Definition

A discount swap differs from a standard swap in the way the interest amounts are calculated.

When you conclude a discount swap, the interest is due at the start of the interest period, and the interest amount is discounted to this date. The interest rate used for the interest calculation is also used as the discount rate.

Use

The discounting option can be used for both interest rate swaps and currency swaps.

Like the discount FRA, this swap variant is mainly used in Australia.

Prerequisites

You define the discount swap in the IMG activity Define Product Types using the product category "Swap". Set the Discount Swap indicator to have the interest calculated differently.

For more information on the interest calculation, see the F1 input help for the Discount Swap field.

In addition, you must assign a condition type in class "1" with the condition category "22 Discounting" to the transaction type you use.

See also: Swaps and Processing OTC Interest Rate Instruments .