Capturing Equity Swap Trades

An equity swap can have multiple flavors:

•

Amortizing swap: equity / equity index / future equity index against interest rate

•

Basket against equity

•

Basket against interest rate

•

Equity / equity index / future equity index against equity / equity index / future equity index

•

Equity / equity index / future equity index against interest rate

For equity, equity index, future equity index, and basket legs, the swap can be:

•

Total return – The return is based on performance and dividend

•

Price return – The return is based on performance only

•

Dividend – The return is based on dividend only

Ⓘ [NOTE: If you want to capture a dividend swap against a fixed amount instead of an interest rate or another asset, you can use the Dividend Swap worksheet - See Capturing Dividend Swaps for details]

Choose Trade > Equity > Equity Swap to open the Equity Linked Swap (ELS) worksheet from Calypso Navigator or from the Trade Blotter.

Equity Swap Quick Reference

When you open a trade worksheet, the Trade panel is selected by default.

Underlying Configuration

Equity products are created using .

Equity index products are created using .

Baskets are created using .

Entering Trade Details

You can select a template from the Template field to populate the worksheet with default values. Then modify the fields as applicable.

Or you can enter the trade fields directly. They are described below, see Field Description.

Ⓘ [Note: the Trade Date is entered in the Details panel]

Proceed to the other panels as applicable.

Saving a Trade

Hit F5 to save the trade, or choose .

You can also hit F3 to save the current trade as a new trade, or choose Trade > Save As New.

A description will appear in the title bar of the trade worksheet, a trade id will be assigned to the trade, and the status of the trade will be modified according to the workflow configuration.

Pricing a Trade

PricerEquityLinkedSwap

An equity linked swap trade requires the following market data: a discount curve, forecast curve, dividend curve, quote for the underlying product, the first rate reset.

If the payment currency is a different currency than the product currency, then an FX rate is also required.

PricerEquityLinkedSwapAccrual

Accrual pricing approach defines the ELS value by recognizing only the unrealized performance and financing based on today's value of the underlying asset. Future flows are not considered while pricing.

NPV = Unpaid performance + Unpaid incomes-Financing Costs

If the deal can be terminated at any time without taking future flows into account Accrual pricing methodology should be used.

Added the pricing parameter FIXING_DATE_ACCRUAL.

True or False. Determines when a cash flow is no longer included in the NPV of the swap. True so that cash flow realization is based on the fixing date. False so that the cash flow realization is based on the payment date.

Default is false.

You can choose to check if all required pricing data are available in the Pricing Environment.

Click Price to price the trade.

Trade Lifecycle

You can allocate the trade to multiple books using .

You can terminate the trade using .

You can fix prices and FX resets using or by using the PRICE_FIXING scheduled task.

You can apply corporate actions using , or using the CORPORATE_ACTION scheduled task

See also - All Trade Menus for information on functions, menus and panels common to all trade windows.

1. Sample Trade

1.1 Total Return Swap on Equity

Equity Swap - Sample Total Return Trade

Equity Swap - Sample Total Return Cashflows

The interest rate part of the trade generates interest cashflows.

The performance part of the trade generates PRICE_CHANGE cashflows based on the performance schedule – They correspond to price fixings.

These cashflows are generated for TotalReturn and PriceReturn swaps.

The dividend part of the trade generates DIVIDEND cashflows based on the dividend schedule – They correspond to realized dividends.

These cashflows are generated for TotalReturn and Dividend swaps.

For an underlying basket, there would be one DIVIDEND cashflow for each component of the basket as applicable.

See Cashflows Details for a description of the most relevant columns.

