Template:M summ Equity Derivatives 12.7: Difference between revisions

Template:M summ Equity Derivatives 12.7 (view source)

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 The difference between ''X'' and ''Y'' (104 - 102) is ''two''. ''Half'' of that difference is ''one''. If it is meant to yield a ''consensus'' single {{eqderivprov|Cancellation Amount}}, this, to put not too fine a point on it, is wildly, obviously, and patently ''wrong''.
+====Equity vs Equity swaps, maybe? Don’t think so.===
-What could be going on? One thought we had — and it is a feeble, half-thought, so pay it little mind other than to dismiss it — is that this is meant to address a {{eqderivprov|Transaction}} where ''both'' parties are hedging separate equity risks: rather than the usual equity swap, which pays an {{eqderivprov|Equity Amount}} return against a {{isdadefprov|Floating Amount}} return, the {{eqderivprov|Transaction}} is structured as two offsetting {{eqderivprov|Equity Amount}}s. This would at least justify there being two {{eqderivprov|Determining Parties}}, and it would also justify them using the ''difference'' between the values, rather than their ''average'' — but not ''half'' the difference between the values. And we are not familiar with such swaps, which would ordinarily be achieved by writing separate long and short Transactions in any case.
+What could be going on? One thought we had — and it is a feeble, half-thought, so pay it little mind other than to dismiss it — is that this is meant to address a {{eqderivprov|Transaction}} where ''both'' parties are hedging separate equity risks: rather than the usual equity swap, which pays an {{eqderivprov|Equity Amount}} return against a {{isdadefprov|Floating Amount}} return, the {{eqderivprov|Transaction}} is structured as two offsetting {{eqderivprov|Equity Amount}}s. This would at least justify there being two {{eqderivprov|Determining Parties}}, and it would also justify them using the ''difference'' between the values, rather than their ''average'' — but not ''half'' the difference between the values. And even here, the concept doesn’t work: a {{eqderivprov|Cancellation Amount}} is crafted the total termination amount for the whole Transaction, not just a valuation of the Equity Amount leg. Nor are such swaps otherwise contemplated in the {{eqdefs}}, seeing as there is a much easier way of achieving long exposure to one underlier and short exposure top another:  just enter two vanilla {{eqderivprov|Transaction}}s, one long and one short.