82,891
edits
Amwelladmin (talk | contribs) (Created page with "===Where there are no exchange-traded options=== You do have to love {{icds}}}, don’t you: who else would take the time t...") |
Amwelladmin (talk | contribs) |
||
(3 intermediate revisions by the same user not shown) | |||
Line 1: | Line 1: | ||
===Where there are no [[Options Exchange - Equity Derivatives Provision|exchange-traded options]]=== | ===Where there are no [[Options Exchange - Equity Derivatives Provision|exchange-traded options]]=== | ||
You do have to love {{icds | You do have to love {{icds}}, don’t you: for who else would take the time to consider<ref>In {{eqderivprov|Options Exchange Adjustment}} under {{eqderivprov|11.2(b)}}.</ref> what to do when you have selected {{eqderivprov|Options Exchange Adjustment}} for {{eqderivprov|Shares}} that ''don’t have any [[Options Exchange - Equity Derivatives Provision|exchange-traded options]]''. Look, folks, if there are no [[Options Exchange - Equity Derivatives Provision|exchange-traded options]] on the underlying shares, then ''don’t select {{eqderivprov|Options Exchange Adjustment}} as your {{eqderivprov|Method of Adjustment}} for crying out loud''. | ||
If he were in a more patient mood, the [[JC]] might suppose that options may unexpectedly cease trading on exchange after a {{eqderivprov|Transaction}} is executed, or may be temporarily suspended — and perhaps “an event having a concentrative or dilutive effect on the value of the shares” might be just the thing to cause a suspension or delisting. But even this is a recommendation to plump for [[Calculation Agent Adjustment (Share Transactions) - Equity Derivatives Provision|Calculation Agent Adjustment]] under {{eqderivprov|11.2(b)}}. You would think. I know, I know: ''but the {{eqderivprov|Calculation Agent}} — usually the [[broker dealer]] counterparty to the transaction, of course —might rip my face off!'' | |||
But, firstly, ''what choice have you got''? If the options ''aren’t'' traded on exchange, what else are you doing to do: have a dealer poll? If they ''are'' traded on exchange, and the {{eqderivprov|Calculation Agent}} makes a determination at variance from the one the {{eqderivprov|Options Exchange}} makes, it will have to justify how it is acting “[[in good faith and a commercially reasonable manner]]”, being the standard required of it by Paragraph {{eqderivprov|1.40}}. Furthermore, if it is [[delta-one-hedging]] (as it will be, if you you are doing [[synthetic prime brokerage]]), its is market neutral and has no interest in delivering you a bad outcome, and indeed every incentive, under the [[commercial imperative]] to deliver you a good one. <br> |