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2002 ISDA Equity Derivatives Definitions
A Jolly Contrarian owner’s manual

Paragraph 11.2(c) in a NutshellTM
Use at your own risk, campers!

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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Paragraph 11.2(c) in full

11.2(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Transaction or Share Basket Transaction (or if no Method of Adjustment is specified in the related Confirmation for such Transaction), then following the declaration by the Issuer of the terms of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a diluting or concentrative effect on the theoretical value of the relevant Shares and, if so, will
(i) make the corresponding adjustment(s), if any, to any one or more of:
(A) in respect of a Share Option Transaction or a Share Basket Option Transaction, the Strike Price, the Number of Options, the Option Entitlement, the Knock-in Price, the Knockout Price, and the relevant Number of Shares;
(B) in respect of a Share Forward Transaction or a Share Basket Forward Transaction, the Forward Price, the Forward Floor Price, the Forward Cap Price, the Knock-in Price, the Knock-out Price, and the relevant Number of Shares;
(C) in respect of a Share Swap Transaction or a Share Basket Swap Transaction, the Initial Price, the Equity Notional Amount, the Knock-in Price, the Knock-out Price, and the relevant Number of Shares;
and, in any case, any other variable relevant to the exercise, settlement, payment or other terms of that Transaction as the Calculation Agent determines appropriate to account for that diluting or concentrative effect (provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Share) and
(ii) determine the effective date(s) of the adjustment(s).
The Calculation Agent may (but need not) determine the appropriate adjustment(s) by reference to the adjustment(s) in respect of such Potential Adjustment Event made by an options exchange to options on the relevant Shares traded on such options exchange.

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Resources and navigation

Resources About the Equity Derivatives Definitions | (full wikitext) | (nutshell wikitext)
Hot topics The Triple Cocktail | Cancellation and Payment | Calculation Agent
TOC | 1 General Definitions | 2 Option Transactions · 2.1 · 2.2 · 2.3 · 2.4 | 3 Exercise of Options · 3.1 · 3.2 · 3.3 · 3.4 | 4 Forward Transactions · 4.1 · 4.2 | 5 Equity Swap Transactions· 5.1 · 5.1 · 5.3 · 5.4 · 5.5 · 5.6 · 5.7 · 5.8 · 5.9 · 5.10 | 6 Valuation · 6.1 · 6.2 · 6.3 · 6.4 · 6.5 · 6.6 · 6.7 · 6.8 | 7 Settlement · 7.1 · 7.2 · 7.3 | 8 Cash Settlement · 8.1 · 8.2 · 8.3 · 8.4 · 8.5 · 8.6 · 8.7 · 8.8 | 9 Physical Settlement · 9.1 · 9.2 · 9.3 · 9.4 · 9.5 · 9.6 · 9.7 · 9.8 · 9.9 · 9.10 · 9.11 · 9.12 | 10 Dividends · 10.1 · 10.2 · 10.3 · 10.4 · 10.5 · 10.6 · 10.7 | 11 Adjustments and Modifications · 11.1 · 11.2 · 11.3 · 11.4 | 12 Extraordinary Events · 12.1 · 12.2 · 12.3 · 12.4 · 12.5 · 12.6 · 12.7 · 12.8 · 12.9 | 13 Miscellaneous 13.1 · 13.2 · 13.3 · 13.4

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See also

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References