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Jan 24, 2013 at 01:35 AM

Interest Accrual with Foreign Currency Valuation



This is a borrowing in foreign currency> When running TPM44 for interest rate instrument, the accrued interest must be converted to local currency using a fix exchange rate and then revalued using the current market rate. How do i do this? In my current configuration, the accrued interest is converted to LC using the market rate and then revalued at a fix ER which I have fixed in the interest flow. I'm thinking of just maintaining a different exchange rate type for this instrument wherein I'll put the fix exchange rate so that the accrued interest will be record at this fix ER. But the tricky part here is the fix ER is different per contract.

Here's my example:

Accrued interest 4,000 = 160,000 loc.currency using fix exchange rate of 40 (this is the loc currency conversion in TPM44)

= 164,000 using current exchange rate of 41

= 4,000 loss resulting from valuation or exchange rate difference (fix vs current rate also in TPM44 via diffrence procedure)

Kind regards,