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Overview

Most securities that accrue interest follow terms that remain constant throughout their tenors. However, some securities stipulate a scheduled change in the way interest accrues. Fixed-to-float bonds, for example, change from fixed rate to floating rate at a predetermined point prior to maturity. There are also total return swaps (TRS) where the spread above the floating rate change as frequently as daily. In other cases, there are market events that require a modification of the accrual terms, such as the transition from traditional interbank offered rates (LIBOR, EURIBOR, etc.) to risk-free rates (RFR) including SOFR and EONIA.

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Implementation

A brief description of the process is provided first, followed by detailed step-by-step instructions.

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