1.2 Fields Description

Trade Details

Fields	Description
Role/Cpty	The first two fields in the worksheet identify the trade counterparty. You can select a legal entity of specified role from the first field provided you have setup favorite counterparties. Favorite counterparties are specified using Utilities > Configure Favorite Counterparties. Alternatively, double-click the Cpty label to set the list of favorite counterparties. You can also type in a character to display the favorite counterparties that start with that character. Otherwise, click ... to select a legal entity of specified role from the Legal Entity Chooser. The second field identifies the trade counterparty’s role. The default role is specified using Utilities > Set Default Role. However, you can change it as applicable. Alternatively, double-click the CounterParty label to change the role.
Book	Trading book to which the trade belongs. Defaults to the book selected in the User Defaults. You can modify as applicable. You can select a book provided you have setup favorite books. Favorite books are specified using Utilities > Configure Favorite Books. Alternatively, double-click the Book label to set the list of favorite books. Otherwise, click ... to select a book. The owner of the book (a processing organization) identifies your side of the trade.
Status	Current status of the trade. The status is automatically assigned by the system based on the workflow configuration. The status will change over the lifetime of the trade according to the workflow configuration and the actions performed on the trade.
ID Ext Ref Int Ref	Unique identification number of the trade. The trade id is automatically assigned by the system when the trade is saved. You can load an existing trade by typing the trade id into this field, and pressing [Enter]. You can also display the internal reference of external reference. The default trade reference to be displayed can be selected in the User Defaults. The internal reference and external reference can be set in the Details panel of the trade worksheet.
Template	You can select a template from the Template field to populate the worksheet with default values. Then modify the fields as applicable.

Contract Details

Fields

Description

Trade Date

The trade date defaults to the current date. Modify as applicable.

You can double-click the Trade Date label to specify the trade time in the Trade Time field.

You can also check the Current checkbox to save the trade with the most current trade date and time.

Fixed Notional

Check for notional-based equity swap. Only available for Equity/Rate equity swaps.

When Fixed Notional is checked, you can enter an Initial Notional on the funding leg, and the Quantity is calculated as Initial Notional / Initial Price.

The field Forward Start Type is set to Notional Based.

Adjust Funding Notional

Only available if Fixed Notional is not checked.

Select the notional adjustment method:

•

No Adjustment – The Notional of the funding leg remains constant.

•

On Pay Date – The Notional of the funding leg equals the Fixing of the Prior Leg * Initial Quantity. The Notional will adjust on the payment date.

•

On Fixing Date – The Notional of the funding leg equals the Fixing of the Prior Leg * Initial Quantity. The Notional will adjust on the fixing date.

Adjust Quantity

Only available if Fixed Notional is checked.

It is set by the system based on the selected Date Calculation Method:

•

If Date Calculation Method = Independent, Adjust Quantity is set to "No Adjustment".

•

If Date Calculation Method = Fixing -> Payment Date, Adjust Quantity is set to “On Fixing Date”.

•

If Date Calculation Method = Payment -> Fixing Date, Adjust Quantity is set to “On Pay Date”.

Date Calculation Method

Select the Date Calculation Method:

•

Independent - Performance and funding leg dates are calculated independently.

•

Fixing Date -> Payment Date - Funding payment dates are determined by Performance payment dates. Fixing date lag on Performance leg is non-editable. It is possible to define a Reset date lag on the Funding leg.

•

Payment Date -> Fixing Date - Performance payment dates are determined by Funding payment dates. It is possible to define a Fixing date lag on the Performance leg.

Forward Start

Check for a forward starting trade.

•

When clear, it is not possible to save a trade without initial price and quantity.

•

When checked, it is possible to save a trade without initial price and quantity. The trade must have the notional entered (on the funding leg). The Start Date is the strike date (or the fixing date) on which the initial price is "fixed" and the quantity becomes known.

Performance cashflows (price change and dividend) are foretasted using the quantity = notional/FORWARD price at the fixing date.

If the settlement currency is different from the underlying currency, the "Initial FX Rate" field can be empty. It can be entered manually, or retrieved from the market data.

The scheduled task UPDATE_ELS_FORW_START updates the trades when the price is known on the start date: Price = quote and Initial Quantity = Initial Notional/Initial Price.

When checked, you can select if the trade is Notional Based or Quantity Based.

Notional Based = The notional of the funding leg is known on the trade date and the quantity is calculated based on the fixing as of the Start Date of the Performance leg.

Quantity Based = The quantity is known on the trade date and the notional will be calculated based on the fixing as of the Start Date of the Performance leg.

Legs Choice

Select the type of swap you want to perform:

•

Amortizing_Swap

•

Basket/Equity

•

Basket/Rate

•

Equity/Equity

•

Equity/Rate

Each type of leg is described below.

Swap Type

The following subtypes are included out-of-the-box:

•

TotalReturn – The return is based on performance and dividend.

•

PriceReturn – The return is based on performance only.

•

Dividend – The return is based on dividend only.

You can extend the list of subtypes in the EquityLinkedSwap.subtype domain.

Early Term Agreement

Select the type of early termination agreement:

•

BILATERAL: Both parties have the right to terminate the transaction.

