3.5.13 Yield Calculation Parameters for T-Bills

The options available for calculating the Numerator are:

• 30 Euro
• 30 US
• Actual

The options available for calculating the Denominator are:

• 360
• 365
• 364

You can select the appropriate.

Note:

For each Security, the Yield Calculation Parameters are defaulted from the market of issue depending on whether it is a Bond or a T-Bill. You will be allowed to modify these details.

Consider the following example for 364 Days Interest Method:

Forgiven bond security (SEC364M2), schedules are generated as shown below:

Security Instrument: SEC364M2

Quantity: 100

Security Face Value: 100

Interest Rate: 2%

Denom Method: Actual/364

Deal Value Date: 2-Sep-2008

Deal Maturity: 23-Nov-2008

Coupon Schedule: Weekly

Table 3-23 Details

No	Coupon Due Date	Days	Interest Amount
1	9-Sep-2008	7	3.89
2	16-Sep-2008	7	3.89
3	23-Sep-2008	7	3.89
4	30-Sep-2008	7	3.89
5	7-Oct-2008	7	3.89
6	14-Oct-2008	7	3.89
7	21-Oct-2008	7	3.89
8	28-Oct-2008	7	3.89
9	4-Nov-2008	7	3.89
10	11-Nov-2008	7	3.89
11	18-Nov-2008	7	3.89
12	23-Nov-2008	5	3.89

Consider the following example for Yield (T-Bills/Bonds)

Security Instrument: SEC364M2

Deal Input Price: 100

Redemption Price: 120

Denom Method: 364

DSTL Date: 2-Sep-2008

Deal Maturity: 23-Nov-2008

Formula used for Yield Calculation:

Discounted:

Yield = ((Redemption Value – Input Price) /(Redemption Value)) * (Denom Method/ No ofdays);

True discount (Return):

Yield = ((Redemption Value – Input Price) /(Input Price)) * (Denom Method/ No of days);

Days between DSTL and Maturity Date = 81

For Discounted:

Yield = ((120-100)/120)*(364/81) = 0.748971193415638

True discount (Return):

Yield = ((120-100)/100)*(364/81) = 0.898765432098765

Premium/Discount for Current Interest Period

Check this option to specify that the premium or discount should be accrued only for the current period. This option will be applicable only if the security is a Floating Rate Bond. If you check this option, all the securities whose market code is identical to the one specified in the Market Definition screen will inherit this feature, provided the interest rate type of the specified security product is Floating.