How to enter a Cross currency interest rate swap (CCIRS)

Created by Erik Åkerlund, Modified on Wed, 07 Feb 2024 at 11:54 AM by Karin Östergren

Here all types of cross currency interest rate swaps are entered. For example paying and receiving floating interest (basis swap) or paying fixed interest against floating interest etc. Different interest fixing and payment periods can be entered and with or without an amortisation plan. 

  1. Choose new deal - Interest Rate Swap
  2. Choose Swap type Cross Currency Swap. 
  3. Choose Interest type Fixed/floating or Floating/floating. Fixed/floating is set by default.
  4. Choose which type of interest you will pay, fixed or receive fixed. Pay fixed is set by default. If Floating/floating is chosen no choice will appear.
  5. If an amortized swap choose between Annuity or Straight amortisations, by default No amortisation is set.
  6. Fill in the right currency on each leg.
  7. Notional rate (the rate between the currency pair) will be calculated and shall not be filled in.
  8. 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.
  9. Choose the right type of capital exchange. None = No capital exchange at all. Initial = Exchange only at start. Final = Exchange only at end date. Initial and Final = Exchange both at start and end.
  10. In Interest tab 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.
  11. Choose the right type of capital exchange. None = No capital exchange at all. Initial = exchange only at start. Final = Only exchange at maturity. Initial and Final = exchange both at start and end.
  12. Fill in all data for both legs interest term. If floating interest, do not forget to fill in the right Fixing index. 'Base interest %' for first period is filled automatically if actual rate has been imported and the interest period is thereby Fixed. If first fixing period is Broken (uneven) the 'Base interest %' will be interpolated. If not the rate has been imported the fixing status will be Missing.
  13. Fixing and payment period can be entered with different period if that is agreed.
  14. 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).
  15. Choose correct day count convention. For further explanation see Day count convention
  16. 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.
  17. 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.
  18. 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.
  19. 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. Will both currencies affects both legs you need to add the other currency on each leg.
  20. If an internal CCIRS 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.
  21. If not Day rate shall be used to book the "foreign leg" and the Notional rate shall be used, then add a FX rate on the foreign leg in the field, FX Spot rate at value date.
  22. If Curves are already defined to do market valuation then choose suitable curves in the Discount curve field, if leave blank Default curves are used (set in Currencies as default). It is also possible to separate the basis spread effect in market valuation. Then Discount curve (No basis spread) shall be different from the Discount curve.
  23. Press Save

Below example is an EUR/SEK basis swap and the Legal entity has SEK as accounting currency.

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

Curves to be used for market valuation can be added afterwards.

How to enter an Interest Rate Swap, please click on the link: How to enter a Interest Rate Swap (IRS) 

How to update an existing Cross Currency Interest rate swap:

If the CCIRS has been entered incorrectly when you have just entered it you can click on the Wizard and correct it and regenerate the deal again. Fixing and other changes that have been made after or added will be removed. 

If missing Additional calendar, FX Spot Rate At Value Start, start- or end dates for the deal or wrong companies have been entered, then Wizard must be used to regenerate the deal. If Accounting and/or payments have been exported the deal is locked and must be unlock first.

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

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