Hi experts,
I have the issue below and I would like to know if you can help me.
The customer has a product type that have variable rate + fixed rate. The fixed rate is calculated over the base amount + variable interest, but the issue of this product is the fixed rate that has amortization separately of variable rate. To make it work up in CFM (version 5.0) I created 2 transactions:
1. 1. Interest rate transaction to calculate the variable rate interest;
2. 2. Facility transaction to calculate the fixed rate interest:
but it didn't work.
There is another solution for this issue?
Thank you and best regards.
Luci Maki
Hello Eduardo,
To better understand your quest, I have two questions. Is it that you are using the SAC gross or net method of amortization and interest is included in the calculation but only the fixed interest? Is this a money market or security product type?
Regards,Lisa
Hi,
If I understand your question correctly, then you need a variable interest on a nominal amount for a period and then a fixed interest calculated on the nominal + Variable amount for the same period? As an example, you have a 10M nominal amount on a 3 Month Libor + 5% fixed rate on the 10M + 3month libor interest amt)?
If this is the case, I am afraid multiple parallel interest conditions are not possible in treasury. For this you would have to use Loans management only where you can have multiple parallel interest conditions. Even there, to include the interest portion as relevant to capital flow for the calculation of the fixed part is not possible.
As you stated, you can do that by creating a IRI and then creating a swap with floating on one side and floating+fixed on the other side. However, the nominal amount for this swap as per your case should be the total of initial nominal + the variable interest which again has to be calculated manually and hence your existing solution itself
Also, since you are in CFM 5.0, how did you calculate amortization through money market?
Regards,
Ravi
Add a comment