Page 60 - PRIAA Glossary

EQUALISATION ACCOUNTING METHODOLOGY
The equitable allocation of incentive fees between each investor in a fund to ensure that the investment manager is paid the correct amount and that each investor is paying the correct amount and is neither subsidised by, nor subsidises, another investor. The key advantage of the methodology is producing one single net asset value (NAV) per share.
EQUITY DERIVATIVE
A contract whose value is at least partly derived from one
or more underlying equity securities, the most common being futures and options. Other examples include contract for difference (COD), exchange traded funds (ETF), equity options, equity swaps and real estate investment fund (REIT).
EQUITY INDEX SWAP
An obligation between two parties to exchange cash
flows based on the percentage change in one or more stock Indices for a specific period with previously agreed re-set dates. The swap is cash settled and based on notional principal amounts.
EQUITY OPTION
An option (call or put) where the underlying asset is
an equity-linked instrument (i.e., share, depository receipts, ETFs, indices, baskets). Index and index basket options are always subject to cash settlement. Other equity-related options can be subject to cash settlement or physical settlement.
EQUITY PICKUP
The income that a firm earns on its investment in another company and reports on its income statement. The reported value is based on the firm’s share of the company assets.
EQUITY SWAP
A swap (derivative contract) in which a set of future
cash flows are agreed to be exchanged between two counterparties at set dates in the future and at least one of the two legs is the cash flow from performance of equity instrument like a stock (usually called equity leg). (For
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