19.2 Bonds with Embedded Options
FSI_D_BORROWINGS, FSI_D_LOAN_CONTRACTS, and FSI_D_INVESTMENTS are the instrument tables that support the embedded options functionality. The indicator in the instruments tables in the EMBEDDED_OPTION_FLG column. The FSI_D_EMBEDDED_OPTIONS table and FSI_D_EMBEDDED_OPTIONS_SCH tables need to be populated for all exercise types. Other relevant tables and the list of values for embedded options are as follows:
- FSI_D_EMBEDDED_OPTIONS
Table 19-1 Details of FSI_D_EMBEDDED_OPTIONS table
Column Name Display Name Description AS_OF_DATE
As of Date
The date at which the data is current, for example, “30-SEP-10”
EXERCISE_TYPE_CD
Exercise Type Code
This attribute stores the exercise type code or option style of the embedded option. The list of valid values is 1 (American), 2 (Bermudan), 3 (European).
ID_NUMBER
ID Number
Unique record identifier such as account number.
OPTION_START_DATE
Option Start Date
This attribute stores the options start date and is valid for the American style of options.
OPTION_TYPE_CD
Option Type Code
This attribute stores the option type of the embedded option. The list of valid values is 1 (Call) and 2 (Put).
RATE_LOOKUP_CD
Rate Lookup Code
This attribute stores the rate lookup code. Depending upon the rate lookup, the rate of the appropriate term is compared against the strike rate. For instance, if the rate lookup code is Payment Frequency, the Strike IRC term point of payment frequency is compared against the strike rate. List of valid values is 1 (Remaining Term), 2 (Original Term), 3 (Payment Frequency), and 4 (Reprice Frequency).
STRIKE_IRC_CD
Strike Interest Rate Code
This attribute stores the coded value of the interest rate curve which is linked to the strike.
STRIKE_TYPE_CD
Strike Type Code
This attribute stores the strike type code of the embedded option. A strike type of price assumes that the price of the instrument is used as the strike. A strike type of rate assumes that the interest rate of the instrument is used as the strike. The list of valid values is 1 (Price) and 2 (Rate).
- FSI_D_EMBEDDED_OPTIONS_SCH
Table 19-2 Details of FSI_D_EMBEDDED_OPTIONS_SCH table
Column Name Display Name Description AS_OF_DATE
As of Date
The date at which the data is current, for example, “30-SEP-10”
ID_NUMBER
ID Number
Stores Identifier Number.
INSTRUMENT_CODE
Instrument Code
Stores the instrument code.
OPTION_EXPIRY_DATE
Option Expiry Date
This attribute stores the expiry date of the option.
STRIKE_VALUE
Strike Value
This attribute stores the strike rate (for example, entering “3.56” equals 3.56% ) or price (for example, 102.15) depending on the strike type of the option specified in FSI_D_EMBEDDED_OPTIONS. STRIKE_TYPE_CD.
- FSI_OPTION_DECISION_TYPE_MLS
Table 19-3 Details of FSI_OPTION_DECISION_TYPE_MLS table
OPTION_DECISION_TYPE_CD OPTION_DECISION_TYPE Description 1
Cashflow to Maturity
Cashflow to Maturity.
2
Cashflow to Exp Date
Cashflow to First Expiry Date.
3
Rate Path Dependent
Rate Path Dependent
0
None
None
- FSI_OPTION_TYPE_MLS table
Table 19-4 Details of FSI_OPTION_TYPE_MLS table
OPTION_TYPE_CD OPTION_TYPE Description 1
Call
Call
2
Put
Put
-1
None
None
- FSI_OPTION_EXERCISE_MLS
Table 19-5 Details of FSI_OPTION_EXERCISE_MLS table
OPTION_EXERCISE_CD OPTION_EXERCISE Description 1
American
American
2
Bermudan
Bermudan
3
European
European
- FSI_OPTION_STRIKE_TYPE_MLS
Table 19-6 Details of FSI_OPTION_STRIKE_TYPE_MLS table
OPTION_STRIKE_TYPE_CD OPTION_STRIKE_TYPE Description 1
Price
Price
2
Rate
Rate
- FSI_OPTION_RATE_LOOKUP_MLS
Table 19-7 Details of FSI_OPTION_RATE_LOOKUP_MLS table
OPTION_STRIKE_TYPE_CD OPTION_STRIKE_TYPE Description 1
Price
Price
2
Rate
Rate
Note:
Floating Rate and Adjustable Rate Instruments are not supported for Bonds with Embedded Options. Embedded options would be ignored and the instrument would be treated as a normal bond. Embedded Options is only supported for Amortization type code of 700 (Non-amortizing or bullet bond). For New Business, Embedded Options modeling through Product Characteristics is not supported.