•

CP: Only the counterparty can terminate the transaction.

•

PO: Only the processing org can terminate the transaction.

You can double click the "Early Termination Agreement" label and enter a lockout date as applicable in the Lockout Date field.

During the lockout period (between the start date and the lockout date), neither party can terminate the contract. The NPV of the deal is only made up of the accrued interest.

Amortizing Details

The Amortizing Swap is similar to an Equity Swap (Equity / Equity Index against Interest Rate) except that the quantity is amortized over the life of the trade. The amortization can either be a fixed number of shares, or manually entered by the user. The amortization is applied based upon the amortization schedule defined by the user in the Quantity Amortization window.

Amortizing Swaps pay a dividend on the Amortized Quantity and use an average as the Fixing Level of the Performance leg, which is based on the Reset Frequency. The Fixing Level used for performance flow calculation is the average of the Fixing Price for each reset.

The equity details of the Amortizing Swap contain the following additional fields.

Fields

Description

Amortization Quantity

You can enter a quantity for a fixed amortizing schedule.

Click to open the Quantity Amortization window.

The input parameters are retrieved from the trade. Modify as needed and click Generate to generate the amortization schedule.

You can modify the date / quantity as needed in the generated schedule.

The quantity is the remaining quantity as of a given date.

Click Save to save the schedule.

Remaining Quantity

Remaining quantity as of the valuation date.

Averaging Method

Select Simple or Weighted (based on amortized quantity) for computing the performance.

The cashflows reflect the amortized quantity.

Equity Basket Leg Details

The equity basket details are the same as the equity details with the additional fields described below.

Fields

Description

Reference Basket

Select a basket. Baskets are defined using Calypso Navigator > Configuration > Basket - Help is available from that window.

Ⓘ [Note: Only baskets weighted in quantity are supported]

When you select a basket, it brings up the Basket Components window - See Basket Components below for details.

You can double-click the reference Basket label to display some basket details:

•

Basket currency

•

Fixing type – The only supported Fixing type in the case of Basket underlying is CLOSE. You can set the fixing type for the individual underlyings in the Basket Components Window.

•

Corporate name

Basket Initial Notional

Basket notional based on the basket components.

You can double-click the Basket Initial Notional label to view some basket details:

•

Initial basket price

•

Divisor

•

Number of units

•

Quote type

•

Currency

Basket Components

Basket Components Details

You can select the fixing type, set the initial price, set percentage of performance paid or received, and set the retrocession rate for each component.

–

Number Of Units: The quantity of the equity basket swap that is traded. This number is constant and does not change during trade life unless there is partial termination or notional increase.

–

Basket Price:

Basket Price = (∑_(i=1)^n^th〖Shares_i×Price_i 〗 ×FX_i ) / Divisor

Where

Shares_i = The weighting of an equity issue within the Basket

Price_i = The current price of each equity share

FX_i = The currency adjustment (for any equities quoted in a currency other than the Basket currency)

The basket notional is defined as:

Basket Notional = (∑_(i=1)^n^th〖Shares_i×Price_i 〗 ×FX_i )

–

Divisor: A fixed basket-level constant.

–

Fixing Type: Fixing types are defined in the Equity Definition window. If not selected, the default is CLOSE, indicating that the fixing is done using the spot quote.

See Equity Definition for details.

You can click Basket Info to bring up the Basket Definition window - Help is available from that window.

Equity Leg Details

Definition

Fields

Description

Direction

Direction of the leg from the book’s perspective. Click the field to select either Pay or Receive.

Start Date

End Date

Enter the start and end dates.

You can double-click the Start Date and End Date labels to specify fixing start and end dates.

Underlying

Select the underlying: equity or equity index. You can also type in the underlying's name.

You can double-click the Underlying label to display some underlying details:

•

Default security code used for searching the underlying (it is retrieved from the User Defaults).

•

Underlying currency.

•

Fixing Type – Select an equity reset as needed. Equity resets are defined in the Equity Definition or Equity Index Definition. If not selected, the default is CLOSE, indicating that the fixing is done using the spot quote.

You can view details about equity resets in the Resets panel.

See Resets Details for more information.

•

Corporate name.

Initial Quantity

Enter the initial number of shares that are exchanged.

Initial Price

Enter the initial price. This price will be used to calculate the first payoff.

You can double-click the Initial Quantity label to view the quote type and currency of the initial price.

