Contents
1. Preface
1.1 Introduction
1.2 Audience
1.3 Documentation Accessibility
1.4 Acronyms and Abbreviations
1.5 Organization
1.6 Related Documents
1.7 Glossary of Icons
2. Over the Counter Options – An Overview
2.1 OTC Instruments and Transactions
2.1.1 Interest Rate Options (IROs)
2.1.2 Swaptions
2.1.3 Currency Options (COs)
2.2 Dependencies
3. General Maintenance
3.1 Branch Parameters
3.1.1 Maintaining Branch Parameters
3.1.2 Maintaining Contract Fair Values
3.1.3 Maintaining Limit Tracking (Other Exposure) Details
4. Defining Attributes Specific to OTC Products
4.1 OTC Options Products
4.1.1 Create OTC Option products
4.1.2 Indicating Exchange Rate Variance
4.1.3 Specifying OTC Product Preferences
4.1.4 Specifying Main Details
4.1.5 Specifying Currency Option Preferences
4.1.6 Exotics
4.1.7 Specifying Interest Rate Option Preferences
4.1.8 Specifying Interest Rate Option Schedules Preferences
4.1.9 Specifying Rate Fixing Details
4.1.10 Specifying Swaption Details
4.1.11 Defining Interest Rate Option Schedules
4.1.12 Defining Charge Components for a Product
4.1.13 Defining Taxes for Product
5. Processing OTC Option Instruments
5.1 OTC Option Contract
5.1.1 Entering Details of OTC Option Contract
5.1.2 Format of Options Contract Input Screen
5.1.3 Specifying Common Details (Main Tab)
5.1.4 Specifying Details Specific to Currency Option
5.1.5 Settlement Method for Currency Options
5.1.6 Specifying Details Specific to Interest Rate Option
5.1.7 Settlement Method for IROs
5.2 Specifying Other Details for OTC Option Contract
5.2.1 Processing Brokerage on Contract
5.2.2 Specifying Advices for Contract
5.2.3 Viewing Event Details
5.2.4 Selecting User Defined Fields
5.2.5 Levying Charges for Transaction
5.2.6 Maintaining Settlement Instruction Details
5.2.7 Levying Tax on Contract
5.3 Manual Knock-In Knock-Out
5.4 Terminating Option Contracts
5.5 Uploading Options Contracts
5.5.1 Uploading Options Contract for Amendment
5.6 Exercising Option
6. Automatic Daily Processing
6.1 Automatic Events Executed during End of Day
6.1.1 Revaluation (REVL)
6.1.2 Amortization
6.1.3 Auto Exercise and Rate Reset (RTFX and EXER)
6.1.4 Knock In and Knock Out (Event KNIN and KNOT)
6.1.5 Auto Settlement (EXST, KNST, KIST, PRPT)
6.1.6 Auto Expiry (EXPR)
7. Annexure A – Event-wise Accounting Entries and Advices for your OTC Options
7.1 Accounting Entries
7.2 OTC Events
7.3 Amount Tags
7.4 Accounting Roles
7.5 Event-Wise Accounting Entries
7.5.1 BOOK – Contract Booking
7.5.2 PRPT - Premium Payment
7.5.3 REVL - Revaluation of Option
7.5.4 AMRT - Amortization of Inception Gain/Loss
7.5.5 TERM - Contract Termination
7.5.6 EXER - Exercise of Options
7.5.7 EXST - Exercise Settlement
7.5.8 EXPR – Contract Expiry
7.5.9 AMDG - Amortization of Deferred Gains-Hedge
7.5.10 KNOT - Knock Out of Currency Option
7.5.11 KNST - Knock Out Settlement
7.5.12 KNIN - Knock In of Currency Option
7.5.13 KIST - Knock In Settlement
7.5.14 Delta Accounting
7.5.15 Event-wise Amount Tags
7.6 Advices Generated
8. Annexure B – Examples of Processing Interest Rate and Currency Options in Oracle FLEXCUBE
8.1 Examples
8.1.1 Example I - Interest Rate Options
8.1.2 Example II - Currency Options
8.1.3 Example III – Contingent Entries and Delta Accounting
8.1.4 Example IV – Swaption with European Expiration
8.1.5 Examples of Different Types of Exotic Currency Options
8.2 Explanation of Terms Associated with IRO Markets / Transactions
9. Reports
9.1 Rate Fixing Report
9.2 Options Revaluation Report
10. Function ID Glossary