Template:M summ Equity Derivatives Triple Cocktail: Difference between revisions

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	The ~~“triple cocktail”~~ is the [[Jolly Contrarian\|JC]]’s shorthand for the collection of Additional Disruption Events that can justify a broker terminating, or repricing, an equity derivatives Transaction. There is a fundamental asymmetry at play in a [[delta-one]] equity swap: the ''customer'' can get in or out at any time at will and without excuse as long as it has the resources to meet any margin calls that might come along. It is a synthetic version of buying a share on margin: the customer, and not the [[prime broker\|broker]] decides when and if to buy or sell, and accordingly can stay ''in'' as song as it pleases.		The “[[Triple Cocktail - Equity Derivatives Provision\|triple cocktail]]” is the [[Jolly Contrarian\|JC]]’s shorthand for the collection of Additional Disruption Events that can justify a broker terminating, or repricing, an equity derivatives Transaction. There is a fundamental asymmetry at play in a [[delta-one]] equity swap: the ''customer'' can get in or out at any time at will and without excuse as long as it has the resources to meet any margin calls that might come along. It is a synthetic version of buying a share on margin: the customer, and not the [[prime broker\|broker]] decides when and if to buy or sell, and accordingly can stay ''in'' as song as it pleases.

	The broker is therefore, effectively, committed: as long as it is adequately collateralised — which is what its margin and hedge arrangements do — it should not have any reason to terminate the trade. Of course, the development over time of capital regulations, which take a dim view of indefinite commitments, put something of a gloss on that, and brokers will usually insist on some kind of 90-day break right, but this is to cheer the crowd in their treasury department, not because they would ever insist on using it.		The broker is therefore, effectively, committed: as long as it is adequately collateralised — which is what its margin and hedge arrangements do — it should not have any reason to terminate the trade. Of course, the development over time of capital regulations, which take a dim view of indefinite commitments, put something of a gloss on that, and brokers will usually insist on some kind of 90-day break right, but this is to cheer the crowd in their treasury department, not because they would ever insist on using it.