Quote Type

The type of quote is displayed.

Currency

The asset's reference currency.

Spot (Current Level)

Displays the current market price if any (current quote retrieved from the quote set).

You can double-click the Spot label to display the quote type of the market price.

Swap Settlement Currency

Select the settlement currency.

If the settlement currency is different from the underlying currency, you can select the FX Conversion Method. The choices are Quanto / Compo and Local as defined below.

Quanto

Quanto corresponds to current behavior when “Is Fixed FX” is checked. The following fields will be available: Fixed Rate, Initial Price (Settle Currency), Initial Notional.

The system displays the initial price / notional in settlement currency.

Compo

Compo corresponds to current behavior when “Is Fixed FX” is unchecked. The following fields will be available: Initial FX Rate, FX Reset, FX Reset Date Lag, Initial Price (Settle Currency), Initial Notional.

When the FX Conversion method is Compo, Only Performance flow “FX Reset Date” is derived from FX Reset Date Lag.

FX Rate Definitions are created using Calypso Navigator > Configuration > Foreign Exchange > FX Rate Definitions.

The system displays the initial price / notional in settlement currency.

Local

The following fields will be available: FX Reset and FX Reset Date Lag.

The system displays the initial price / notional in underlying currency. In the case of Local FX conversion method, both Performance and Funding flow FX Reset Dates are derived from FX Reset Date Lag.

Ⓘ [Notes: You can view settlement currency details in the cashflows by adding the following columns: Pay Start Price, Pay End Price, Pay Proj. Start Price, Pay Proj. End Price]

FX Reset Date Lag

FX Reset Fixing will be used to derive the FX Reset Date on Performance and Funding flow. The default value of FX Reset Fixing is set to CashflowPaymentEndDate.

CashflowPaymentEndDate	To apply FX Reset Date Lag on payment end date.
CashflowPaymentDate	To apply FX Reset Date Lag on payment date.

Performance – Only applies to TotalReturn and PriceReturn swaps.

Fields

Description

Price Change %

Enter the percentage of performance that the equity leg receives or pays.

You can double-click the Price Change label to define limits and a spread factor as applicable.

Select the type of limit from the Floater field.

–

None: No limit.

–

Cap: Enter a maximum performance in the Cap field, in percentage.

–

Floor: Enter a minimum performance in the Floor field, in percentage.

–

Collar: Enter a maximum and minimum performance in the Cap and Floor fields, in percentage.

Check Spread Factor to define a spread. Then enter the spread and select the daycount.

PRICE_CHANGE = Quantity * Spread Factor * Price Change (%) * (End Price * End FX – Start Price * Start FX) + Spread Factor * Quantity * Start Price * Start FX

Performance Schedule

Select the performance payoff schedule.

•

AT_MATURITY: The final payoff occurs on the end date.

•

CUSTOM_SCHEDULE: Enter the fields below to specify the payoff frequency.

Select a payoff frequency, a roll day for weekly and monthly frequencies, stub rule if any, and period rule.

The period rule can be ADJUSTED or UNADJUSTED to determine if the end date of a payoff period is adjusted or not when it falls on a non-business day (applicable with BUS lag payment), or select FRN or MAT_UNADJUSTED.

•

DATE_RULE: Select a date rule for generating the payoff schedule.

The fixing date lag defaults to zero, and the fixing calendar defaults to the holiday calendar of the exchange for the stock/index.

You can specify a different fixing lag as needed if the Date Calculation Method is not "Fixing -> Payment Date".

Shortcut – You can enter for example 2b to specify 2 business days.

Under fixing to payment date calculation method, cashflows generated on equity leg based on stub rule selection would drive the cashflow generation of funding leg. Under the independent Date Calculation method, stub rules from equity leg and funding leg will be independently used to generate cashflow periods for equity and funding legs.

Payment Date Lag

The payment lag defaults to the spot days of the reference stock/index: number of days between the payoff date and the actual payment date.

You can specify a different payment lag as needed if the Date Calculation Method is not "Payment -> Fixing Date".

The holiday calendar defaults to the calendar specified for the payment currency in the currency definition.

Payment Holiday calendar will be used for period generation and Settle Holiday calendar will be used for payment date calculation.

Shortcut – You can enter for example 2b to specify 2 business days.

