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Template:M summ Equity Derivatives 12.7: Difference between revisions
Template:M summ Equity Derivatives 12.7 (view source)
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Running a synthetic equity business is mainly boring, often fraught, and on the odd occasion [[Archegos|terrifying]] job. Calculating {{eqderivprov|Cancellation Amount}}s upon market disruption counts, at least, as fraught. If the {{eqderivprov|Hedging Party}} can’t match its hedge executions with its client pricing, it will lose money. It occasionally escapes the buyside community, but this is not the idea. The dealer is does not expect to profit, or lose, from movements in the underlier: the point is to pass those onto the client, who has specifically signed up for them. | Running a synthetic equity business is mainly boring, often fraught, and on the odd occasion [[Archegos|terrifying]] job. Calculating {{eqderivprov|Cancellation Amount}}s upon market disruption counts, at least, as fraught. If the {{eqderivprov|Hedging Party}} can’t match its hedge executions with its client pricing, it will lose money. It occasionally escapes the buyside community, but this is not the idea. The dealer is does not expect to profit, or lose, from movements in the underlier: the point is to pass those onto the client, who has specifically signed up for them. | ||
Accordingly,the dealer will be ''most'' unamused if a client asks it to consider an alternative price someone ''else'' has come up with to value its own hedge liquidation. This is like saying, to a football fan, | Accordingly, the dealer will be ''most'' unamused if a client asks it to consider an alternative price someone ''else'' has come up with to value its own hedge liquidation. This is like saying, to a football fan, “look, I know Crystal Palace lost to Scunthorpe in extra time at the weekend, but my mate is a football expert, and he says Palace were dead unlucky, hit the crossbar a couple of times, and that Scunthorpe goal should have been called off-side, so why don’t we call this 4:0 to Palace?” | ||
The dealer will, tersely, say, “Look, I know you have a great relationship with [[Wickliffe Hampton]] and everything, but I could not care a row of buttons where ''they'' sees the notional value of ''my'' hedge. ''They'' don’t have to sell it. ''I'' do. We are where we are. The price ''I'' see is X. Now if [[Wickliffe Hampton]] is prepared to make ''me'' a [[firm bid]] at Y to buy my actual hedge, from me, then I am listening. Otherwise, it is X.” | The [[dealer]] will, tersely, say, “Look, I know you have a great relationship with [[Wickliffe Hampton]] and everything, but I could not care a row of buttons where ''they'' sees the notional value of ''my'' hedge. ''They'' don’t have to sell it. ''I'' do. We are where we are. The price ''I'' see is X. Now if [[Wickliffe Hampton]] is prepared to make ''me'' a [[firm bid]] at Y to buy my actual hedge, from me, then I am listening. Otherwise, it is X.” | ||
====But it is {{eqderivprov|Determining Party}}, not {{eqderivprov|Hedging Party}}==== | ====But it is {{eqderivprov|Determining Party}}, not {{eqderivprov|Hedging Party}}==== | ||