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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 the 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: |
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rate reset caps, |
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rate reset floors, |
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rate reset change caps, |
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rate reset change 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. |
Rate Reset Values
In addition, the rate reset array logic incorporates Look Back Days, the
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Rate Reset Cap,
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Rate Reset Floor,
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Rate Reset Change Cap, and
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Rate Reset Change Floor when setting the rate value for a given date. Note that the
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Rate Reset Change Cap and Floor values are a relative change from the last rate, while the
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Rate Reset Cap and Floor values are an absolute cap/floor. At each new date in the array, the earnings code checks the coupon value for the following:
The new rate does not break the
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Rate Reset Change Cap/Floor rule. For example, if Current Rate is 4% and
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Rate Reset Change 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%,
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Rate Reset Change 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
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Rate Reset Cap or Floor. For example, if the
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Rate Reset 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,
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Rate Reset Change Cap value is 1, and
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Rate Reset 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.
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 calculation of income.
If you do not specify a fixing date business calendar for a security, the Earnings process uses the security's business calendar. If the business calendar is not available, the Earnings process uses the calendar associated with the security's issue country to derive the valid business day in the interest rate fixing process.
Eagle Accounting Earnings
When calculating the amortization yield of either a floating rate or a variable rate security, Eagle Accounting uses the most recent coupon rate, and projects that rate forward for the calculation of future cash flows. Whenever the coupon rate of the security changes in the current coupon period, Eagle Accounting automatically recalculates the yield using the new coupon rate, and uses the new coupon rate in the projection of future cash flows.