Apply Roll Lag on Cmp Cashflows

When Apply Roll Lag on Cmp Cashflows checkbox will be checked, lag will be applied on the compounded cashflow dates calculated based on Roll On Day and Roll on Day Lag (derived from payment date lag on equity leg) field to get desired / adjusted dates.

Dividend – Only applies to TotalReturn and Dividend swaps.

Fields

Description

Schedule

Select the payment schedule associated with the equity:

•

NONE – No dividend payment.

•

AT_MATURITY – The dividend, if any, will be paid / received on the end date.

•

UPON_RECEIPT – The dividend, if any, will be paid / received on the dividend date.

You can double-click the 0 Bus label in the Date Lag field to set a payment lag between the dividend date and the payment date.

•

PERF_SCHEDULE – Dividend will be recognized upon recognition, i.e. in the period corresponding to the ex-div date of the dividend. The dividend, if any, follows the performance payoff schedule. If Dividend Pmt Date is after the Trade End Date, Dividend Pmt Date in the cashflow will be the same as Trade End Date.

•

ASIAN_SCHEDULE - Dividend ownership relies on Ex-Div Date included in the period: when Trade Start Date < Ex-Div date, dividend is generated and when Trade Start date > Ex-div date, dividend is not generated.

For the last flow of the schedule, dividend ownership is also driven by ex-div date: divPay date > startDate, divPay <= end date.

•

FUNDING_SCHEDULE - The payment date of the dividend flow is the first funding payment date on or after the dividend date.

Dividend Ownership

Does not apply to schedule NONE or ASIAN_SCHEDULE.

You can select one of the following options:

•

Second Period - It relies on dividend ex-div date and it means each period from, but excluding, one fixing date to, and including, the next fixing date, except that the initial dividend period will commence on, but exclude, the trade date and the final dividend period will end on, and include, the final fixing date.

•

First Period - It relies on dividend record date included in period: record date >= funding leg effective date, record date < funding leg termination date.

Dividend Currency

Dividend currency of the underlying.

Dividend Settlement Currency

Select the dividend settlement currency.

If the dividend settlement currency is different from the dividend currency, you can set the initial FX rate in the field Initial FX Rate.

You can then specify if the FX rate is fixed or not. If it is not fixed, you can select the FX Rate Definition that will be used to fix the FX rates.

FX Rate Definitions are created using Calypso Navigator > Configuration > Foreign Exchange > FX Rate Definitions.

FX Reset Fixing:

Dividend Record Date - In this case, the dividend record date will be used to derive the FX Reset date.

Dividend Payment Date - In this case, the original dividend payment date will be used to derive the FX Reset date.

Cashflow Payment End Date - In this case, the original cashflow payment end date will be used to derive the FX Reset date.

Cashflow Payment Date - In this case, the original cashflow payment date will be used to derive the FX Reset date.

Retrocession Rate (%)

Enter the percentage of dividend to be received or paid.

Tax Refund

Check this checkbox to indicate a refund for the taxes attached to the dividend.

This is for information purposes only. This information is available in the Trade Browser. The system does not use this information to generate any cashflows or fees.

Funding Leg Details (Interest Rate)

Definition

Fields	Description
Direction	Direction: Pay or Receive. It is set based on the other leg's direction.
Effective Date	Effective date. It is set based on the trade's start date.
Termination Date	Termination date. It is set based on the trade's end date. You can double-click the Termination Date label to display the duration of the trade as a tenor, and the remaining days as of the valuation date.
Initial Notional	Initial trade amount in settlement currency. The amortization type is set by the system. Initial Notional Currency field is non-editable in Equity Linked Swap trade and is populated from the underlying security currency.
Currency	Settlement currency.

Funding Rate

Fields

Description

Leg Type

Select Fixed or Float.

Fixed Rate %

For a fixed leg, enter the fixed rate.

You can click to define a fixed rate schedule.

Rate Index

For a floating leg, select the rate index: currency, reference index, tenor, and source.

You can also set the following parameters:

•

Index Factor

•

Spread in %. You can click

to define a spread schedule. Spread changing intra reset periods is not currently supported.

•

Reset Lag - Number of day, bus / cal, holidays, date roll

Use Observation Shift Period - When checked, it includes an Observation Shift that allows shifting the whole Sample Period in addition to the Reset Dates, such that the weights of any given daily fixing remains the same.

•

Reset Timing

•

First Reset in %

•

RoundingMethod - Rounding method and number of decimals.

