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Template:M summ Equity Derivatives 12.8(a): Difference between revisions
Template:M summ Equity Derivatives 12.8(a) (view source)
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{{eqderivprov|Cancellation Amount}} is a beast of a definition. But when you boil it down, it’s pretty straightforward. It applies when terminating a {{eqderivprov|Transaction}} following an {{eqderivprov|Extraordinary Event}} or an {{eqderivprov|Additional Disruption Event}}. Importantly, by dint of Section {{eqderivprov|12.8(e)}}, the {{eqderivprov|Determining Party}} may pass through hedge breakage costs and losses. | {{eqderivprov|Cancellation Amount}} is a beast of a definition. But when you boil it down, it’s pretty straightforward. It applies when terminating a {{eqderivprov|Transaction}} following an {{eqderivprov|Extraordinary Event}} or an {{eqderivprov|Additional Disruption Event}}. Importantly, by dint of Section {{eqderivprov|12.8(e)}}, the {{eqderivprov|Determining Party}} may pass through hedge breakage costs and losses. | ||
===Geopolitical events=== | ====Geopolitical events==== | ||
Now, what gains or losses might the {{eqderivprov|Determining Party}} incur in replacing the material terms of the {{eqderivprov|Transaction}} if, due to wars, sanctions and other miscellaneous geopolitical hanky-panky, a market gets totally shut down? If, for example, the outside world has imposed economic sanctions on the jurisdiction in which your {{eqderivprov|Share}}s trade (as, at the time of writing,<ref>Feburary 2022.</ref> seems far possible for Russia), of if the {{eqderivprov|Share}}s’ jurisdiction itself imposes sanctions on money coming in from or going out to the outside world (as did Greece, for a brief moment, in 2015)? | Now, what gains or losses might the {{eqderivprov|Determining Party}} incur in replacing the material terms of the {{eqderivprov|Transaction}} if, due to wars, sanctions and other miscellaneous geopolitical hanky-panky, a market gets totally shut down? If, for example, the outside world has imposed economic sanctions on the jurisdiction in which your {{eqderivprov|Share}}s trade (as, at the time of writing,<ref>Feburary 2022.</ref> seems far possible for Russia), of if the {{eqderivprov|Share}}s’ jurisdiction itself imposes sanctions on money coming in from or going out to the outside world (as did Greece, for a brief moment, in 2015)? | ||
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Now the nature of geopolitical events is to be unpredictable. They may manifest themselves in different and unexpected ways, so — while no-one likes to rag on {{icds}} more than the [[JC]] does, readers, you know that — you can’t really blame [[the ’squad]] for not setting out the myriad of unintended knock-on consequences there might be to your equity derivative portfolio as a result of an unwarranted military incursion in the Urals. | Now the nature of geopolitical events is to be unpredictable. They may manifest themselves in different and unexpected ways, so — while no-one likes to rag on {{icds}} more than the [[JC]] does, readers, you know that — you can’t really blame [[the ’squad]] for not setting out the myriad of unintended knock-on consequences there might be to your equity derivative portfolio as a result of an unwarranted military incursion in the Urals. | ||
====Talk to your clients==== | ====Talk to your clients==== | ||
That said, it is all about managing expectations. The other typical characteristic of geopolitical hanky-panky is that it rarely comes out of the blue: it brews, there is posturing, brinkspersonship, manoeuvering before anything happens. ''This is a good time to get out and talk to your clients''. Remember the name of the game is to manage client expectations: a client who ''didn’t'' know it had some risk, even though it ''should'' have known (or, in fact ''did'' know<ref>This is an [[unknown known]] in the JC’s [[forensic epistemology]].</ref> but in a moment of motivated irrationality had conveniently ''forgotten'') is more likely to be upset when that risk materialises than one who ''did'' know, because you reminded it. Your goal, remember, is not to ''win'' | That said, it is all about managing expectations. The other typical characteristic of geopolitical hanky-panky is that it rarely comes out of the blue: it brews, there is posturing, brinkspersonship, manoeuvering before anything happens. ''This is a good time to get out and talk to your clients''. Remember the name of the game is to manage client expectations: a client who ''didn’t'' know it had some risk, even though it ''should'' have known (or, in fact ''did'' know<ref>This is an [[unknown known]] in the JC’s [[forensic epistemology]].</ref> but in a moment of motivated irrationality had conveniently ''forgotten'') is more likely to be upset when that risk materialises than one who ''did'' know, because you reminded it. [[Your goal is not to win litigation but avoid it|Your goal, remember, is not to ''win'' litigation with your customers, but ''avoid'' it]]. | ||