Hi guys- quick question one equity swap giveups and I wonder if you can help.
How does an equity swap giveup work and how does the hedge work from the prime broker after its given up? I'm trying to think of this from a fund , prime broker and another broker executing the trade.
Hopefully someone helpful will be able to help!
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Once the trade is done between the fund and the counterparty, the prime broker steps in to face the cpty (or the central clearer), in lieu of the fund. The fund ends up facing the prime broker on an identical trade.
I am not sure what "hedge" you're referring to here.
I am not sure what "hedge" you're referring to here.
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Agreed, a swap give-up trade does not have to be a hedge.
Agreed but as the prime broker receives the give up from the executing broker, they will surely look the hedge their exposure they have just taken on with an offsetting trade?
What exposure? Just have a careful think about the give-up process and you'll see the light, I'm sure...
When a PB agrees to receive the giveup they agree to (for a long equity swap) pay the hedge fund the returns on that stock in the future until the swap matures. Surely they don't just leave themselves open to that P+L swings?
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