A commodity swap is similar to an interest rate swap, but the parties exchange a fixed price for a commodity with a floating price for the commodity.
Commodity swaps can have the following types:
Fixed for Floating Swap (Buyer/Receiver)
Floating for Floating (Basis) or Location Swap
Before you can enter your commodity swap details, you must ensure that you have correctly defined your settings in Customizing for the Transaction Manager.
You need to make the following Customizing settings:
Define Product Types:
The creation of financial transactions and management of positions in the Transaction Manager is based on product types.
To create product types in Customizing, choose
.Select the OTC Swaps tab page and then choose New Entries.
Assign a key for the product type (81A, for example).
Assign the product type a long text up to 30 characters and a short text no longer than 10 characters.
Product Category = 810 Commodity Swap
Save your entries.
Define transaction types for your corresponding product types:
Choose
to create at least one transaction type for the following transaction categories:300 Payer
301 Payee
302 Basis
303 Fix to Fix
You can specify that the system assists you with data entry by proposing default values for you to apply. For more information, see Flow Generator for Commodity Swaps and Swap Symmetry of Commodity Swaps.
For the system to generate only a payment for the difference between an incoming and an outgoing flow, activate the setting Use Compensation. Otherwise, the system creates a separate payment for the incoming flow and for the outgoing flow.
In the Customizing activity Define Flow Types, create the transaction flow types for transaction management. Some examples are:
1107 Nom.Unit Decr.(Not Rel.f.Pos) for flow category: 10 Principal Increase
1117 Nom.Unit Decr.(Not Rel.f.Pos) for flow category: 11 Principal Decrease
1310 Cash Settlement for flow category: 31 Cash Settlement
Assign the required flow types to each transaction type. You must include all the flow types needed to process a transaction. For example, flow types 30 and 31. (Customizing activity: Assign Flow Types to Transaction Type)
Define the relevant update types and assign them to the corresponding transaction types in the Update Types section. For example:
DE1107 (Nominal Unit Increase)
DE1117 (Nominal Unit Decrease)
Define field selections and assign these to transaction types. To do this, choose
.COMMODITY SWAP: PAYER
COMMODITY SWAP: RECEIVER
COMMODITY SWAP: BASIS
COMMODITY SWAP: FIX TO FIX
Make the required settings for the commodity master data by choosing Commodity Master Data.
. See also:Settings for managing positions for commodity swaps:
Determine the steps to be taken and the order in which they should be carried out for the key date valuation and the determination of derived business transactions by choosing
and Assign Position Management Procedure. You can then create a position management procedure for the position management category OTC Derivatives.Assign the update types required for valuation based on the position management procedure by choosing
.Assign the update types required for the derived business transactions. When doing this, observe the position management procedure. To do this, choose
.To make the settings required for posting the relevant update types to Accounting, choose
.To create a new commodity swap:
Choose
and enter the following basic data for the transaction:Company Code
Product Type
Transaction Type This includes the following variants:
Payer: Outgoing interest payments are fixed, incoming are variable
Payee: Incoming interest payments are fixed, outgoing are variable
Basis: Variable against variable interest payments
Fix to Fix: Fixed against fixed interest payments
Business Partner
Choose Create.
Open the Structure tab page.
Enter the start date and end date of the Term.
Enter the following details for the commodity swap:
Commodity ID
Commodity Quantity/Units
Price
Payment Frequency
Open the Administration tab page and enter the General Valuation Class.
Enter the required data on the other Tab Pages
Save the transaction.