Variable Interest and Interest Rate Adjustment

Use

Two types of entries are required to represent the variable interest rate.

  1. You must define the underlying reference interest rate and the calculation method for the variable interest rate in the condition item Variable interest.

  2. You define the frequency with which you want the new variable interest to be recalculated or become effective, and the day you want to establish the reference interest rate value for determining the variable interest rate in the condition item Interest adjustment.

Prerequisites

We recommend that you maintain the reference interest rate table regularly to ensure that current data is available for interest rate fixing.

Procedure

  1. Variable interest

  2. By inserting a simple plus sign to link the variable interest and the reference interest rate in condition type Variable interest, you can enter these directly in the initial entry screen or in the Condition Details screen .

    To define more complicated calculation formulas, choose the Formula button at the top of the Condition Details screen . Select a formula in the next screen by double-clicking one. In the following screen, enter the variables.

    The remaining entry fields in this condition item are the same as those for entering nominal interest for fixed-interest percentage-quoted bonds.

  3. Interest rate adjustment

    1. Enter the Effective from date.

    2. Branch to the Condition Detail Screen 1.

    3. The screen is divided into two areas: Interest rate adjustment and Interest fixing :

    4. In the Interest rate adjustment area, you enter the frequency with which you want the variable interest to be recalculated or become effective. The following alternatives are available:

      1. at start of period

      2. frequency with fixed date

      3. single dates

      4. for each table entry

      The Single dates function displays the interest rate adjustments which recur annually and which you cannot display via At start of period and Frequency with fixed date.

      Interest rate adjustment takes place annually on 03/15 and 10/15.

      You can only show this irregular sequence of interest rate adjustment dates via Single dates.

    6. In the Interest rate fixing area, you define when you want to determine the interest rate value for calculating the new variable interest rate. You can choose from the following:

      1. Relative to interest rate adjustment date

      2. Relative to start of period

      3. Relative to period end

      4. Relative to due date

      In the field below, enter how many days beforehand the interest rate fixing is to take place.

      Also define which calendar you want to use for determining the date.

    8. Using the Dates button you can display the interest rate adjustment dates. The system displays the following dates per interest rate adjustment:

      1. Effective from date of the new interest rate (interest rate adjustment date)

      2. Interest fixing date

      3. Percentage fixing date (this can differ from the interest fixing date, if no entry has been made in the reference interest rate table. The system therefore chooses the previous entry).

      4. New interest rate amount