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Contrary to the coupon reference data used to build the regular coupon array, there is no last rate reset date available. The Business Calendar field is implemented for all securities, not just Inverse Floaters/Floating Rates, and is required when you select a Business Day Convention or Day of Month Override field based on Business day. You need to enter the interest rate for the underlying Index every day in order for correct floating rate calculations. For floating rate securities established with any one of the following attributes: life time rate reset caps, life time rate reset floors, periodic rate reset change caps, periodic rate reset change floors, or eligible for OID processing, you must populate the interest rate of the underlying index from the earliest date between dated date and issue date. The reason for this is two-fold: Eagle Accounting needs to be able to calculate the coupon rate, and Eagle Accounting needs to be able to calculate an adjusted issue price. |
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In addition, the rate reset array logic incorporates Look Back Days, the Lifetime Rate Reset Cap, Lifetime Rate Reset Floor, Periodic Rate Reset Change Cap, and Periodic Rate Reset Change Floor when setting the rate value for a given date. Note that the Period Rate Reset Change Cap and Floor values are a relative change from the last rate, while the Lifetime Rate Reset Cap and Floor values are an absolute cap/floor. At each new date in the array, the earnings code checks the coupon value for the following:
- The new rate does not break the Period Rate Reset Change Cap/Floor rule. For example, if Current Rate is 4% and Periodic Rate Reset Change Cap is 1, a New Rate of 5.25% is not allowed, and instead the New Rate is 5%. Similarly, if Current Rate is 4%, Periodic Rate Reset Change Floor is 1.2 and New Rate from variable rate table is 2.5%, New Reset Rate is set at 2.8% (4 minus 1.2).
- The new rate does not go above or below the Lifetime Rate Reset Cap or Floor. For example, if the Lifetime Rate Reset Cap is 6% and the rate available from the Variable Rate Table is 6.2%, the New Rate is set at 6%.
- Both of the above tests must pass. For example, Current Rate is 5, Periodic Rate Reset Change Cap value is 1, and Lifetime Rate Reset Cap value is 5.5; If the New Rate in variable rate table is 5.75, the rate in the Reset Array is set to 5.5.
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