Price a Vanilla Swaption

Updated December 03, 2024 14:52

In Fairways Debt, before booking a transaction, you can first price and simulate their schedules.

Note: Only currencies that are managed for the transaction can be selected.

Prerequisites

Enable the Pricer application for the customer account or the organization (contact your Finance Active consultant)
Enable the Vanilla Swaption 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 Swaption

Click Vanilla Swaption.
Complete the form with all relevant details.

Note: Fields marked with an asterisk * are mandatory.

Field	Description
Market Date	Date on which the transaction is priced.
Nominal	Nominal amount to invest in the transaction and its related currency.
Start Date	Unadjusted start date of the transaction.
End Date	Unadjusted end date of the transaction.
Amortization	Amortization mode. Notes: Extra fields may display beside depending on the selected mode. For custom amortizations, see below for more details.
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
Type	Swaption direction.
Exercise Type	Option exercise type.
Exercise Frequency	Note: This field only displays for the Bermudan option. Frequency of the option exercise.
First Exercise Date	Note: This field only displays for the Bermudan option. First exercise date of the option.
Exercise Start Date	Note: This field only displays for the American option. Exercise start date of the option.
Exercise End Date	Note: This field only displays for the American option. Exercise end date of the option.

Field	Description
Index	Type of the index used to calculate the rate value. The list also includes the Risk-Free Rate (RFR) indexation related to the transaction currency (or IBOR if still published). The available indexes for each currency are as follows: CHF: SARON EUR: EURIBOR, ESTER, Term ESTER GBP: SONIA, Term SONIA SEK: STIBOR USD: Fed Funds, SOFR, Term SOFR, Average SOFR, SIFMA Note: The fields below display depending on the selected type.
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.
Strike	Note: This field only displays for the fixed type rate. The exercise rate of the option indicates the fixed rate to swap with the floating rate.
Spread	Note: This field only displays for the floating type rate. Spread (or margin) value in bp.
Fixing Type	Note: This field only displays for the the IBOR or Term RFR index. In Advance: The reference fixing is the one at the start of the interest rate period. Only this type is available for a Term RFR index. In Arrears: The reference fixing is the one at the end of the period.
Fixing Offset	Note: This field only displays for the the IBOR or Term RFR index. Number of days to move from the fixing type selected, can be earlier or later, e.g.: -2 for 2 days earlier 2 for 2 days later
Floor Option	Note: The floor option is not currently supported.

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.
Payment Date Adjustment	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.

Note: The value for the estimated market rate corresponds to the market rate for a standard transaction (same currency and standard index) with the same schedule (dates and outstanding balances).

The standard rates for the managed currencies are as follows:

CHF: SARON
EUR: ESTER
GBP: SONIA
USD: SOFR
Other currency: IBOR

The pricing results display.

Custom Amortization

Click Edit.

Double-click the relevant payback amount fields and enter their amounts.
Click Save.