The PIK bond corporate action triggers the accrual calculation process for the parent bond. The system calculates Interest up to the scheduled date (Coupon Payment Date - 1) of the parent PIK bond. It applies the stated Coupon Rate or interest schedule of rates applicable to the parent bond through the accrual period. The parent bond is fully accrued as of the Ex-Date. No further interest accrues for the PIK bond for the current coupon period.
The accrual process is modified for PIK bond processing only, to prohibit the creation of an Income Receivable upon Payment Date (coupon payment). The PIK bond processing security type (PST), DBIBPK, drives this change. All other accrual processing applies to the bond. The payment period rolls to the next period and interest again commences accruing in the new period.
The system calculates amortization using the normal amortization process, based on the specified rule.
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