Floating vs Purple Collar Interest Rate Swap

Description

A Floating vs. Purple Collar IRS is a derivative that provides a periodical exchange of a floating rate on a certain amount (notional principal), defined for a certain maturity (Leg A), for a 4 scenarios payoff on the same notional principal (Leg B). The leg A can be customized in order to pay a floating rate (adjusted by optional multipliers, spread and options). THe leg B has a customizable payoff which can be specified in terms of three floating rate thresholds which separates four scenarios. For all scenarios the payoff is Mutliplier*FloatRate+Spread where the Multiplier and the Spread are scenarios specific.

Customizables Attributes

Contract Terms

Maturity Represents the expiration date or maturity of the contract (Interest rate, Equity etc.) without any business date convention adjustment.
Currency The Currency in which the product pays.
Valuation Side It defines the side or the point of view of the valuation. By setting Leg A, leg (A) pays fixed rate cash flows, and receives the floating leg (B) cash-flows, vice versa, by setting Leg B, the holder pays the floating leg (B) cash-flows.
Effective Date The Effective Date is the Date on which the contract takes effect: usually the date on which first payment defined in the contract takes place.

Leg A - Floating

Notional The notional (principal) used to calculate the payments. It can be "bullet" (enter a single element) or "amortizing" (enter as many values as the number of payments).
Floating Rate Indexing Specifies the maturity of the floating rate.
Payment frequency Frequency of payments: actually we support daily, weekly, bi-weekly, monthly, Quarterly, Semi-Annual and Annual frequencies.
Reset type Reset type specifies the fixing rules for the floating rate. In-Advance means that the floating (interest) rate is calculated at the beginning of the period and paid at the end. In-Arrears means that the floating (interest) rate is calculated and paid at the end of the period.
Days before reset It is the number of days to subtract to the reset dates. Usually, if not specified into the contract, the convention is to subtract two days.
Date rolling convention Date rolling conventions are a series of rules that indicate which date to consider when a payment date or a date used to calculate accrual interest falls into a holiday according to a business day calendar. Supported conventions are: Following: the payment date is rolled to the next business day; Modified following: the payment date is rolled to the next business day, unless doing so would cause the payment to be in the next calendar month, in which case the payment date is rolled to the previous business day. Many institutions have month-end accounting procedures that necessitate this; Preceding: the payment date is rolled to the previous business day; Modified business day: the payment date is rolled to the previous business day, unless doing so would cause the payment to be in the previous calendar month, in which case the payment date is rolled to the next business day. Many institutions have month-end accounting procedures that necessitate this; Unadjusted: paid on the actual day, even if it is a non-business day.
Day count convention Day count conventions define how many days must be considered between two coupons payments dates or from the valuation date to the next payment date (see also the difference between clean price and dirty price of a bond) to calculate the accrued interest. The conventions are : Thirty/360: uses 30 days in a month and 360 days in a year for calculating interest payments; Actual/365: each month is treated normally and the year is assumed to be 365 days. For example, in a period from February 1, 2005 to April 1, 2005, the Factor is considered to be 59 days divided by 365; Actual/365: indicates the actual number of days in the period for calculating interest divided by 365. If any part of that period of calculation of interest fall in a leap year, the rate is calculated as the sum of: - actual number of days in that part of the interest calculation period falling in a leap year divided by 366; - actual number of days in that part of the interest calculation period falling in a non-leap year divided by 365.
Spread It defines the spread rate which can optionally be added to or subtracted from the floating rate.
Rate Options Defines how the floating rate is used in the payoff by taking into account floor, cap and collar type options.Customize the coupons in order to take into account floor cap and collar type options.
Rate Multiplier The rate multiplier is applied to the coupon before adding the floating rate spread.
Floor Level Optional Floor level (or levels) at which floating coupons are subjected. If your contract have payment specific levels enter as many values as the number of payments.
Cap Level Optional Cap level (or levels) at which floating coupons are subjected. If your contract have payment specific levels enter as many values as the number of payments.

Leg B - Purple Collar

Floating Rate Indexing Specifies the maturity of the floating rate used to trigger the scenarios and to calculate the payoff for scenarios.
Payment frequency Frequency of payments: actually we support daily, weekly, bi-weekly, monthly, Quarterly, Semi-Annual and Annual frequencies.
Reset type Reset type specifies the fixing rules for the floating rate. In-Advance means that the floating (interest) rate is calculated at the beginning of the period and paid at the end. In-Arrears means that the floating (interest) rate is calculated and paid at the end of the period.
Days before reset It is the number of days to subtract to the reset dates. Usually, if not specified into the contract, the convention is to subtract two days.
Date rolling convention Date rolling conventions are a series of rules that indicate which date to consider when a payment date or a date used to calculate accrual interest falls into a holiday according to a business day calendar. Supported conventions are: Following: the payment date is rolled to the next business day; Modified following: the payment date is rolled to the next business day, unless doing so would cause the payment to be in the next calendar month, in which case the payment date is rolled to the previous business day. Many institutions have month-end accounting procedures that necessitate this; Preceding: the payment date is rolled to the previous business day; Modified business day: the payment date is rolled to the previous business day, unless doing so would cause the payment to be in the previous calendar month, in which case the payment date is rolled to the next business day. Many institutions have month-end accounting procedures that necessitate this; Unadjusted: paid on the actual day, even if it is a non-business day.
Day count convention Day count conventions define how many days must be considered between two coupons payments dates or from the valuation date to the next payment date (see also the difference between clean price and dirty price of a bond) to calculate the accrued interest. The conventions are : Thirty/360: uses 30 days in a month and 360 days in a year for calculating interest payments; Actual/365: each month is treated normally and the year is assumed to be 365 days. For example, in a period from February 1, 2005 to April 1, 2005, the Factor is considered to be 59 days divided by 365; Actual/365: indicates the actual number of days in the period for calculating interest divided by 365. If any part of that period of calculation of interest fall in a leap year, the rate is calculated as the sum of: - actual number of days in that part of the interest calculation period falling in a leap year divided by 366; - actual number of days in that part of the interest calculation period falling in a non-leap year divided by 365.
Scenarios Threshold 1 The floating rate threshold defining the event which separates the first and the second payoff scenarios payable by leg B. Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Rate Multiplier 1 The rate multiplier applied to the floating coupon before adding the rate spread for scenario 1. Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Spread 1 Fixed rate or spread to be added to floating rate for scenario 1 (floating rate <= threshold 1). Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Scenarios Threshold 2 The floating rate threshold defining the event which separates the second and the third payoff scenarios payable by leg B. Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Rate Multiplier 2 The rate multiplier applied to the floating coupon before adding the rate spread for scenario 2. Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Spread 2 Fixed rate or spread to be added to floating rate for scenario 2 (threshold 1 < floating rate < threshold 2). Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Scenarios Threshold 3 The floating rate threshold defining the event which separates the third and the fourth payoff scenarios payable by leg B. Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Rate Multiplier 3 The rate multiplier applied to the floating coupon before adding the rate spread for scenario 3. Each scenario has the following payoff Multiplier*FloatingRate+ Spread,
Spread 3 Fixed rate or spread to be added to floating rate for scenario 3 (threshold 2 <= floating rate < threshold 3). Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Rate Multiplier 4 The rate multiplier applied to the floating coupon before adding the rate spread for scenario 4. Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.
Spread 4 Fixed rate or spread to be added to floating rate for scenario 4 (floating rate >= threshold 3). Each scenario has the following payoff: Multiplier*FloatingRate+ Spread.