See Capturing Swap Trades for details on these interest rate parameters.

Compounding

Check Compounding to enable compounding and specify the following fields as needed.

Frequency - Select the compounding frequency. For WK/BIWK/LUN, you can select Original or Regular. Difference between Original and Regular (Example for a 3M swap paying MONTHLY compounding WEEKLY):

•

Original splits the 90 days into periods of 7 days and puts the remaining as STUB.

•

Regular splits the 90 days into 3 periods of 30 days each, and then splits the 30 day periods into periods of 7 days thus leaving stubs on each coupon period.

Cutoff Lag - Only available for DLY frequency. You can enter a number of days for the cutoff lag, bus / cal days and holidays.

Sample Timing - Only available for DLY frequency. Select BEG_PER / END_PER.

Method - Select the compounding method:

•

Flat - Flat compounding - The spread is added after the compounding is computed if any. Current period interest is calculated using floating rate plus spread. But compound interest is calculated using floating rate only (and the spread is not added).

•

Spread - The interest compounds at the rate value plus spread. Enter the Spread in the Compounding Spread field.

•

SimpleSpr - This involves compounding the Floating Rate but treating the spread as simple interest. In other words, the floating rate interest is earned at the end of a period but not the spread (only the floating rate is added back into the principal). The spread is then calculated on the principal for the entire calculation period without compounding.

•

NoCmp - A cashflow is created at the compounding period without actually compounding the interest. The daily rate resets for the floating rate are used to calculate the simple interest everyday and summed to find the total interest for the period.

Diff. Reset Date - Check to generate the reset dates based on the coupon frequency. It uses the index tenor otherwise.

Multiplicative Spread - Check "Multiplicative Spread" so that the spread over the rate index is multiplicative rather than additive.

Averaging Reset

Check Averaging Reset to enable averaging reset and specify the following fields as needed.

Averaging Method - Select the averaging method:

•

Cutoff Adj. (Only applies to Daily reset) - Calculates weighting up to cutoff date. The cutoff date is set as a number of days from the last sample period’s end date in Cutoff Days.

•

Cutoff Weekly (Only applies to weekly reset) - If you specify a reset cutoff, the last sample period will be "end date – reset cutoff". Set the cutoff lag in Cutoff Days.

•

Equal - Resets within the sampling period are equally weighted. You can specify a cutoff lag as needed to freeze the daily fixings for the remainder of the period.

•

Simple - The reset rate is calculated as the mean rate within the sampling period. You can specify a cutoff lag as needed to freeze the daily fixings for the remainder of the period.

•

Weighted - Resets are weighted according to the number of days for which they apply. For example, if a reset occurs on a Monday, the weight is 1 day; if it occurs on a Friday, the weight is 3 days (Friday, Saturday and Sunday). You can specify a cutoff lag as needed to freeze the daily fixings for the remainder of the period.

Frequency - Select the reset frequency to sample resets at a frequency different from the coupon frequency. Otherwise, the resets are sampled at the coupon frequency.

For Cutoff Days, you can enter the number of days, select bus / cal and the holidays.

Averaging Period Rule - Select the period rule:

•

Match - Rates are sampled over the entire averaging period.

•

Custom - Rates are sampled over a user-defined period. Define the number of days of the sampling period in Start Offset.

Different Reset Dates per Coupon

Check to generate the reset dates based on the coupon frequency. It uses the index tenor otherwise.

DayCount

Specify the day-count convention.

Daycount defaults to the day count of the Rate Index.

See Calypso Navigator > Help > Day-Count Conventions for descriptions of the day-count conventions.

Frequency

The payment frequency and stub rule are set based on the selected performance schedule.

Roll On Day

Roll On Day to be set by user to generate desired compounded cashflows dates.

Coupon Schedule

The coupon schedule is set based on the selected performance schedule.

Stub Rule

The stub rule is set based on the selected performance schedule.

Period Rule

The period rule is set based on the selected performance schedule.

Payment Date Lag

The payment date lag is set based on the selected performance schedule.

2. Cashflows Details

2.1 Performance Cashflows

Performance cashflows have the type PRICE_CHANGE. The columns calculated for performance cashflows are described below.

