption Event}} that otherwise would surely be alleged). Note that the trade will terminate, but not until scheduled termination, and in the absence of mutual agreement both parties are committed to the term, which may not make a great deal of sense where the underlyer has been subject to {{eqderivprov|Insolvency}}, {{eqderivprov|Nationalization}} or a similarly drastic {{eqderivprov|Extraordinary Event}}.
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| Note that a {{eqderivprov|Delisting}} covers full cessation of trading but not a suspension of trading, even if indefinite. But in that case a {{eqderivprov|Hedging Disruption}} or - at a pinch - {{eqderivprov|Increased Cost of Hedging}} ought to get you home.
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| ====See Also====
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| {{eqderivanatomy}}
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