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Template:M summ Equity Derivatives 10: Difference between revisions
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===Section {{eqderivprov|10.5}} {{eqderivprov|Dividend Payment Obligations Relating to Physically-settled Option Transactions}}=== | ===Section {{eqderivprov|10.5}} {{eqderivprov|Dividend Payment Obligations Relating to Physically-settled Option Transactions}}=== | ||
There are some provisions of the 2002 ISDA Equity Derivatives Definitions that will cause extended, heated negotiation and a degree of enmity between even mild-mannered negotiators. This is not one of them. | There are some provisions of the 2002 ISDA Equity Derivatives Definitions that will cause extended, heated negotiation and a degree of enmity between even mild-mannered negotiators. This is not one of them. | ||
=== Section {{eqderivprov|10.6}} {{eqderivprov|Extraordinary Dividend}} === | |||
[[Extraordinary Dividend - Equity Derivatives Provision|You]] would be forgiven for thinking this definition a little circular, especially if you haven’t specified what an {{eqderivprov|Extraordinary Dividend}} will be in the {{isdaprov|Confirmation}}. This is because — we venture — {{icds}} felt it was all a bit hard. | |||
“Because,” said they, “of the difficulties of determining in advance in any formulaic way what would constitute an {{eqderivprov|Extraordinary Dividend}}, the details of this are left to parties to state in their {{isdaprov|Confirmation}}s.” | |||
Of course, the point about an {{eqderivprov|Extraordinary Dividend}} is that it is ''extraordinary''. Out of the ordinary; off the beaten track; beyond the mortal comprehension, and powers of prediction, not just of the sainted ISDA drafting committee, but of those poor saps, too, grinding out your equity derivative trade confirms in some mice-invested operations depot in suburban Almaty. How are ''they'' supposed to know what an {{eqderivprov|Extraordinary Dividend}} is? | |||
But look on the bright side: “{{eqderivprov|Dividend}}” is not defined in the {{eqderivdefs}} ''at all!''<ref>Try “{{eqderivprov|Dividend Amount}}”, which refers to a “gross cash dividend” without further elaborating on what that might be.</ref> | |||
Anyway, the definition boils down, as best as I can fathom, to this: | |||
“An {{eqderivprov|Extraordinary Dividend}} is whatever the {{eqderivprov|Calculation Agent}} jolly well says it is.” | |||
Which, in its way, is fine, especially if you happen to be acting for the {{eqderivprov|Calculation Agent}}, but if you ''are'' the {{eqderivprov|Calculation Agent}} and the question before you is “is this really weird thing that’s just happened to the voting stock of some obscure trucking company in Panama an {{eqderivprov|Extraordinary Dividend}} or not?” you might feel anchored a little high up the beach as the tide goes out. | |||
Look, I don’t make the rules, folks. | |||
===Section 10.7 === | |||
See paragraph {{eqderivprov|10.1(b)}} {{eqderivprov|Ex Amount}}, which applies to normal, unremarkable dividends and {{eqderivprov|10.7(b)}} {{eqderivprov|Ex Amount}} which applies to {{eqderivprov|Extraordinary Dividend}}s (or you could really go to town and ''{{compare|39921|39920}}'' them). | |||
Most of the time you’ll be using the normal one under paragraph {{eqderivprov|10.1(b)}}, but (except for the reference to “gross cash dividend” on one hand and “extraordinary dividend” on the other. | |||