Columns	Description
Start Quantity End Quantity	Start Quantity and End Quantity are identical for the ELS equity leg.
Pmt Begin Pmt End	Start and End period. Usually End Date corresponds to the payment date and matches the Start Date of the following period.
Fixing Date	The date when a price fixing has occurred.
Start Price End Price	The Start Price and End Price correspond to the asset price observed to calculate the performance on asset. By definition Start Price corresponds to the End Price of the previous period.
Start FX Rate End FX Rate	If the reference currency does not match the pay currency, then the Start Price and End Price will be converted into the pay settlement currency using the FX rates available on the Start Date and End Date. The performance amount will be calculated as: Amount = Quantity * (endPriceEndFXRate - startPriceStartFXRate) * Performance%
Pay Start Price Pay End Price	The start price in the pay currency = Start Price * Start FX Rate. The end price in the pay currency = End Price * End FX Rate.
Amount	The payoff is calculated according to the ELS definition: Simple Payoff Amount = Quantity * (endPrice - startPrice) * Performance% Cap: If Perf > CapPerf then EndPrice = (startPrice* capPerf) + startPrice Floor: If Perf < FloorPerf then EndPrice = (startPrice * floorPerf) + startPrice RangeFloater: Cap and Floor cases mixed. Ⓘ [Note: if the equity currency does not match the ELS currency, Calypso converts the Start Price and End Price into the ELS currency using the Start FX Rate and the End FX Rate]

2.2 Dividend Cashflows

Dividend cashflows have the type DIVIDEND.

When there is FX translation and:

The FX rate is explicitly specified on the trade (flag “Is Fixed FX” checked, FX rate specified in “Initial FX Rate” field) – The proceeds will be known on the "ex-date". There will be a known payment. The Start FX Rate and any projected values are not required. The End FX Rate should equal the value on the trade.

There is an FX Reset – The start FX Rate is not required. The amount of the flow is known on the "ex-date". The end FX Rate be calculated by the pricer when the valuation date < known date.

If the equity swap cashflows are customized, you can display the dividends added to the underlying equity product provided the domain "Equity.customCFDividend" contains the value EquityLinkedSwap.

The columns calculated for dividend cashflows are described below.

Columns	Description
Proj Amt Interest Amt	Projected dividend amount paid or received.
Div Unit Amount	The dividend unit amount is based on the projected dividend of the dividend curve associated with the trades. Important Note – In order to generate projected dividends, the dividend curve associated with the trade must be a discrete dividend curve.
Div Qty	Number of shares negotiated at transaction level.
Div Retro Rate	Retrocession Rate negotiated at transaction level. Final Dividend Amount adjusted by this coefficient.
Div Tax Refund	Not supported.
Div Ex-Date	Projected dividend ex-date based on the dividend rule associated with the trade.
Div Record Date	Projected dividend date based on the dividend curve associate with the trade.
Div Ratio	100%
Pmt Date	Payment date according to the dividend rule associated with the trade.

2.3 Interest Rate Cashflows

Interest rate cashflows have the type INTEREST.

Compared to a standard interest rate swap leg, the ELS notional automatically adjusts if you select Adjust Funding Notional = On Pay Date or On Fixing Date.

According to the number of equities, initial price, and ELS settlement currency, Calypso calculates the initial notional as:

InitialNotional = StartPrice * Quantity * StartFXRate

In this case, at each price fixing, Calypso recalculates the next notional using the new price fixing (the start price of the next period).

3. Processing Forward Starting Trades

The initial price and quantity of forward starting trades is only known on the trade start date.

You need to use the scheduled task UPDATE_ELS_FORW_START to update the initial price and quantity.

You can select the following attributes:

•

Update only empty initial prices – true/false. If true: the trade field Initial Price will only be modified with a new value if it is empty. If false: it will be modified with a new value even if it already has a value. This will serve for corrections (for example the quote was incorrect and the scheduled task needs to be run again to correct the trades values).

•

Update only empty FX rates – true/false. If true: the trade field Initial FX Rate will only be modified with a new value if it is empty. If false: it will be modified with a new value even if it already has a value.

4. Resets Details

You can select the Resets panel to display Resets details for the various legs.

You can select an equity reset from the Reset Name field. The fixing quote should be set for the quote name in the form "EquityReset.<equity name>.<reset name>". If you do not select an equity reset, CLOSE is selected by default. The fixing quote is the spot quote in that case.

You can also select "Specific Reset" and enter a manual fixing quote in the Value field.

Equity resets are defined in the Equity Definition or Equity Index Definition.