Interest Rate Instruments 

Use

An interest rate instrument is a money market transaction with additional structural characteristics, such as variable interest and installment repayment.

In order to calculate the corresponding interest receivables or payables, you must carry out an interest rate adjustment. See Interest Rate Adjustment.

Prerequisites

Before you can use the Money Market component, you have to maintain master data.

·        You have to create your Business Partners, assign the corresponding roles to these partners and maintain the transaction authorizations.

·        You have to set up the Standing Instructions (correspondence, payment details) and release the business partner.

You also have to make the following settings in Customizing:

·        Define the Product Type (if you do not want to use one of the standard product types delivered with the system, you can define your own product types). You create financial transactions and manage positions on the basis of product types. An example of a product type in the money market area is an interest rate instrument.

·        Define the Transaction Type. Transaction types determine the type of transactions that can be concluded with a particular product type. They also control the transaction and position management process. Example: Investment or borrowing transaction for an interest rate instrument.

·        Define the Flow Type. These describe the various changes to the cash flows. Example: Increase in the nominal amount

·        You must assign flow types to transaction types.

·        Define the condition type. This setting controls which structural characteristics are displayed when you create transactions. Example: Nominal interest

For more information, see the relevant section in the Implementation Guide.

You can then define Money Market transactions in the SAP R/3 System.

Features

To manage interest rate instruments, you can use the standard functions and processes for entering, editing and processing transactions, managing their status, and transferring data to Financial Accounting.

Activities

For details on the relevant activities, see Processing Interest Rate Instruments and Creating Interest Rate Instruments.