In Fairways Debt, before booking a transaction, you can first price and simulate their schedules.
A collar is a security combining the purchase of a cap and the sale of a floor (buyer’s side) or the sale of a cap and the purchase of a floor (seller's side) to specify a range in which an interest rate will fluctuate. The security insulates the buyer/seller against the risk of a significant rise in a floating rate, but limits the benefits of a drop in that floating rate.
Note: The flows used to calculate the Mark-to-Market indicator, for example, are discounted using the zero coupon curve corresponding to the index selected to price the transaction.
Prerequisites
- Enable the Pricer application for the customer account or the organization (contact your Finance Active consultant)
- Enable the Vanilla Collar pricer (contact your Finance Active consultant)
- Enable the relevant currencies (contact your Finance Active consultant)
Navigate to the Pricer Application
- Log in to your Fairways Debt account.
- Select a customer account.
- Navigate to Applications > Pricer.
Price a Vanilla Collar
- Click Vanilla Collar.
- Complete the form with all relevant details.
Note: Fields marked with an asterisk * are mandatory.
|
Field |
Description |
|---|---|
|
Market Date |
Date on which the option is priced. |
|
Nominal |
Nominal amount of the underlying cap and floor, and currency of the option and the underlying. Note: The reference interest rate (IBOR) is defined according to that currency. |
|
Start Date |
Unadjusted start date of the underlying cap and floor. |
|
End Date |
Unadjusted end date of the transaction. |
|
Notional or nominal depreciation over the life of the option. Note: Extra fields may display beside depending on the selected mode. |
|
|
Rate |
Note: This field only displays for the progressive amortization mode. Progressivity rate. |
|
Frequency |
Note: This field only displays for the straight line, progressive and custom amortization modes. Amortization frequency. |
|
Field |
Description |
|---|---|
|
Collar Type |
Transaction direction:
|
|
Result |
Derivatives to price/solve. Note: The fields beside display depending on the selection. |
|
Collar Price |
Note: This field only displays for the Solve Cap Strike and Solve Floor Strike results. Price of the collar. |
|
Cap Strike |
Note: This field only displays for the Price Collar and Solve Floor Strike result. Strike of the underlying cap. |
|
Floor Strike |
Note: This field only displays for the Price Collar and Solve Cap Strike results. Strike of the underlying floor. |
|
Frequency |
Frequency of the interests perceived or paid. This frequency determines the tenor of the index (3 months, 6 months, etc.). |
|
Day Count |
Computes the day fraction of an interest accrual period. |
|
Fixing Type |
|
|
Fixing Offset |
Number of days to move from the fixing type selected, can be earlier or later, e.g.:
|
|
Field |
Description |
|---|---|
|
Roll Convention |
Note: The field value displays depending on the selected end date and stub. Date rolling convention. |
|
Stub |
Defines whether the last period should be a short or long stub when it does not match the selected frequency. |
|
Calendar |
Calendars with banking days and holidays of a specific city work with adjustments to provide an accurate schedule. |
| Adjustment mode for the payment date. | |
|
First Regular Start Date |
Note: This field only displays for the mixed stub. Start date of the stub. |
|
Last Regular Start Date |
Note: This field only displays for the mixed stub. End date of the stub. |
- Click Apply.
The pricing results display.
Amortization
|
Mode |
Description |
|---|---|
|
Bullet |
No depreciation during the lifetime of the transaction. Cumulative depreciations are counted at the end of the transaction term. |
|
Linear |
Constant depreciation. |
|
Progressive |
The rate is progressive. |
|
Different values apply to each amortization. |
Custom Amortization
- Click Edit.
- Double-click the relevant payback amount fields and enter their amounts.
- Click Save.
