Create an Interest Rate Swap (IRS)

An interest rate swap (IRS) is an agreement between two parties providing for the exchange of interest payments (usually fixed rate vs. floating rate), based on a specific notional amount.

Interest rate swaps can be used for hedging purposes, in order to turn a fixed rate debt into a floating rate debt (or vice versa).

An interest rate swap can be canceled or extended by the party or the counterparty.

Navigate to the Debt & Derivatives Application
  1. Log in to your Fairways Debt account, e.g. https://login.financeactive.com/login.
  2. Select a customer account.
  3. Navigate to Applications Applications.png > Debt & Derivatives.
Create an Interest Rate Swap
  1. Click Add Transaction > Derivative > Interest Rate Swap.

DebtDerivatives_Transaction_Derivative_EN.png

  1. Complete the form with all relevant details.

Note: Fields marked with an asterisk * are mandatory.

Field Description
Reference Code Unique reference of the transaction. Identifies the transaction in the portfolio. The reference must be unique among all the entities managed in the account.
External Reference Code Used by external systems to identify the transaction. Used when transactions are imported from or exported to another system.
Notional Amount Notional amount of the interest rate swap.
Premium Premium paid at the start date of the interest rate swap.
Currency Currency of the notional amount.
Party

Entity in the system involved in the transaction.

Note: Users can only manage entities available in the current organization.

Counterparty Can be either internal (an entity in the system) or external (a commercial bank).

DebtDerivatives_Transaction_Derivative_InteresRateSwap_Transaction_EN.png

Field Description
Trade Date Date at which the transaction has been traded. From that date, the system takes the transaction into account as an item of the portfolio.
Start Date Unadjusted start date of the transaction.
Maturity Date Unadjusted maturity date of the transaction.

DebtDerivatives_Transaction_Derivative_InterestRateSwap_TimeFrame_EN.png

Field Description
Swap Type

Notes:

  • Standard, here, means "not callable."
  • Cancelable and extendable swaps are only possible if one of the parties can cancel or extend the swap.
  • Additional fields to complete display depending on your selection.
Cancelable by

Who can cancel the swap between the party or counterparty.

Cancelation Date When the swap can be canceled.
Extendable by Who can extend the swap between the party or counterparty.
Extended Maturity Date Date the swap can be extended to.

DebtDerivatives_Transaction_Derivative_InterestRateSwap_SwapType_EN.png

Field Description
Amortization Type Amortization mode.

DebtDerivatives_Transaction_Loan_Standard_Amortization_EN.png

Field Description
Index

Name of the index used to calculate the rate value, e.g. FIXED for fixed rate.

Note: You can only apply fixed and floating indexes to cancelable and extendable swaps.

Interest Rate

Fixed rate value in percentage.

Note: An extendable interest rate swap can have an extension interest rate defined.

Initial Interest Rate

Initial rate of the custom index.

Spread Spread (or margin) value in percentage.
Day Count Convention Used to compute the day fraction of an interest accrual period.
Frequency Frequency of the payments.
Adjustment Adjustment mode for the interest calculation. The nominal start and end dates of the accrual period will be adjusted accordingly before computing the interest amount.

DebtDerivatives_Transaction_Derivative_InterestRateSwap_Leg_EN.png

Field Description
Payment Date Adjustment Adjustment mode for the payment date, applicable to both legs.

DebtDerivatives_Transaction_Derivative_InterestRateSwap_Payment_EN.png

  1. Enable Show Details after Validation to automatically open the new standard loan profile once created.
  2. Click OK to create the standard loan.

The new standard loan displays in the draft portfolio.

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Adjustment

Adjustment modes define how the system rolls dates in case of holidays in the calendar.

Field Description
Unadjusted Not rolled.
Preceding Rolled to the previous business day.
Following Rolled to the next business day.
Modified Preceding Rolled to the previous business day, only if that day occurs in the same month. Otherwise, rolled to the next business day.
Modified Following Rolled to the next business day, only if that day occurs in the same month. Otherwise, rolled to the previous business day.
End of Month (unadjusted) Rolled to the last day of the month.
End of Month (preceding) Rolled to the last day of the month, then adjusted to the previous business day.
Modified Following (year)

Rolled to the next business day, only if that day occurs in the same year. Otherwise, rolled to the previous business day.

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