In some cases a change to an amortization rule results in the system recalculating the yield during processing. In other cases the system does not need to recalculate the yield after an amortization change, and no recalculation occurs. This section describes the conditions under which Eagle Accounting does and does not recalculate the yield during processing after an amortization rule change.
An amortization rule change, for purposes of this discussion, refers to a scenario where an existing amortization rule requires a change as of a certain point in time. The old rule ends, and the new rule begins to take its place. For example, the amortization rule currently processes using the Constant Yield 1 amortization method, and as of a certain date, you plan to change the amortization method to Level Yield 2. In this case, you edit the existing amortization rule with the old amortization method and enter the Rule End Date. Then you create a new amortization rule with the new amortization method and with a Rule Begin Date that indicates when the new rule begins. For example, the End Date of a previous amortization rule is December 31st, and the Begin Date of the new amortization rule is January 1st.
During Earnings processing, the system checks the amortization rule Instance (tag 4256) to determine whether the amortization rule changed. If the amortization rule did change, the system identifies which values changed between the old amortization rule and the new amortization rule. It uses this information, along with additional criteria, to determine whether it is necessary for the system to recalculate the yield. The system only recalculates the yield when the change to the amortization rule meets the criteria that indicates that the change has an impact on the yield result and the yield recalculation is necessary.
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For example, in the following table, the first row indicates that the system needs to recalculate the yield in cases when you change the Amortization Accretion Method (tag 113) field value, but only in some cases. It recalculates the yield if you change the Amortization Accretion Method value and if the value changed from the previous day. It does not recalculate the yield if you change the Amortization Accretion Method value but the value did not change from the previous day. For a description of each field, see Amortization & Accretion Rules Panel Options.
Option Type | If Option Value Changes | Tag | And If You Meet This Criteria, Recalculate the Yield |
|---|---|---|---|
Core amortization | Amortization/Accretion Method | 113 | Amortization/Accretion Method value changed from the previous day. |
Core amortization | Amortization/Accretion Election | 3933 | Amortization/Accretion Election value changed from the previous day. OR Amortization/Accretion Election value changes from None to another value. Or Amortization/Accretion Election value changes from another value to None. |
Core amortization | Amortization Methodology | 16007 | Amortization Methodology value changed from the previous day. |
Core amortization | Yield Type | 17468 | Yield Type value changed from the previous day. |
Call / Put / Prerefunded | Recognize Pre-refunding | 3860 | Security has a prerefunded schedule defined. |
Call / Put / Prerefunded | Recognize Put Date & Prices | 3937 | Security has a put schedule defined. |
Call / Put / Prerefunded | Recognize Call Date & Prices | 3939 | Security has a call schedule defined. |
OID | DeMinimis Test Application | 3935 | The lot, security, and position are all OID eligible. For example, the OID Indicator (tag 218) value is Yes. |
OID | Recognize OID | 9197 | The lot, security, and position are all OID eligible. For example, the OID Indicator (tag 218) value is Yes. |
OID | Amortization/Accretion Method 2 | 11581 | The lot, security, and position are all OID eligible. For example, the OID Indicator (tag 218) value is Yes. |
MBS | Prepayment Speed Override | 9689 | Security is factor based. That is, the security's processing security type begins with DBFB or the security's processing security type is TBA (DBTATA). |
MBS | Estimate Vs. Actual | 9690 | Security is factor based. That is, the security's processing security type begins with DBFB or the security's processing security type is TBA (DBTATA). |
MBS | Override Prepayment Model | 9691 | Security is factor based. That is, the security's processing security type begins with DBFB or the security's processing security type is TBA (DBTATA). |
MBS | Override Prepayment Speed | 9692 | Security is factor based. That is, the security's processing security type begins with DBFB or the security's processing security type is TBA (DBTATA). |
MBS | Prepayment Assumption | 4518 | Security is factor based. That is, the security's processing security type begins with DBFB or the security's processing security type is TBA (DBTATA). |
MBS | Prepayment Time Series Source | 16110 | Security is factor based. That is, the security's processing security type begins with DBFB or the security's processing security type is TBA (DBTATA). |
MBS | Effective Maturity Date Method | 16650 | Security is factor based. That is, the security's processing security type begins with DBFB or the security's processing security type is TBA (DBTATA). |
Cash Flow | Use Third Party Cash Flows | 11768 | Security has cash flows. |
Cash Flow | Source Number | 1168 | Security has cash flows. |
Cash Flow | Cash Flow Type | 11760 | Security has cash flows. |
Cash Flow | Requested Speed | 11761 | Security has cash flows. |
Step Bond | Step Bond Utilize Bifurcation Method | 3934 | Security is a step bond. Eagle Accounting recognizes a security as a step bond when you set the Coupon Type Code (tag 97) option to Step Rate (S). |
Amort on Shorts | Allow Amortization on Short Positions | 11484 | Position is held short and the position is flagged for short amortization. That is, you set the tax lot's Allow Short Amort (tag 11484) field to Yes in the trade panel. |
User Defined Amortization Schedule | Use User Defined Amortization Schedule | 9156 | Lot has a user-defined amortization schedule. |
Convertible Bond | Convertible Option Price Method | 3858 | Security is a convertible bond. That is, the security's Convertible Indicator (tag 1531) has a value of Yes. |
Straight-line Override | Straight Line Override | 3938 | Position is amortizing within the straight-line override period. That is, the field applies the straight line actual (SLA) method within 60, 180, or 365 days from maturity, and the earn thru date is within that period nearing maturity. |