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Template:Nutshell Equity Derivatives 12.7: Difference between revisions
Template:Nutshell Equity Derivatives 12.7 (view source)
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{{eqderivprov|12.7}} '''{{eqderivprov|Payment upon Certain Extraordinary Events}}'''<br> | {{eqderivprov|12.7}} '''{{eqderivprov|Payment upon Certain Extraordinary Events}}'''<br> | ||
{{eqderivprov|12.7(a)}} If “'''{{eqderivprov|Cancellation and Payment}}'''” or “'''{{eqderivprov|Partial Cancellation and Payment}}'''” applies, then one party will pay the other the amounts described below no later than three {{eqderivprov|Currency Business Days}} after notice of the determination, which must be given promptly, is effective. <br> | {{eqderivprov|12.7(a)}} If “'''{{eqderivprov|Cancellation and Payment}}'''” or “'''{{eqderivprov|Partial Cancellation and Payment}}'''” applies, then one party will pay the other the amounts described below no later than three {{eqderivprov|Currency Business Days}} after notice of the determination, which must be given promptly, is effective. <br> | ||
{{eqderivprov|12.7(b)}} '''{{eqderivprov|Option Transaction}}s''': The parties must promptly agree within five {{eqderivprov|Exchange Business Days}} of the relevant event (the “'''{{eqderivprov|Closing Date}}'''”) the amount {{eqderivprov|Seller}} must pay {{eqderivprov|Buyer}} . If they cannot: <br> | {{eqderivprov|12.7(b)}} '''{{eqderivprov|Option Transaction}}s''': The parties must promptly agree within five {{eqderivprov|Exchange Business Days}} of the relevant event (the “'''{{eqderivprov|Closing Date}}'''”) the amount {{eqderivprov|Seller}} must pay {{eqderivprov|Buyer}}. If they cannot: <br> | ||
:{{eqderivprov|12.7(b)(i)}} if “'''{{eqderivprov|Agreed Model}}'''” applies, | :{{eqderivprov|12.7(b)(i)}} if “'''{{eqderivprov|Agreed Model}}'''” applies, the {{eqderivprov|Calculation Agent}} will determine the sum of the {{eqderivprov|Unadjusted Value}} and the {{eqderivprov|Adjustment Value}}, (noting that the {{eqderivprov|Buyer}} will not have to pay the {{eqderivprov|Seller}} anything on cancellation of an {{eqderivprov|Option Transaction}} other than unpaid {{eqderivprov|Premium}}). <br> | ||
::(A) the Calculation Agent will determine the “'''{{eqderivprov|Unadjusted Value}}'''” as the value of the relevant portion of the {{eqderivprov|Option Transaction}} on the {{eqderivprov|Closing Date}} based on: <br> | ::(A) the Calculation Agent will determine the “'''{{eqderivprov|Unadjusted Value}}'''” as the value of the relevant portion of the {{eqderivprov|Option Transaction}} on the {{eqderivprov|Closing Date}} based on: <br> | ||
:::(1) the average {{eqderivprov|Implied | :::(1) the average {{eqderivprov|Implied Volatility}} of the relevant {{eqderivprov|Shares}} over the 15 {{eqderivprov|Exchange Business Days}} up to the {{eqderivprov|Closing Date}}; <br> | ||
:::(2) expected | :::(2) expected [[dividend]]s between the {{eqderivprov|Closing Date}} and the {{eqderivprov|Expiration Date}} based on, and payable on the same dates as: | ||
::::(a) gross ordinary cash dividends due on the relevant {{eqderivprov|Shares}} in the one-year period ending on the {{eqderivprov|Closing Date}} or | ::::(a) gross ordinary cash dividends due on the relevant {{eqderivprov|Shares}} in the one-year period ending on the {{eqderivprov|Closing Date}} or | ||
::::(b) if the {{eqderivprov|Calculation Agent}} determines the {{eqderivprov|Issuer}} has changed its dividend policies before the {{eqderivprov|Closing Date}}, the expected dividends per the changed policy | ::::(b) if the {{eqderivprov|Calculation Agent}} determines the {{eqderivprov|Issuer}} has changed its dividend policies before the {{eqderivprov|Closing Date}}, the expected dividends per the changed policy | ||
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::(B) “'''{{eqderivprov|Adjustment Value}}'''” means the difference between the amounts determined pursuant to (B)(1) and (B)(2) below: <br> | ::(B) “'''{{eqderivprov|Adjustment Value}}'''” means the difference between the amounts determined pursuant to (B)(1) and (B)(2) below: <br> | ||
