Eagle Accounting begins using the Dated Date Rate of the underlying index plus any applicable index offset, from the period from Dated Date to the First Rate Reset. Floating Rates and Inverse Floating Rate securities do not automatically change to a new rate when the rate becomes available based on the underlying security's security alias in the Variable Rate table. Instead, rate changes are based on dates in the rate reset array, which are created using First Rate Reset Date, Reset Frequency, Business Calendar field, and the Business Day Convention.
MS is above Business Calendar or Fixing Date Business Calendar??
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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 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 caps, life time floors, periodic caps, periodic 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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- The new rate does not break the Period Cap/Floor rule. For example, if Current Rate is 4% and Periodic 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 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 Cap or Floor. For example, if the Lifetime 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 Cap value is 1, and Lifetime 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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Identify the Fixing Date
The coupon rate fixing date is the date for which the system selects a rate/price for use on the reset date. When you set the Reset Look back Days Type (tag 5075) field to Business Days, the system uses the fixing date business calendar specifies in the Fixing Date Business Center field to determine the fixing date. Eagle Accounting can use a fixing date calendar for a floating rate or inverse floating security that differs from the security's business calendar. The Earnings process uses the fixing date business calendar to determine the fixing date in order to use the correct rate/price in the the calculation of income.
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