Template:Nutshell Equity Derivatives 11.2(c): Difference between revisions

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:{{eqderivprov|11.2(c)}} If “'''{{p|eq|Calculation Agent Adjustment (Share Transactions)|Calculation Agent Adjustment}}'''” is the {{eqderivprov|Method of Adjustment}} for a {{eqderivprov|Share Transaction}} or {{eqderivprov|Share Basket Transaction}} (or if none is specified) then following the {{eqderivprov|Issuer}}’s declaration of an {{eqderivprov|Potential Adjustment Event}}, the {{eqderivprov|Calculation Agent}} will determine whether the {{eqderivprov|Potential Adjustment Event}} will concentrate or dilute the value of the {{eqderivprov|Shares}}. If it will the Calculation Agent may  
:{{eqderivprov|11.2(c)}} If “'''{{p|eq|Calculation Agent Adjustment (Share Transactions)|Calculation Agent Adjustment}}'''” is the {{eqderivprov|Method of Adjustment}} for a {{eqderivprov|Share Transaction}} or {{eqderivprov|Share Basket Transaction}} (or if none is specified) then following the {{eqderivprov|Issuer}}’s declaration of an {{eqderivprov|Potential Adjustment Event}}, the {{eqderivprov|Calculation Agent}} will determine whether the {{eqderivprov|Potential Adjustment Event}} will concentrate or dilute the value of the {{eqderivprov|Shares}}. If it will, the Calculation Agent may:
::(i) adjust:
::(i) adjust any relevant variable under that {{eqderivprov|Transaction}} it considers necessary to account for that dilution or concentration (without adjusting just for changes in volatility, expected dividends, stock loan rate or liquidity) and  
:::(A) for a {{eqderivprov|Share Option Transaction}} or {{eqderivprov|Share Basket Option Transaction}}, the {{eqderivprov|Strike Price}}, the {{eqderivprov|Number of Options}}, the {{eqderivprov|Option Entitlement}}, the {{eqderivprov|Knock-in Price}}, the Knockout Price, or the {{eqderivprov|Number of Shares}};
:::(B) for a {{eqderivprov|Share Forward Transaction}} or a {{eqderivprov|Share Basket Forward Transaction}}, the {{eqderivprov|Forward Price}}, the {{eqderivprov|Forward Floor Price}}, the {{eqderivprov|Forward Cap Price}}, the Knock-in Price, the {{eqderivprov|Knock-out Price}}, and the relevant {{eqderivprov|Number of Shares}};
:::(C) for a {{eqderivprov|Share Swap Transaction}} or a {{eqderivprov|Share Basket Swap Transaction}}, the {{eqderivprov|Initial Price}}, the {{eqderivprov|Equity Notional Amount}}, the {{eqderivprov|Knock-in Price}}, the {{eqderivprov|Knock-out Price}}, or {{eqderivprov|Number of Shares}};
::and any other variable relevant to the exercise, settlement, payment or other terms of that {{eqderivprov|Transaction}} the {{eqderivprov|Calculation Agent}} thinks necessary to account for that diluting or concentrative effect (provided that it will not adjust just for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant {{eqderivprov|Share}}) and  
::(ii) determine the effective dates of any adjustments.  
::(ii) determine the effective dates of any adjustments.  
:In doing so the {{eqderivprov|Calculation Agent}} may refer to adjustments made by an options exchange to corresponding options to account for the {{eqderivprov|Potential Adjustment Event}}. <br>
:The {{eqderivprov|Calculation Agent}} may refer to adjustments an {{eqderivprov|Options Exchange}} makes to corresponding options when doing so. <br>

Latest revision as of 18:52, 25 January 2020

11.2(c) If “Calculation Agent Adjustment” is the Method of Adjustment for a Share Transaction or Share Basket Transaction (or if none is specified) then following the Issuer’s declaration of an Potential Adjustment Event, the Calculation Agent will determine whether the Potential Adjustment Event will concentrate or dilute the value of the Shares. If it will, the Calculation Agent may:
(i) adjust any relevant variable under that Transaction it considers necessary to account for that dilution or concentration (without adjusting just for changes in volatility, expected dividends, stock loan rate or liquidity) and
(ii) determine the effective dates of any adjustments.
The Calculation Agent may refer to adjustments an Options Exchange makes to corresponding options when doing so.
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