...
...
...
...
...
...
...
...
...
Caps and Floors Key Options
A cap/floor must adhere to the same requirements as all fixed income securities. For example, the First Coupon Date and Last Coupon Date values must be in sync with the payment frequency of the bond, and you must enter all required fields before submitting the record. Also, the values for the First Coupon Date, Last Coupon Date, and Maturity Date must not include Delay Days. For general information about reference setup, see Understand Fixed Income Reference Data.
...
When you use the Caps& Floors panel to set up a cap or floor security, the following setup information is specific to caps and floors:
...
- OPIRCA (Interest Rate Option Caps) to establish a cap SMF record.
- OPIRFL (Interest Rate Option Floors) to establish a floor SMF record.
...
| Info |
|---|
Eagle Accounting determines the payment frequency of the bond from the Payment Frequency, Interest Payment Timing, Business Day Calendar, Business Day Adjustment, Coupon Day of Month, and Day of Month Override fields. |
For more information about reference setup, see "Reference Data."
...
When you set up a cap or floor security, review the following key options. The following options are available in Issue Viewer's Caps & Floors panel. Note options may vary according to your selections.
Option | Tag | Description |
|---|---|---|
Processing Security Type | 3931 | Specifies the code value that the system uses to determine the type of cap/floor you are adding. Options include:
|
Coupon Type Code | 97 | Indicates the type of coupon associated with the security. Options include:
|
Strike Rate | 11850 | Determines the rate at which you can exercise against the cap/floor. This value stores the ceiling rate for cap contracts and stores the floor rate for floor contracts. If you set up the security with a Floating Rate or Inverse Floating Rate coupon type, Eagle Accounting uses the value in the Strike Rate field along with the rate of the underlying security on the reset date to determine at what rate the contract accrues interest. If the coupon type on the cap/floor contract is not Floating or Inverse Floating, the Strike Rate field is for reference only. |
Maturity Price | 42 | Specifies the price at which the security returns principal. The Maturity Price defaults to 0 because both cap and floor contracts are interest-only and there is no repayment of principal. |
Trading Flat | 3949 | Indicates whether the security is trading with or without interest. As a general rule, cap and floor contracts trade without interest (trades flat). Therefore this field has a default value of Yes. In the event that a contract does trade with interest, you can change the value to No. Options include:
|
OID Indicator | 218 | Indicates whether the security is OID (original issue discount) eligible. For caps/floors, because the Maturity Price (tag 42) of a cap/floor defaults to 0; the OID Indicator is set to No. Options include:
|
About Coupon Setup for Caps and Floors
When you use the Caps & Floors panel to set up a cap or floor security, you must specify a Coupon Type (tag 97) field value. The following setup information is specific to the Caps & Floors panel.
Eagle Accounting supports the following coupon types for cap/floor contracts
...
.
- Variable Rate. If you select this value, you need to populate coupon rates in the Variable Rate table to accrue interest income. Eagle Accounting uses the coupon rates directly from the Variable Rate table. The Strike Rate field is not used in the calculation of coupon rates.
- Unscheduled Variable Rate. If you select this value, you need to populate coupon rates in the Variable Rate table to accrue interest income. Eagle Accounting uses the coupon rates directly from the Variable Rate table. The Strike Rate field is not used in the calculation of coupon rates.
- Floating Rate. If you select this value, Eagle Accounting requires the following fields:
- Underlying Issue Name (tag 1141)
- Underlying Ticker (tag 1349)
- Underlying Asset ID (tag 1348)
- Underlying Security Asset ID (tag 1347)
- First Rate Reset Date (tag 10911)
- Reset Frequency Code (tag 1788)
- Underlying Issue Name (tag 1141)
For cap/floor security master records set up with a Floating Rate coupon type, Eagle Accounting uses the coupon rates of the attached underlying security on the Rate Reset Date from the Variable Rate table. Eagle Accounting then adds any applicable Index Offset (tag 215) to the coupon rate selected from the Variable Rate table. Eagle Accounting then compares the sum of the underlying security Coupon Rate and Index Offset with the Strike Rate to determine what the coupon rate should be.
- Inverse Floating Rate. If you select this value, Eagle Accounting requires the following fields:
- Underlying Issue Name (tag 1141)
- Underlying Ticker (tag 1349)
- Underlying Asset ID (tag 1348)
- Underlying Security Asset ID (tag 1347)
- First Rate Reset Date (tag 10911)
- Reset Frequency Code (tag 1788)
- Inverse Floater Rate (tag 1553)
- Inverse Floater Multiple (tag 4532
...
A Cap Security has:
- Strike Rate of 8%
- Underlying Index on the cap contract is LIBOR
- Index Offset is 250 basis points
- The security Resets and Pays coupons on January 1, April 1, July 1, and October 1.
Rates are as follows.
