19.2.8.4 Process of Amendment on Redemption Schedules
You can amend future-dated redemption schedules. In such a scenario, accruals linked to the DPRP event are completed based on the old yield an old cash flows till the application date. New cash flows are built on the application date. The YTM for all the existing deals is recalculated as of the application date based on new cash flows. Also, future accruals linked to the DPRP event are calculated based on the new YTM. During the amendment of back-dated redemption schedules, accruals linked to the DPRP event are completed based on the old yield an old cash flows till the event date of redemption.
New cash flows are built as of the event date. The YTM for all the existing deals is recalculated as of event date based on the new cash flows. For re-computation of YTM, the following formula is used for NPV calculation: NPV = Face value – Un-accrued Discount + Un-accrued premium. Future accruals linked to the DPRP event are computed based on the new YTM. coupon accruals are also adjusted based on the new face value. Back-dated redemption processing on the amendment is done at EOD.
Parent topic: Security Redemption