Plain Vanilla Interest Rate Option

Description

This template models a series of plain vanilla options on the forward interest rates typically found on floating rate loans. It is possible to specify the floating rate maturity, spread, and additional Floor, Cap and Collar Options. The options will be evaluated on bullet or ammortizing notionals

Customizables Attributes

Contract Terms

Maturity Date Represents the expiration date or maturity of the contract (Interest rate, Equity etc.) without any business date convention adjustment.
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). . This field is used only if 'Has Custom Notional' is set to True.
Currency The Currency in which the product pays.
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 Conv. 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 Conv. 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.
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.

Option Details

Frequency Frequency of payments: actually we support daily, weekly, bi-weekly, monthly, Quarterly, Semi-Annual and Annual frequencies.
Option Type 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.
Floating Rate Indexing Specifies the maturity of the floating rate.
Cap Strike 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.
Floor Strike 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.