10.7.16.1.1 Adjustment - Fixed Rate

Figure 10-13 Adjustment Rule Details

The Fixed Amount Adjustment method allows the user to associate an amount with specific terms or term ranges. Reference term selections include the following:

• Repricing Frequency: The fixed amount is matched to the specified reprice frequency of the instrument. If the instrument is a fixed rate and, therefore, does not have a reprice frequency, the fixed amount lookup happens based on the original term of the instrument.
• Original Term: The calculation assigns the fixed amount based on the original term on the instrument.
• Remaining Term: The calculation assigns the fixed amount based on the remaining term of the instrument.

The remaining term value represents the remaining term of the contract and is expressed in days.

• Holiday Calendar: Select if a holiday calendar is applicable for calculating the charges/credits.
• Rolling Convention: Select the appropriate business day rolling convention if a Holiday Calendar is selected.
• Interest Calculation logic: Select the appropriate option to indicate how the interest payment should be adjusted when a holiday date is encountered.

Remaining Term = Maturity Date – As-of-Date.

• Duration (read from the TP_DURATION column): The calculation assigns the fixed amount based on the Duration of the instrument, specified in the TP_DURATION column.
• Average Life (read from the TP_AVERAGE_LIFE column): The calculation assigns the fixed amount based on the Average Life of the instrument, specified in the TP_AVG_LIFE column.

You can create your reference term ranges and assign a particular adjustment amount to all instruments with a reference term falling within the specified range.

Note:

All adjustment rates should be input as annual rates.