Creating a Contract 

Use

The IDES AG wants to secure 9 million EUR for a term of 6 months in 3 months. The treasurer expects increasing interest rates and thus agrees a FRA contract (Forward Rate Agreement) with the bank for 9 million DEM that begins in three months and has a term of 6 months. The agreed interest rate is 4.2 %.

First you enter the FRA transaction in the IDES System as a contract. The settlement is processed in a second step.

You enter the FRA with the respective data in this step. This is typically done by the trader.

Procedure

  1. Call up the transaction as follows:
    2.

    Menu Path

    Accounting ® Treasury ® Treasury Management ® Derivatives ® Trading ® OTC Interest Rate Instrument ® Create

    Transaction Code

    TO01

  2. Enter the following data:
    3.

    Field

    Data

    Description

    Company code

    1000

    IDES AG

    Product type

    63 A

    Forward Rate Agreement

    Transaction type

    100

    Purchase

    Partner

    1000

    Deutsche Bank

    Contract

    Select

    		  
  3. Choose .
  4. Enter the following data:
    5.

    Field

    Data

    Description

    Start of hedge period

    ++3

    Identification code for the begin of the term in three months

    End of hedge period

    ++9

    Identification code for the end of the term in nine months

    Base amount

    9m/EUR

    m: Identification code for million

    Interest rate

    4.2

    		  

    Ref.int.rate

    LIBOREUR06

    		  

    Calendar 1

    GB

    Uses the British factory calendar for interest calculation as a LIBOR base

    Interest calculation method

    act/360

    Underlying interest calculation method (for example, exact days, year with 360 days

  5. Choose .

    6. The system automatically entered the default value 2 in the Fixing field. This input determines the time of calculation for the interest clearing payment to two days before the start of term.

    The system already generated the contract date in the Contract section. Besides, you can add data regarding the business partner or display the authorized traders via the possible entries push button.

  6. Choose the Administration tab page.

    7. If the system displays a dialog box to check the working days, select Copy.

  7. Check the following entry in the Create FRA: Administration screen:

    8. Field

    Data

    Description

    Account assignment reference

    DERIVATE

    Allocates the transaction accounting information for the FRA position

    This section also shows the processing category as it was determined in customizing, or you can enter other flows (incl. payment amounts for charges or commission, payment dates) etc.

    Via Administration you can maintain information for internal allocation purposes or internal references, recognize reverse entries etc.

    Besides, you can display payment details and correspondence entries.

  8. Choose the Cash flow tab page.

    9. You can see that the payments of the source transaction are fictitious and therefore not relevant for posting. This is documented by the posting status (PS). You can also recognize that the system does not yet display an interest total. This will only be calculated two days before the start of the fixed period.

  9. Choose .

    10. The system displays the message Financial transaction saved under number XXX.

  10. Note the number of the transaction.
  11. Choose until the overview tree appears.