Manage Swap Reset Schedules

You can maintain and process reset schedules for swaps, such as a reset schedule for the return leg (equity, index, fixed income) and finance legs of a total return swap. At predetermined reset dates, the system recognizes gains or losses on return and finance legs. The system calculates the unrealized gain/loss on the price movements on the underlying of the return leg and interest from the finance leg. It uses the current price of the underlying security of the return leg to reset the notional (for recalc notional only) for the next valuation period. In that case during SMF setup, you set the Notional Reset Type (tag 4409) field to a value of Recalc Notional.

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The global Reset Total Return Swap process uses the Coupon/Reset schedule you provide for the swap. You can use the Reset Total Return Swap panel to reset the current price of the underlying security of the return leg for the next valuation period. The system uses all of the information in the Coupon/Reset schedule, if available, to determine the day's price used to reset the swap, generate the payment, and reset the notional. The reset process recalculates the accruals to date if the coupon on the accrual leg is not paid at the same time. If the Coupon/Reset schedule is not available for a security, the system calculates the payment dates for you using Security Master File information in a manner similar to that used to calculate a coupon for a bond.

The Earnings process uses the Coupon/Reset schedule to determine the date to reset the accrual rate, what rate to use, and the settlement date when a coupon is generated.

Eagle Accounting offers several ways to add a Coupon/Reset type schedule for a swap. You can directly add or edit the full Coupon/Reset schedule for the swap security. Or you can have the system add the Coupon/Reset schedule for the security at the time you add/edit the security by setting the security-level Generate Swap Reset Schedule option to Yes in the Issue Viewer security entry panels. You can also use the Generate Swap Reset Schedule panel to have the system add a Coupon/Reset schedule for a swap. When Eagle Accounting generates the schedule for you, it identifies the reset dates, fixing dates, valuation dates, and cash payment dates, as appropriate, for the legs of the swap, based on SMF attributes.