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In case of a catastrophe, the principal loss should be processed by selling off the position at a price of zero (or 0.000001). This will create a 100% realized loss. In the event of a partial principal loss, the appropriate portion of the position should be sold to represent the partial loss.
Reduced (or
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Zero) Coupon
In the event of a catastrophe the, user can update the variable rate to zero or a reduced rate to reflect the reduced coupon payment. If this occurs in the middle of a payment period, the user may need to rollback earnings to the beginning of the period to properly accrue at the adjusted rate. Another alternative is to place the security into default, which will shut off the income and amortization streams.
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Eagle supports loading Cat Bond SMFs and trades through standard Message Center streams. The SMF must be loaded prior to the trade (trades do not spawn SMFs). Refer to https://eagledocs.atlassian.net/wiki/spaces/GENERICINTER/overview for more information.