How to enter a Interest Rate Swap (IRS)

Created by Erik Åkerlund, Modified on Wed, 07 Feb 2024 at 10:57 AM by Karin Östergren

Here all types of interest rate swaps are entered. For example paying fixed interest against floating interest or receiving fixed interest against paying fixed. Different interest fixing and payment periods can be entered, with or without an amortisation plan. 


  1. Choose New deal - Interest Rate Swap.
  2. Choose Swap type Interest Rate Swap. 
  3. Choose Interest type Fixed/floating or Floating/floating. Fixed/floating is set by default.
  4. Choose which type of interest: Pay fixed or Receive fixed. Pay fixed is set by default. If Floating/floating is chosen no choice will appear.
  5. If an amortizing swap choose between Annuity or Straight amortisations, If Ad hoc amortisation amounts, then add them afterwards on one ot the legs. The amortisation amounts will be copied over to leg 2. By default no amortisation is set.  
  6. Please observe that End date must be entered correctly when entering the deal and be already adjusted with the business day convention. For example if a 2-year IRS deal is entered with begin date 2024-02-05 and the end date (plus 2 years) then will be on 2026-02-07 which is on a Saturday you need to enter 2026-02-09 as End date. You can always do a check by clicking on the Calendar icon.
  7. Fill in all valid data in TAB - Interest. Choose Fixing index when Interest type Floating is chosen. If no "ibor" rates or O/N rates are show in the list that needs to be predefined in Market data set up as it can't be left blank. Index for Floating leg is a Mandatory field.
  8. Fixing and payment period can be entered with different period if that is agreed.
  9. Last day of period: Checked = adjust roll date to last day of period. For example if a period ends on the 30th of March the date will be adjusted to the 31st in accordance with the business day convention (Date rolling behaviour).
  10. Choose correct day count convention. For more details see Interest day count convention
  11. Three options for adjust dates:
    • None = no adjustment on either maturity or payment date.
    • Payment date = Only payment date will be adjusted. If maturity date falls on a Sunday the interest rate will be calculated until Sunday but paid on Monday (or according to chosen business day convention). Normally called no adjusted in agreements.
    • Maturity and Payment Date = Both interest calculation date (maturity date) and payment date will be adjusted according to the entered business day convention. Normally called adjusted in agreements.
  12. Interest floor type, None is default. Base interest floor, i.e. if base interest is negative it will be calculated as zero. Total interest floor, i.e. if total interest (incl spread) is negative.
  13. Decimal interest if Default the interest amounts will follow the Currency standard, for example SEK has two decimals. If set to 0 rounding of the interest amount will be done and no decimals on the interest amount.
  14. Bank accounts are set according to the set up in Default Bank Accounts. Legal entity's bank accounts must be filled in (mandatory fields) for both legs. Counterpart's bank account are optional.
  15. TAB Tags are optional. If a tag value is entered on one of the legs (paying) it will not be automatically be set on the other leg (receiving). It needs to be set for both legs. If it is an internal deal the mirror will get the same tags. 
  16. TAB Finish if additional bank holiday calendar will be added this will be done on tab - Finish. By default the transactions currency will be set as effective calendar.
  17. If an internal interest rate swap are entered and an automatic mirror deal shall be created this needs to be set up in Mirror Rules. The rule can be overruled here by changing from "Use rule" to No Mirror or Create mirror in field Mirror creation type.
  18. Press Save

Two legs will be created in one Deal ID: Payer and Receiver Leg:


Summary:

Transaction per leg:



How to update an existing Interest rate swap:


If the Interest Rate Swap has been entered incorrectly you can click on the Wizard and correct it and regenerate the deal again. Fixing and other changes made after will be removed.


If the bank accounts or tags need to be updated or other changes that do not need to regenerate the IRS from the start, Terms, Modify Tags or Modify bank acc can be used.


Example below, Adjust Date has been wrongly entered on the fixed leg and Terms can then be used to change future interest transactions. Begin date is from the Interest period start date.

How to enter a Cross currency interest rate swap (CCIRS). Click on the link: How to enter a Cross currency interest rate swap (CCIRS)

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