Defining Amortization Functionality for IRP and IR Swap Deals

The information in this topic describes amortization functionality that is common only to IRP and IR swap deals.

Page Name

Definition Name

Usage

Deal Detail Page

TRX_DETAIL_TR

Define the conditions for amortizing an IRP or IR swap deal.

See the Deal Detail Page for more information.

Interest and Payment Dates Page

TRX_INTEREST_TR

View detailed information about payment dates.

See the Interest and Payment Dates Page for more information.

Before you specify amortization methods for an IRP deal, the following conditions must be set on the Deals Detail page for an IRP deal:

  • The Discount/Premium field value on the Deal Detail page must be Straightline.

  • The Same Interest each Period option must be selected in the Interest Calculation section.

  • Fixed-rate deals, which you define by selecting Fixed in the Rate Type field, can use an amortization method of Constant Term, Constant Payment, or Factored. You select the amortization method from the Amort Method field menu.

  • Floating rate deals, which you define by selecting Floating in the Rate Type field, can use only the Factored amortization method.

    You cannot use the constant term and constant payment amortization methods with floating-rate deal types because the interest rate changes on a frequent basis.

This table describes the options for IRP deals:

Amortization Method

Rate Type

Interest Calculation

Constant Term/Payment

Note: You cannot use the constant amortization methods for floating-rate deals.

Fixed

Same Interest each Period

Factored

Fixed

Either of the following options:

  • Same Interest each Period

  • Day Counted Interest

Factored

Floating

Day Counted Interest

Entering amortization methods for IR swap deals is similar to the process that you use for IRP deals.

For you to specify amortization methods for an IR swap deal, the Interest Calculation field in the Interest Rate Swap Details section of the Deal Detail page must be set to Interest Bearing, and the following conditions must be met:

Amortization Method

Rate Type - Leg 1

Rate Type - Leg 2

Interest Calculation (Specified on the Dates Page)

Constant Payment / Term

Selected in the Amort Method field.

Note: You cannot use a constant payment or a constant-term amortization method if either leg is set to Floating.

Fixed

Fixed

Same Interest each Period

Factored

Fixed

Fixed

Either of the following methods:

  • Same Interest each Period

  • Day Counted Interest

Factored

Floating

Fixed

For Leg 1: Day Counted Interest

For Leg 2, either of the following methods:

  • Same Interest each Period

  • Day Counted Interest

Fixed Paydown

Fixed

Fixed

Either of the following methods:

  • Same Interest each Period

  • Day Counted Interest

Fixed Paydown

Floating

Fixed

For Leg 1: Day Counted Interest

For Leg 2, either of the following methods:

  • Same Interest each Period

  • Day Counted Interest

Use the Deal Detail page (TRX_DETAIL_TR) to define the conditions for amortizing an IRP or IR swap deal.

Navigation:

Deal Management > Capture Deals > Deals > Deal Detail

Field or Control

Description

Amort Method (amortization method)

Select the method for amortizing the principal to zero or an end principal. Values are:

  • Constant Payment: Mortgage-style amortization, for which the periodic payments are the same: part principal and part interest. If the principal is paid down early, then the payment still stays the same; however, the term is shortened.

    The system generates scheduled payments of the same amount each period, viewable on the Interest and Payment Dates page. Each payment includes part of the principal and part of the interest owed. As the deal matures, the payment percentages change, with the amount paid towards the principal increasing, and the amount paid towards the interest decreasing. (This amortization method is commonly used with loans such as mortgages and automobiles.)

  • Constant Term: Mortgage-style amortization, for which the periodic payments are the same: part principal and part interest. If the principal is paid down early, then the term still stays the same; however, the payment amount each period is lessened for the rest of the term.

  • Factored: Amortization and accretion factors are applied to the principal and the principal is adjusted by that percentage.

    When you select this value, the system amortizes the principal amount using factors that are entered on the Interest and Payment Dates page.

    You must complete the setup of this amortization method on the Deal Detail page before saving and exiting the deal.

  • Non Amortizing: The principal is not amortized throughout the life of the deal.

  • Fixed Paydown: The principal changes for the term at a fixed percentage every period or by a fixed amount. The fixed paydown option is available only for IR swap deals.

Use the Deal Detail page (TRX_DETAIL_TR) to specify an IR swap amortization method.

Navigation:

Deal Management > Capture Deals > Deals > Deal Detail

This page is similar to the Deal Detail page for IRP deals; however, the two regions, the Pay region and the Receive region, exist for both sides of the swap.

Note: For definitions of the payment results of the constant or factored amortization method, see the section that covers amortization for IRP deals. This discussion focuses on using these amortization methods with an IR swap deal.

Select a method of amortization from the following values:

Field or Control

Description

Constant Payment or Constant Term

When you select one of these values, the End Principal fields for the Pay and Receive regions appear on the Deal Detail page with a 0 value by default; you can edit these fields.

Factored

When you select this value, the Beginning Amount and End Amount fields are unavailable. You must complete the setup for this factored swap on the Amortization Details page. The factors can be added on the Interest and Payments pages.

Fixed Paydown

Select this amortization method to make changes to the principal balance (after the system has generated the payment schedule) by amount or percentage. When you select this value, the Percent/Amount fields for the Pay and Receive regions appear on the Deal Detail page.

Use the Interest and Payment Dates page (TRX_INTEREST_TR) to view detailed information about payment dates.

Navigation:

Click Interest Dates on the Deal Detail page.

Access the Interest and Payment Dates page (click Interest Dates on the Deal Detail page).

This page displays comprehensive, payment-information results for a Constant, Factored, or Fixed Paydown method type amortization. If you selected the Constant method on the Deal Detail page, no further setup is required. However, if you selected the Factored or Fixed Paydown method, you must enter a value so that the system can correctly calculate the factored or fixed-paydown amortization amount. Values are:

Field or Control

Description

Factored

To enter a factored value:

  1. In the Change Principal region, select Pay or Receive in the Leg field.

  2. Enter a payment amount and payment date.

  3. Click Change Principal at the prompt.

    The system inserts a row with Paydown selected as the payment type, and the Factor field enabled.

  4. Click Save.

Fixed Paydown

To edit the fixed-paydown, principal amount:

  1. Click the Change Principal link for a specific Pay or Receive row on the Deal Detail page.

  2. Click Save.