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n1
(0
1 Trade Capture
c2
Cash Settlement
s ISDA Documentation
ID
b
Reconciliation of P&L &
Cash post Value date I
, I '
a
Trade Details of a Swap ..
* Trade Date
* Effective Date
* Maturity Date
* Notional
* Swap Coupon '(fixed rate)
* Reference Index rate page
* floating rate, i.e. London Inter-bank offer rate [LIBOR]
* Spreads
* Reset Date & Payment Date
* Calculation Period
* Dav Count Convention
I
~ - ~ - - - -
3. Coupon Period
- Monthly, Quarterly, Semi-annually, Annually
Fixed: 7%
b
Party Party
A 4 B
Floating: UBOR
a
Components Needed for a Swap Calculation:
SCIRS (Single Currency Interest Rate Swap)
Notional Amount * Rate * No.Days in Period / Basis = Interest
Party A Pays:
Fixed-10 mill * 7% * (901360) = $175,000
Party B Pays:
Float-10 mill * 5.0625 (LIBOR) * (901360) = $126,562.50
Settlement
Client Services I Once settlement I
System sends Client services is confirmed
creates a payment is
rate type request approves rate payment
to Rates resets in
notice
Database Settlement
System
Client Services
faxes payment
Rates Database notice to Client
will download
rates four times
daily to Settlement
System
Client Services calls
client to confirm
Types of Rate Resets
Averaging
3. Compounding
Vanilla Rate Reset
3. Rate Cut-off
The Relevant Rate for each Reset Date in the period
from, and including, a Rate Cut-off Date to, but
excluding, the next applicable Period End Date.
a
Compounding Monthly Pays Quarterly
Variation:
Compounding before rate spread
Compound takes place on Notional + Interest
before adding the spread to the base rate.
Compounding after rate spread
Compounding takes place on Notional + Interest
after adding the spread to the base rate.
Flat Compounding
Calculates the interest of the flat Notional after
adding the spread'to the base rate.
Payment Process
t-
Specialist approve
payments in Back Office CASH settlement system
I
t
; Manager approves
flows
SUMMARY
Definition of a Swap
Process & Control Cycle
Trade Details of a Swap
Swap Calculation
Reset Process
Types of Resets
Payment Process