Template:M summ Equity Derivatives 12.7: Difference between revisions

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''.

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.