IBOR transition

Created by Erik Akerlund, Modified on Mon, 20 Feb 2023 at 02:31 PM by Erik Akerlund

Treasury Systems has full support to calculate compounded interest amount for the new risk free interest rates e.g. SONIA, €STR, SOFR. It works for all floating rate instrument such as Loan, Bond, Bank account interest, Interest rate swap, Caps and Floors. 

Market data set up

  1. Open market data set up and add the new Fixing index 
  2. Enter the number of days in Lookback. If you will have different Lookback days for different instruments you need to define one fixing index for each Lookback day. See print screen below. 
  3. Interest form: How the market date is defined and imported. Usually Simple if you are not importing market data that has already been calculated as compounded.  
  4. Tick Compounded in arrears (to calculate the interest amount as compounded) 

Lookback: How many business days prior to the interest period should the interest be fetched from (fixing date) usually 2D or 5D. The number of days to use as Lookback needs to be is defined in market data setup.

When entering the Loan the different defined Lookback days will be shown in Fixing index.

Observation shift: is the date period from when the interest rates has been set. If the interest amount should be calculated on the observation shift period then you need to tick observation shift when entering the loan. If the interest should be calcuated on the normal interest period do not tick this box. 

Spread add the counterparty spread and if applicable the CAS (Credit Adjustment Spread) and enter it in the spread field. The spread is not calculated as compounded in arrears. 

New report columns available 

  • Cumulative interest days
  • Cumulative observation days
  • Observation days
  • Observation shift
  • Observation start date
  • Fixing rate (shows the fixing rate from interest rate table) 
  • Base interest shows the acual interest the amount is calculated on. 

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