Rate Reset Date | Coupon Rate | Index Offset | Total Rate |
|---|---|---|---|
1-Jan | 6.0 | 2.5 | 8.5 |
1-Apr | 5.0 | 2.5 | 7.5 |
1-Jul | 5.5 | 2.5 | 8.0 |
1-Oct | 4.5 | 2.5 | 7.0 |
...
- )
...
A Floor Security has:
- Strike Rate of 8%
- Underlying Index on the Cap Contract is LIBOR
- Index Offset of 250 basis points
- The security Resets on January 1, April 1, July 1, and October 1.
Rates are as follows.
Rate Reset Date | Coupon Rate | Index Offset | Total Rate |
|---|---|---|---|
1-Jan | 6.0 | 2.5 | 8.5 |
1-Apr | 5.0 | 2.5 | 7.5 |
On January 1, Eagle Accounting compares the All in Rate (Total Rate), which is 8.5%, against the Strike Price of 8%. Because the security is a Floor contract and the All in Rate is greater than the Strike Price, Eagle Accounting accrues 0.00% for the period.
In the quarter starting April 1, the All in Rate is less than the Strike Rate. Therefore Eagle Accounting calculates a coupon rate using the following formula:
Strike Rate - All in Rate = Coupon Rate, or 8.0% - 7.5% = .5%
Inverse Floaters act in the similar manner with the following exception: the All in Rate is calculated using this formula:
All in Rate = Inverse Floating Rate - (Coupon Rate from the underlying security + Index Offset) * Inverse Multiplier
Note: | For more information on Floating Rate and Inverse Floating Rate Coupon Types, see "Reference Data." |
...
The Caps & Floors panel's fields follow in this example.
...
Name
...
Value
...
SRM Status Flags
...
...
Release Status
...
...
Authorize Flag
...
...
Validation Process Flag
...
...
Cap/Floor Identification
...
...
Issue Name
...
strike rate test
...
Issue Description
...
strike rate test
...
Ticker
...
strike rate test
...
CUSIP/SEDOL Check Digit Control Flag
...
...
Primary Asset ID Type
...
INTERNAL
...
Primary Asset ID
...
STRIKE RATE TEST
...
Alt Asset ID Type
...
...
Alt Asset ID
...
...
Cap/Floor Xreference Identification
...
...
CUSIP
...
...
ISIN
...
...
Sedol
...
...
Reuters
...
...
Bloomberg ID
...
...
SICOVM
...
...
Valoren
...
...
CEDEL
...
...
CINS
...
...
XREF Exchange
...
BSE
...
Cap/Floor Details
...
...
Investment Type
...
OP
...
Processing Security Type
...
OPIRCA
...
Security Type
...
...
Sub Security Type
...
...
Quantity Type
...
CONTRACTS
...
Price Multiplier
...
0.0100
...
Quantity Scale
...
1.00
...
Country Of Risk
...
...
Country Of Risk Code
...
...
Issue Country
...
UNITED STATES
...
Issue Country Code
...
US
...
Asset Currency
...
USD
...
Settlement Currency
...
USD
...
Income Currency
...
USD
...
Issue Tax Type
...
SPECIAL
...
Primary Exchange
...
BOSTON STOCK EXCHANGE
...
Primary Exchange Code
...
BSE
...
Region
...
...
Cap/Floor Coupon Periods
...
...
Coupon
...
0.000000
...
Coupon Type Code
...
Floating Rate
...
Strike Rate
...
8.000000
...
Day Count Basis
...
ACT/360
...
Payment Frequency
...
Quarterly
...
Payment Frequency Code
...
3_M
...
Business Day Convention
...
...
Business Calendar Name
...
...
Day of Month Override
...
...
Interest Payment Timing
...
...
Delay Days
...
...
Cap/Floor Dates
...
...
Issue Price
...
0.00000000
...
Issue Date
...
20020101
...
Dated Date
...
20020101
...
First Coupon Date
...
20020401
...
Last Coupon Date
...
20040101
...
Maturity Date
...
20040101
...
Maturity Price
...
0.00
...
Variable Rate Next Reset Date
...
...
Calculate/Validate Last Coupon Date
...
Validate Last Coupon Date
...
Valid Last Normal Coupon Date
...
...
Cap/Floor Flags
...
...
Trading Flat
...
Yes
...
OID Indicator
...
No
...
Rate Reset Flag
...
Upfront
...
2a7 Flag
...
...
Inactive Flag
...
...
Floating Rate Information
...
...
First Rate Reset Date
...
20020401
...
Reset Frequency
...
QUARTERLY (QUARTERLY)
...
Reset Frequency Code
...
3_M
...
Reset Look Back Days
...
0
...
Underlying Information
...
...
Underlying Security ID
...
Libor
...
Underlying Issue Name
...
Libor
...
Underlying Ticker
...
Libor
...
Index Offset
...
250.0000
...
Issuer Information
...
...
Issuer ID Name
...
...
Issuer ID
...
...
Issuer Alias
...
...
Country Of Incorporation Code
...
...
Issuer Industry
...