6 Risk Free Rates

The System accepts the Risk Free Rates (RFR) and other index rate daily from a published source. There is provision to consume RFR or any other the index rate daily from a published source. The Product Processor sends appropriate parameters to the Interest Calculation Engine per contract and receives the interest rate and computed 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 contract.

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

Note:

Only simple interest calculation can be done by WAC.

RFR supports negative interest rate calculations for arrears method.

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

RFR Supports IRS, CCS, and FRA products with positive interest rate.

RFR Supports IRS and CCS products with negative interest rate.

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

The Derivative module supports the below RFR methods:

In the Arrear Method, includes the below the types:

• Lookback
• Lockout
• Payment Movement
• Plain
• Interest Rollover

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

• Lookback and Lock out
• Lookback, Lockout, and Payment Movement

In Advance Method, the supported types include the below:

• Last reset
• Last recent

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 detailed information on RFR calculation method for each type, refer to 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 provides the instructions to capture the Risk Free Rates details.
• RFR Enabling for SGEN
  This topic describes the RFR enabling process for SGEN messages.
• Treasury Interest Maintenance
  This topic describes the treasury interest class maintenance.
• Derivative Product
  This topic describes RFR preference details in derivative product.
• Derivative Contract
  This topic describes the derivative contract.
• Derivative Manual Liquidation
  This topic provides the instructions to capture the Manual Liquidation with risk free rates.
• Life Cycle Process Impact
  This topic describes the life cycle process impact for RFR contract.