How to: Deal input - Interest rate swaps

Created by Erik Åkerlund, Modified on Mon, 20 Feb 2023 at 02:28 PM by Erik Åkerlund

This form is used to enter long-term cross currency and interest rate swaps where each swap has a unique structure. The form can also be used to enter swaptions. The asset (receiver) and liability (payer) legs are entered as two tranches.

Step-by-step guide

Go to Deal input/ Interest Rate Swaps
Create a new contract (F6)
Choose a name and press OK. The new contract Wizard will be shown. Enter Legal entity, counterpart and base data concerning the Interest Rate Swap (IRS). Complete the registration by adding portfolio codes.

	Description
Capital exchange	Used for cross currency interest rate swaps None = no exchange of nominal amounts, default for IRS Initial = Nominal amounts are exchanged at start date (value date) Final = Nominal amounts are exchanged at end date (maturity date) Intial+final = Both nominal amounts are exchanged at start and end dates
Amortizing swap	If checked amortisation structure can be entered
Basis swap	Is used for cross currency interest rate swap = checked
Swaption	Is used for entering swaptions. Exercise date is visible and premium paid or received can be entered.
No trans	Not used.
CPI swap	Is used for CPI interest swaps. New fields, CPI Base, Defl (deflation protection), CPI curve and Interest bearing amount. Interest bearing amount is used to calculate interest on other nominal amounts or for previous period than start date (value date)
Bank Holidays Reg	Add extra bank holiday calenders. Default bank holiday calenders: Currency of each tranche and the local currency of the entity.
No	Tranche number
L D	Enter L for a Loan (Payer leg) and D for a Deposit (Receiver leg).
Begin / End	Enter the begin date (value date) and end date (Final maturity date) for the contract.
Cur	Select currency from list box.
Basis spread %	If a basis swap the originally basis spread can be entered. Only for information. Not mandatory field.
FX rate	FX rate against Legal entity accounting currency. If cross currency swap the FX rate between the two legs.
B day convention	Decides how to treat transactions falling on a bank holiday. Following - If payment is due on a bank holiday the date is moved forward to the next valid bank day. Mod follow - If the payment is due on a bank holiday the date is moved forward to the next valid bank day. But if it is a new month the date is moved back to the first preceding valid bank day. Preceding- payment date is moved back to previous valid bank day. IMM- the third wednesday in each quarter.
Adj	If checked maturity date and payment date are adjusted according to B day convention. If not checked only payment date is adjusted.
Notional amount	This is the nominal amount of each tranche. The amounts you enter is automatically set to minus if it is a payer leg.
Amortisation	Is only enable if Amortisation is checked.
Period	Enter the amortisation period (for amortisation).
First Roll d	Date for the first amortisation transaction.
Yield curve/ Yield curve fixing/ discount curve	Yield curve is used for market valuation and interest fixing via Confirm start. If not "-IBOR" rates are included in the used Yield curve then use Yield curve fixing. Discount curve should be used for market valuation of Cross currency interest rate swaps. Discount curve is the yield curve plus actual basis spread. The discount curve must be defined as a Yield curve (YC) in the system.
Type	Enter if interest rate is Fixed (F) or Variable (V).
Period	Enter the interest period (for interest payment).
Interest Conv	Enter the convention relevant for the instrument. If “Act/365” is specified, the actual number of days in the Calculation Period or Compounding Period in respect of which payment is being made divided by 365; If “Act/360” is specified, the actual number of days in the Calculation Period or Compounding Period in respect of which payment is being made divided by 360; If “30e/360” or “Eurobond Basis” is specified, the number of days in the Calculation Period or Compounding Period in respect of which payment is being made divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30/day months, without regard to the date of the first day or last day of the Calculation Period or Compounding Period unless, in the case of the final Calculation Period or Compounding Period, the Termination Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthended to a 30/day month). If “30u/360” or “Eurobond Basis” is specified, the number of days in the Calculation Period or Compounding Period in respect of which payment is being made divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30/day months. Each month is assumed to have 30 days, with an exception that if the last day is the 31st and the first day is not 30th or 31st then that month has 31 days ACT/ACT ICMA if you choose ACT/ACT you can check ICMA. ICMA means that all coupon payments are the same amount
ICMA	Can only be used together with Interest conv Act/Act.
Floor base/ Floor tot	Base interest can not be below zero / Total interest ( base + spread) can not be below zero.
Base interest	Enter interest base for example STIBOR3M. Just an information field.
Base Int%	Enter interest rate without spread for the transaction. If variable interest which has not been fixed the last available interest shall be entered.
Spread +/- %	Margin which will be added to the Base Int %.
Interest %	Automatically calculated (Base int+ Spread) for the transaction.
First Roll d	Date for the first interest payment.
First broken / last	Only used with variable interest type. Is checked if the first/last interest transaction is interpolated between two periods. The fixing for the broken period must be done manually.
T	If checked other cost/revenues is calculated as VAT and withholding tax.
Oth C/R %/ Oth C/R amount	Enter other cost or revenue as a percentage (%) or an other cost or revenue amount.
LDOP	If checked, roll date will always be last day of period with adjustment to business day convention.
Man Fix	If checked interest fixing will be done manually and will not be updated automatically with the fixing function in confirm start.
Fix days	Number of fixing days (business days). Default is is set to 2 days.
Bank acc 1/ Bank acc 2	Specifies the bank account used on value date ( bank acc 1) and maturity date ( bank acc 2). Note! if bank acc 2 is omitted bank acc 1 will be used on maturity date.