Termination

The safer, easier way to pay online. This series ("Life of a Trade") and the last ("How Does a Bank Work?") are available as a beautifully designed printable eBook compatible with mobile devices. You can get it online for $5.49 for immediate download.
Available as an eBook.

Buy it now!

The last lifecycle event of a trade is, of course, its termination. It can be triggered for a variety of reasons. Whatever the reason may be, when a trade is terminated, it calls for settlements and documentation archival by Back Office. In addition, it may trigger public disclosures (in an aggregate form) by Finance, and incentive adjustments by Human Resources.

The common reasons for trade termination and the workflow it triggers are depicted in the figure below.

Trade termination

  • Trade Maturity: When a trade or an option reaches maturity, it gets terminated, which is the most uneventful mode of trade termination.
  • Option Exercises: Wenn die Bank oder ihre Gegenpartei eine Option ausübt,,en,Übungen können jederzeit während der Laufzeit eines Handels stattfinden,,en,oder nur zu bestimmten Terminen,,en,abhängig von der Beschreibung des jeweiligen Produkts,,en,Barrierebrüche,,en,Barriereoptionen,,en,oder Knock-In- und Knock-Out-Optionen,,en,kann die vordefinierten Barrieren durchbrechen und möglicherweise beendet werden, um Siedlungen oder neue Geschäfte zu generieren,,en,Zielauslöser,,en,Instrumente, die sich in Richtung eines Ziels ansammeln,,en,wie z. B. Bereichsabgrenzungen oder Zielrücknahme vorwärts,,en,kann beendet werden, wenn das Ziel erreicht ist,,en,Handelsnovation,,en,Novation ist der spezielle Prozess, durch den sich die Handelspartnerin ändert,,en,In der Tat,,en,Die ursprüngliche Gegenpartei verkauft den Handel oder die Option an eine andere,,en,Wenn eine Novation passiert,,en,Der ursprüngliche Handel wird beendet und ein neuer mit besonderen Merkmalen eingeleitet,,en, it gets terminated. Exercises can take place any time during the lifetime of a trade, or only on specific dates, depending on the termsheet description of the product involved.
  • Barrier Breaches: Barrier options (or knock-in and knock-out options) may breach the pre-defined barriers and may get terminated generating settlements or new trades.
  • Target Triggers: Instruments that accumulate toward a target (such as range accruals or target redemption forwards) may get terminated when the target is reached.
  • Trade Novation: Novation is the special process by which the trade counterparty changes. In effect, the original counterparty sells the the trade or the option to another one. When a novation happens, the original trade is terminated and a new one initiated with special characteristics.

Comments