Swap 

Use

With swaps, the interest rate flows are generated according to the Condition Details.

Depending on the type of payment flows to be exchanged, you can have Interest Rate Swaps and Currency Swaps. You can structure these in any way you require using the nominal amounts, interest or term fields.

For more information, see Discount Swap.

In addition, you can create a Compound Swap. In the case of a compound swap, the interest is capitalized and paid out during and / or at the end of the term. Another available feature is the Eonia Swap, a special type of compound swap.

1. On the initial screen, enter the following basic data for the transaction:

2. Choose Enter to go to the basic data screen for the transaction. On the Structure tab page, enter the actual transaction data for the swap.

3. You can change nominal amounts and specify interest rate adjustment conditions. Choose the Create nominal changes pushbutton to create nominal amount increases or decreases during the term. Repayment structures are created by reductions in the nominal amount. After you have changed the nominal amounts, the pushbutton changes to: Nominal changes exist.
4. You can also use the pushbutton to adopt nominal amount increases or decreases from the ‘incoming interest’ side and to copy them to the ‘outgoing interest’ side, or vice versa. To do this, choose the Adopt and copy pushbutton.
5. You can view the conditions overview for the incoming and the outgoing side and also double-click to view the condition details.
6. In the Detail View: Interest Rate Adjustment, you can specify how frequently the variable interest rate should be recalculated and on which day the underlying reference interest rate should be set. An interest rate adjustment can be carried out at the start of the period, regularly or on specific dates, for example.
7. For more detailed information on the pushbuttons (interest and interest rate adjustment), see Condition Details.
8. An important additional function is the NPV Calculator, which enables you to calculate the value of the swap on the basis of the zero coupon curve. To do this, choose Extras ® NPV Calculation. The NPV calculator calculates both the price you would have to pay to clear the swap and the price you would have to pay to buy the instrument. The difference between the displayed NPVs reflects the corresponding bid/ask spreads.
9. You start an automatic interest rate adjustment by choosing Back Office ® Variable Interest Calculation ® Interest Rate Adjustment ® Automatic Processing.
10. To settle a swap prematurely, you can use the Notice function. You have the option of giving notice for a future date. Interest rate adjustment dates that lie before the date of notice but after the contract conclusion date do not change. The final repayment is due on the date of notice.
11. You can specify in Customizing whether you want the name of the trader to be displayed. You can also enter additional information, such as the business partner or a reference for the business partner.
12. You can also branch to the entry screens for the general transaction management functions. To do this, you use the various tab pages.

• Interest Rate Adjustment Data and
• Incoming and Outgoing Flows.

14. To use additional functions, choose Extras and Environment from the menu.
15. To save the basic data, choose Swap ® Save.

For general explanations of terms, see Basic Data - Derivatives.