Dispersion Leg Terms

From Open Risk Manual


Dispersion Leg Terms. Either leg of a Dispersion Swap. This is a structure defining one or other underlying component of a Dispersion Swap.

Both legs are Return Legs, there is no Payment Leg. Model review notes: Dispersion Swap is a basket, where the constituents of the basket would typically include indices. So it may be Long the index and short the top 20 constituents of that index. Typically index v some form of the constituents, is what makes up a dispersion swap. Also (statistical swaps) - Market Disruption Event. For instance - define what dates are observed, so some dates get dropped due to market disruption events There would be some contractual terms about this, defining for instance the kinds of events defined as market disruptions, and the fact that the dates when these happen, these observations are not made. Look at examples.


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