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===[[Synthetic prime brokerage]]=== | |||
The {{eqderivprov|Valuation Date}} comes in handy if you are restriking your {{isdaprov|Transaction}}s periodically, as you are likely to be doing if you are providing [[synthetic prime brokerage]] — being as it is, an undated [[delta-one]] exposure to equities delivered through an equity derivative. | |||
Your [[prime broker]] will not want to run indeterminate exposures to shares, even if it is collateralised daily, so restriking the transactions periodically can zero out whatever the [[LRD|residual risk]] is in the paranoid eyes of your financial controllers. | |||
Now interim {{eqderivprov|Valuation Date}}s — which are glorified estimates of the present value of an ongoing position — and the final {{eqderivprov|Valuation Date}} — which is the price at which you definitively close out your position and go “off risk” — have rather different consequences. [[Tax attorney|US Tax attorney]]s, as obsessed as they are with avoiding the suggestion that a swap counterparty is controlling its [[broker]]’s hedge, will seek to avoid any suggestion that the ''final'', scheduled valuation arises from anything quite so mucky as the price at which the broker closes out its hedge. So, there, expect references to [[VWAP]]. | |||
The same [[tax attorney]] will not be so bothered how you come up with your prices on other {{eqderivprov|Valuation Date}}s, seeing as on that theory of the game, the counterparty is not going on or off risk. | |||
In the [[synthetic prime brokerage]] world, where {{isdaprov|Transaction}}s are callable at will, that ''scheduled'' {{eqderivprov|Termination Date}} is a fairly arbitrary figure plucked out of the air at some point in the distant future, as much as anything else because “{{eqderivprov|Termination Date}}” is a mandatory field in your PB’s booking system. Also, to quiet the black horses of despair playing through the wild paddocks of your financial controller’s tortured psychology. It won’t, of course, but you can always try. | |||
Curiously, [[tax attorney]]s are less exercised about the method by which a [[Broker]] values the transaction for an ''optional'' early termination, even though that is the usual method by which a client terminates a synthetic equity swap, which is broadly an undated transaction terminable at the client’s whim. | |||