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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12 mins 11 secs
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.
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
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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:
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.
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.
An independent calculation agent is involved in three key stages of the transaction:
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