:::(1) the {{eqderivprov|Calculation Agent}}’s valuation of the relevant portion of the {{eqderivprov|Option Transaction}} based on: <br> | :::(1) the {{eqderivprov|Calculation Agent}}’s valuation of the relevant portion of the {{eqderivprov|Option Transaction}} based on: <br> | ||
::::(a) the average {{eqderivprov|Implied | ::::(a) the average {{eqderivprov|Implied Volatility}} of the relevant {{eqderivprov|Shares}} over the 15 {{eqderivprov|Exchange Business Days}} up to the {{eqderivprov|Announcement Date}}; <br> | ||
::::(b) expected dividends between the {{eqderivprov|Announcement Date}} and the {{eqderivprov|Expiration Date}} based on, and payable on the same dates as: | ::::(b) expected dividends between the {{eqderivprov|Announcement Date}} and the {{eqderivprov|Expiration Date}} based on, and payable on the same dates as: | ||
:::::(x) gross ordinary cash dividends due on the relevant {{eqderivprov|Shares}} in the one-year period ending on the {{eqderivprov|Announcement Date}} or | :::::(x) gross ordinary cash dividends due on the relevant {{eqderivprov|Shares}} in the one-year period ending on the {{eqderivprov|Announcement Date}} or | ||
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::::(d) a combined interest rate and stock loan rate as specified in the related {{eqderivprov|Confirmation}} from the {{eqderivprov|Announcement Date}} to the {{eqderivprov|Expiration Date}}; and <br> | ::::(d) a combined interest rate and stock loan rate as specified in the related {{eqderivprov|Confirmation}} from the {{eqderivprov|Announcement Date}} to the {{eqderivprov|Expiration Date}}; and <br> | ||
::::(e) a term of the {{eqderivprov|Option Transaction}} from the {{eqderivprov|Announcement Date}} to the {{eqderivprov|Expiration Date}}. <br> | ::::(e) a term of the {{eqderivprov|Option Transaction}} from the {{eqderivprov|Announcement Date}} to the {{eqderivprov|Expiration Date}}. <br> | ||
:::(2) a value for the relevant portion of the {{eqderivprov|Option Transaction}} based on the factors listed in (1)(a)-(e) above, but with an average {{eqderivprov|Implied | :::(2) a value for the relevant portion of the {{eqderivprov|Option Transaction}} based on the factors listed in (1)(a)-(e) above, but with an average {{eqderivprov|Implied Volatility}} over the 15 {{eqderivprov|Exchange Business Day}}s from the {{eqderivprov|Announcement Date}}. <br> | ||
:{{eqderivprov|12.7(b)(ii)}} If “'''{{eqderivprov|Calculation Agent Determination}}'''” applies, then the {{eqderivprov|Calculation Agent}} will determine the amount. <br> | :{{eqderivprov|12.7(b)(ii)}} If “'''{{eqderivprov|Calculation Agent Determination}}'''” applies, then the {{eqderivprov|Calculation Agent}} will determine the amount. <br> | ||
{{eqderivprov|12.7(c)}} Any {{eqderivprov|Forward Transaction}} or {{eqderivprov|Equity Swap Transaction}}, will be cancelled and the {{eqderivprov|Cancellation Amount}} determined as follows: <br> | {{eqderivprov|12.7(c)}} '''{{eqderivprov|Forward Transaction}}s and {{eqderivprov|Equity Swap Transaction}}s''': Any {{eqderivprov|Forward Transaction}} or {{eqderivprov|Equity Swap Transaction}}, will be cancelled and the {{eqderivprov|Cancellation Amount}} determined as follows: <br> | ||
:(i) where there is one {{eqderivprov|Determining Party}}, it will calculate the {{eqderivprov|Cancellation Amount}} and who has to pay it. <br> | :(i) where there is one {{eqderivprov|Determining Party}}, it will calculate the {{eqderivprov|Cancellation Amount}} and who has to pay it. <br> | ||
:(ii) where there are two {{eqderivprov|Determining Parties}}, each will calculate a {{eqderivprov|Cancellation Amount}} and they will split the difference.<br> | :(ii) where there are two {{eqderivprov|Determining Parties}}, each will calculate a {{eqderivprov|Cancellation Amount}} and they will split the difference.<br> | ||