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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Expert led content

+1,000 expert presented, on-demand video modules

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Testing & certification

Gain CPD / CPE credits and professional certification

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Connect Finance Unlocked to your current platform

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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The Role of Calculation Agents in Capital Markets

The Role of Calculation Agents in Capital Markets

Mark Dalton

20 years: Equity capital markets

A calculation agent is the party that performs calculations that are set out in a transactional documents, typically related to a corporate financing or corporate derivative transactions. In this video, Mark discusses when these agents may be required, the type of work they do and they way they complete the work required.

A calculation agent is the party that performs calculations that are set out in a transactional documents, typically related to a corporate financing or corporate derivative transactions. In this video, Mark discusses when these agents may be required, the type of work they do and they way they complete the work required.

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The Role of Calculation Agents in Capital Markets

12 mins 11 secs

Key learning objectives:

  • Describe a Calculation Agent

  • Identify the types of transactions that benefit from the use of an independent calculation agent

  • Outline the key roles that an independent calculation agent plays

Overview:

It is increasingly common for transactions with complex calculations to involve an independent third-party calculation agent which is responsible for performing those independently and correctly. These can include capital market instruments like bonds with make-whole calls, bank capital, and convertible and exchangeable bonds, but also bilateral contracts like derivatives, and even employee compensation plans. This video looks at the role of the independent calculation agent, and how it is performed.

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Summary

What is a Calculation Agent?

A calculation agent is the party that performs calculations that are set out in a transactional document which requires calculations for its operation. Historically this role was performed by:

  • Investment banks (for derivatives),
  • Agent banks (for bonds), or
  • If there was complexity, the responsibility might have been left with the issuer itself.

An independent calculation agent could be a bank, but there are also specialist firms providing this service, staffed by people with extensive experience in the types of transactions for which they are doing the calculations.

What types of transactions benefit from the use of an independent calculation agent?

Because errors almost always work against the issuer, rather than in their favour, an independent calculation agent can add value to any situation in which there is any degree of risk that the issuer itself could get the numbers wrong. Basically, the more complex the calculations, the more likely an independent calculation agent will be useful.

What are the key roles an independent calculation agent plays?

An independent calculation agent is involved in three key stages of the transaction:

  1. Before issuance, reviewing the transaction documentation in detail, to ensure it works the way it is intended, and building the models needed to run the calculations over time.
  2. During the life of the transaction, performing the required calculations and helping the company understand and communicate the results to interested parties.
  3. At the end of the transaction, performing the final settlement calculations, to ensure the parties get the fair outcome set out in the transaction documentation… no more and no less.

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Mark Dalton

Mark Dalton

Mark Dalton was an investment banker for 15 years, starting out in Toronto working for BMO Capital Markets, before moving to London to do a Masters in Finance at London Business School. He then spent 11 years at UBS, where he was involved in structuring, documenting, and executing tens of billions of convertible bond and strategic equity derivatives transactions. Currently, Mark is the Managing Director and Founder of ConvEx, a leading independent calculation agent in EMEA.

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