LearnPayouts01
0/7

Lesson 01 · 5 min

How to Read Any Payout

The shared base fields, the eight-way choice, and a three-step protocol that works on every leg in the model.

Welcome back to the toolbox

Foundations ended with a claim: learn the shared base once and every leg reads the same way. This module puts that to the test across the whole model. Each lesson covers one asset class through a deal on Pershing Square's desk, and by the end you will read rates, FX, options, credit, equity, and commodity products as comfortably as the swap you already know. First, the map of the module.

PayoutBasethe base every leg extendsRatesInterestRatePayout02FXSettlementPayout03OptionsOptionPayout04CreditCreditDefaultPayout05EquityPerformancePayout06CommoditiesCommodity + FixedPrice07FinancingAssetPayoutnot in this module

The base type, precisely this time

PayoutBase has exactly four fields, and the cardinalities tell you which parts are negotiable. payerReceiver is 1..1: no leg exists without a direction. The other three are optional slots: priceQuantity (how much this leg is on), principalPayment (any exchanges of principal), and settlementTerms (how the leg turns into actual cash or assets). Every payout in the model extends this base. All eight of them.

Eight? The Payout choice lists the full set: InterestRatePayout, OptionPayout, PerformancePayout, CreditDefaultPayout, SettlementPayout, FixedPricePayout, CommodityPayout, and AssetPayout. The first seven cover the six asset classes ahead (commodities use two). The eighth, AssetPayout, models securities financing: repos and securities lending. It shares the base but sits outside this module's scope.

Key ideas

  • The wrapper key names the leg

    On the wire, each entry in payout is an object with one key: interestRatePayout, creditDefaultPayout, and so on. Read the keys before anything else and you already know what kind of product you are holding.

  • Combinations are products

    Two interest rate payouts make a swap. An interest rate payout next to a credit default payout makes a CDS. The model says this itself, in the Payout type's documentation.

  • The base fields answer the same three questions everywhere

    Who pays whom, how much, and how it settles. Specialty fields answer the fourth question: how the amount is computed. That fourth answer is what makes each asset class different.

The reading protocol

Every lesson in this module applies the same three moves. One: read the wrapper keys in payout to identify the legs. Two: read each leg's base fields, especially payerReceiver, because direction is per leg and the mirrored roles encode who is long what. Three: read the specialty fields, the ones the leg added on top of the base, because those are what qualification functions inspect to derive the product name.

{} payout, wrapper keys only
{  "payout": [    {      "creditDefaultPayout": {        "payerReceiver": {          "payer": "Party1",          "receiver": "Party2"        },        "…": "protection terms, credit-event gated"      }    },    {      "interestRatePayout": {        "payerReceiver": {          "payer": "Party2",          "receiver": "Party1"        },        "…": "rate machinery, periods and resets"      }    }  ]}
Step one already paid off: protection one way, periodic payments the other. This product is a credit default swap before you have read a single specialty field.
Try itOpen Payout in the explorer and count the branches yourself. Then skim each branch's one-line description: the six lessons ahead are right there in miniature.
◆ Checkpoint

01On the wire, how do you tell which kind of leg a payout entry is?

1 / 3