Run this program to automatically reset any floating rates that are based on a benchmark rate and margin. This program only resets floating rates in Wholesale Term Money and Interest Rate Swap deals that you specified a benchmark rate and a margin for.
A benchmark rate is any interest rate that a floating rate is based on. A margin is the difference between the specified interest rate and the adjusted floating rate. Margins are expressed in basis points and can be positive or negative.
When you run the Reset Floating Benchmarked Rates program, all transactions in floating rate wholesale term money and interest rate swap deals are adjusted using the following calculation.
Adjusted Floating Rate = (Benchmark Rate + Margin)
For example, assume that you enter an interest rate swap deal with a margin of 100, and a benchmark rate of CDOR1M. The benchmark rate details are as follows:
| Rate Code | Bid Price | Ask Price | Date Time |
|---|---|---|---|
| CDOR1M | 1.96 | 1.96 | January 9 |
The resulting interest periods for the deal would be as follows:
| Interest Period | Rate Fixing Date | Start Date | Maturity Date |
|---|---|---|---|
| 1 | January 9 | January 9 | February 9 |
| 2 | February 9 | February 9 | March 9 |
| 3 | March 9 | March 9 | April 9 |
When you run the Reset Floating Benchmarked Rates program, the floating rate would be adjusted as follows:
1.96 + 1.00 = 2.96
The program updates the first interest transaction for the above deal to the adjusted rate of 2.96. Subsequent transactions are also updated with the same interest rate for cash forecasting purposes. When the starting date of the second (or any subsequent) interest transaction approaches, then you must run the Reset Floating Benchmarked Rates program again.
Note: To adjust floating rates correctly, the deal's Rate Fixing Date must be the same as the benchmark rate's Date Time. For example if the Rate Fixing Date for a deal is January 9, then the Date Time for the benchmark rate must be January 9 too.
For more information on the floating rate deals that are affected, see: Wholesale Term Money and Interest Rate Swaps.
Reset Date Adjustment: The number of days from the Rate Reset Date that you want to search for a historical benchmark rate for each transaction in a wholesale term money or interest rate swap deal. For example, enter 7 if you want to find any benchmark rates that are up to 7 days earlier than the current system date. Enter a value of 1 or greater in this field. If you leave this field blank, the system looks for a rate where the Rate Reset Date of the transaction and the Date Time of the benchmark rate are an exact match. If there are no historical benchmark rates recorded for the dates in question, the rates will be not be adjusted.
Benchmark Rate: The interest rate that you want to use as a benchmark for resetting the floating rates in your wholesale term money or interest rate swap deals. A benchmark rate can be any interest rate that is defined in the Current System Rates window.