30 Risk Free Rates for Securities

There is provision to consume RFR or any other the index rates daily from a published source. The product processor integrates this value with the interest calculation engine. The Product Processor sends appropriate parameters to the Interest Calculation Engine per deal and receives the interest rate and interest amount.

RFR supports interest rate calculation on both simple average method and the compounding method, where the accrued interest is added to the principal. The system maintains the daily interest amount and daily rate for each deal.

RFR also supports interest rate calculation by using weighted average method (WAC).

Note:

Only simple interest calculation can be done by WAC.

The required accruals are posted on currency working days only and are reconciled for payouts at the end of the interest period.

RFR supports both the back and future value date bookings with proper interest application.

RFR also supports negative interest rate calculations using arrears methods.

Security Module supports the below RFR methods:

In Arrear method supported for floating interest bearing bonds include the below types:

• Lookback
• Lockout
• Payment Delay
• Plain
• Interest Rollover

In addition to the above, Securities module also supports below RFR combination methods

• Lookback and Lockout
• Lookback and Payment Delay
• Lockout and Payment Delay
• Lookback, Lockout, and Payment Delay

The WAC method supports the Arrear method and RFR combination method.

The arrear method supports the following bearing products:

• Lookback
• Lockout
• Payment Delay
• Plain

The below RFR combination methods are supported in the WAC method:

• Lookback and Lockout
• Lookback and Payment Delay
• Lockout and Payment Delay
• Lookback, Lockout, and Payment Delay

For more information on the RFR calculation method for each type, refer to the RFR Calculation Method.

This topic has the following sub-topics:

• Define Rate codes for Risk Free Rates
  This topic provides the instructions to define the rate codes for risk free rates.
• Risk Free Rates
  This topic Describes the instructions to capture the Risk Free Rate code details.
• Treasury Interest Maintenance
  This topic describes the interest maintenance.
• Securities Instrument Product
  This topic describes the instrument product.
• Interest Revision
  This topic describes the interest revision details.
• Lifecycle process Impact
  This topic describes the lifecycle of RFR contract.