OVERVIEW

This document describes how Eagle’s Pricing Center can be used to automatically pull the price from a Total Return Swap’s underlying security and apply it to the Return Leg for valuation.

Implementation requires a moderate to advanced understanding of Pricing Center and that Pricing Center already be configured (or is in the process of being configured) for all general pricing purposes.

TRS PRICING

• TRSs in Eagle are priced on the Return Leg (PST = SWLXEQ or SWLXDB)
• The following PSTs can be stored as underlying securities on the Return Leg: EQCSCS (Common Stock), EQCSPF (Preferred Stock), INXXXX (Index), and DBIBFD (Long-Term Bond)

PRICING CENTER

To implementing TRS pricing based on its underlying, demand must exist for both the underlying security itself and for the Return Leg (SWLXEQ) of the TRS that is being priced. The underlying security price must also be available at the target source for the TRS price rule.

The below process details the Pricing Center configuration, assuming target source prices are already available for the underlying index or security.

Rule

A rule must be created to allow the underlying security’s price to be applied to the TRS’s Return Leg.

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• The Priority can be either Override or Underlay
  • Override: the price adjustment source will override any source in the source hierarchy
  • Underlay: the rule will first look for a validated price within the source in the source hierarchy rule, and if none is available, it will look to the price adjustment

Execution

After the Price Rule has been created it can be submitted.

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