4.23.5 Propagating All-In Rate Floor/Ceiling for an Effective Date

If Floor/Ceiling values of All in Rates are newly maintained/amended, the propagation for any all-in rate floor/ceiling change is handled for the active/uninitiated drawdowns under the tranche which have Fixed Interest Type Components with Rate Fixing as Yes. Propagation happens during batch as follows:

While saving the new values of Floor/Ceilings for all-in rate for interest components across drawdowns under a tranche for the current application date, the system checks for the following validations:

• Check if any active/uninitiated drawdowns having the corresponding interest component in which the all-in rates for the current application date or the future dates are outside the boundary of newly maintained Floor/Ceiling rates.
• If any such drawdowns are identified, mark the newly maintained floor and ceiling records for the propagation. The propagation happens as part of the end of day batch.

Propagation to active and uninitiated drawdowns are as follows:

• The system checks if the propagation is required for the any new maintenance of Floor and Ceiling All In rate values for various interest components for all tranches.
• If propagation is required, the list of drawdowns requiring the propagation is identified based on the interest components that have Floor or Ceiling defined in the maintenance for the tranche.
• For the identified drawdowns and the interest component combinations, the system checks if existing All-in rate is outside the range of new Floor/Ceiling all-in rate. If the current all in rate is less than the new Floor all in rate, the difference is stored in the Adjustment rate field and the Floor all in rate is used for computation. If the current all in rate is greater than the new Ceiling all in rate, the difference is stored in the Adjustment rate field and the Ceiling all in rate is used for computation.
• The Rate amendment event (RTAM) is used to handle this propagation at the drawdown level and interest is recomputed with the revised all in rates. RTAM event also considered for the STP functionality.
• Any Margin propagation that results in change of All-In-Rate leads to the Floor/Ceiling all-in rate validations as well and the above mentioned defaulting logic is applicable in such cases as well.

Note:

RTAM do not fire when base rate, all-in rate and margin are changed as part of the propogation during a contract.