18.2.6 Capture Information Specific to the Security Type

If the Security Type is bond

You can indicate if Call and Put options are available for the bond that you maintain in this screen. The issuer of a bond may also offer the option of converting the bond into shares or equities. Such bonds are referred to as convertible bonds. Choosing the Convertible option can capture this information. You can also indicate if the bonds would be Redeemable, and if so, the mode of redemption. An issuer can redeem bonds in three ways:

• Series
• Quantity
• Bullet

For bonds with the Redemption Type defined as Series, you can specify the Series details in the Security Definition - Series screen. Click Series.

Figure 18-2 Series

Description of "Figure 18-2 Series"

The actual (series) redemption dates can be specified, in the Security Definition – Redemption Schedules screen. For bonds with the Redemption Type, defined as Quantity and Series, you can specify the redemption details in the Security Definition - Redemption Schedules screen. This screen is invoked by clicking on the ‘Redemption Schedule’ button.

Figure 18-3 Redemption Schedule

Description of "Figure 18-3 Redemption Schedule"

Specify the date(s) of redemption (in the Event Date field) and the quantity of redemption (in terms of a percentage/fraction/actual cashflow). If the redemption mode is series, specify the series that should be redeemed on an Event Date. If the redemption quotation is ‘Cashflow’, you should ensure that the quantity is not less than the interest for the period. Redemption price will be derived based on redemption quotation type. If the Redemption quotation is ‘Factor’, then the redemption price will be derived as follows:

• Fn is the redemption factor of the nth redemption schedule
• Fn-1 is the redemption factor of n-1th redemption schedule (this value will be 1 for thefirst redemption schedule)
• RPn is the redemption price of the nth redemption schedule
• FV0 is the original face value of the security

Note:

The factor for the final redemption date will be zero. During modification of redemption schedules, the system will validate whether the cumulative factor of all redemption schedules(previous period factor – current period factor) is equal to one or not. The factor for each redemption schedule cannot be greater than one.

If the Redemption quotation is ‘Cashflow’, then the redemption price will be derived as follows:

• CFn is the cash flow of nth redemption schedule
• Cn is the actual coupon cashflow for the nth coupon period
• RPn is the redemption price of the nth redemption schedule

In case the Redemption Quotation is ‘Percentage’, the system will allow you to define the percentage as zero for any intermediate schedule. However, it will validate whether the sum of all percentages is equal to 100 or not. At the time of instrument definition for Factor/Cashflow type of securities, if the Factors/ Cashflows are unknown, the final redemption price will be the initial face value. At any point in time, if the factor values/cash flows for redemption date(s) are specified, then the final redemption price will be calculated as the Face value – the sum of the redemption price of the intermediate schedules. If the total redemption price across all schedules is not equal to the initial face value for Factor/Cashflow type of securities, the system will display an error message upon saving the record.

Note:

For Collateral Debt Obligations (CDOs), the sum of intermediate cash flows cannot be greater than the face value.

If the Security Type is equity

The issuer of equity can grant a holder voting rights. This information can be captured when maintaining a security, with the Security Type, Equity.

If the Security Type is Right or Warrant

Rights and Warrants can be renounced. You can capture this information when maintaining rights and warrants.

The system will display the following details:

• Current Face Value - It indicates the current face value for every quantity redemption.
• Redemption Factor - Based on Redemption Quotation (Factor, Cashflow or Percentage), the equivalent factor of the schedule cashflow will be computed. For 'Factor', the value will be same as Redemption Price. For 'Cashflow' and 'Percentage' redemption quotation, the factor equivalent of the schedule will be displayed.