Premium Fee Calculator

This document describes the settings of the Premium Calculator window.

When the trade is priced, the premium fee is automatically calculated according to the cashflow schedule. You can modify the premium fee to be a single fee, or to be calculated according to a custom schedule.

The premium fee is a fee of type PREMIUM. Such a fee needs to be defined in the Calypso Navigator under Configuration > Fees, Haircuts, & Margins > Fee Definition.

Once you apply the premium fee to the trade, it is displayed in the Fees panel.

The premium fee can be defined as follows:

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Defining a Premium Fee According to the Cashflow Schedule

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Defining a Single Premium Fee

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Defining a Premium Fee According to a Custom Schedule

1. Defining a Premium Fee According to the Cashflow Schedule

This is the default calculation when the trade is priced.

You can modify the rounding convention from the Rounding field.

You can modify the fee amount as needed.

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Click “Fixed Premium Amount” and check the “Edit Amount” checkbox to modify the fee amount for each fee period.

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Or click “Fixed Premium Percentage” and check the “Edit Amount” checkbox to modify the fee percentage.

Then click Calc to recalculate the fee, and click Apply to save the fees. You can view the generated fees in the Fees panel.

2. Defining a Single Premium Fee

Select “Custom Single” from the Mode field.

Click Percentage to enter the fee as a percentage of the notional, or Amount to enter a fee amount.

Select the rounding convention from the Rounding field, and enter the fee date in the Date field.

Then click Calc to calculate the fee, and click Apply to save the fee. You can view the generated fee in the Fees panel.

3. Defining a Premium Fee According to a Custom Schedule

Select “Custom Schedule” from the Mode field.

Click Percentage to enter the fee as a percentage of the notional, or Amount to enter a fee amount. This is the total amount that will be broken down according to the schedule.

Select the rounding convention from the Rounding field.

Check “Amortize Fee Over Schedule” to assign the total premium by percentage or amount to each period, or uncheck to assign the same amount to each period.

Enter the criteria to define the custom schedule: From and To dates, frequency, payment calendars, date roll convention, day count, payment date, and roll day adjustment.

Fields

Description

Frequency

Select the payment frequency.

Holidays

Click ... to select payment calendars. They are used to determine business days.

END_PER/BEG_PER

Double-click the END_PER label to switch to BEG_PER as needed.

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END_PER if the payment occurs at the end of the payment period.

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BEG_PER if the payment occurs at the beginning of the payment period.

DateRoll

Select the date roll convention to roll the payment dates when they fall on business days. The payment calendar is used to determine business days.

Date roll conventions are described in the Calypso Navigator under Help > Date Roll Conventions.

Daycount

Select the day count convention to determine the number of days in the payment periods.

Daycount conventions are described in the Calypso Navigator under Help > Day-Count Conventions.

R Day

Check the “R Day” checkbox to enter a fixed day of the month to which the date will be rolled. For example, entering “5” forces the payment date to be on the fifth calendar day of the month.

Use Cashflow Schedule

Only applies if the trade has stub periods.

When checked, if your trade has stub periods, all the correct dates will have been generated for the trade. Then you can overlay the settings of frequency, date roll, beg/end, etc. on top of that. Ensure that the frequency is less than or equal to the frequency of the cashflows. This is similar to the way Bermudan exercise dates generation works.

Then click Calc to calculate the fee, and click Apply to save the fees. You can view the generated fees in the Fees panel.