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GLOBUS USER GUIDE
FUTURE RATE AGREEMENTS
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CHAPTER 12
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TABLE OF CONTENTS
12
FUTURE RATE AGREEMENTS ......................................................................12-1

12.1
Introduction .......................................................................................................................12-1
12.2
FRA.PARAMETER ..........................................................................................................12-2
12.2.1 Future Rate Agreement Types ........................................................................................12-2
12.2.2 General processing information......................................................................................12-3
12.2.3 Accounting information..................................................................................................12-3
12.3
Inputting a FRA.................................................................................................................12-4
12.3.1 Basic Information ...........................................................................................................12-4
12.3.2 Additional Information ...................................................................................................12-6
12.3.3 Related Deals..................................................................................................................12-6
12.4
FRA positions.....................................................................................................................12-7
12.4.1 Position Definition..........................................................................................................12-7
12.4.2 Information held .............................................................................................................12-8
12.5
FRAs and Limits................................................................................................................12-9
12.6
FRA Position Management Interface ............................................................................12-10
12.6.1 Cash-Flow/Liquidity.....................................................................................................12-10
12.6.2 Interest Gap ..................................................................................................................12-10
12.6.3 FX Position...................................................................................................................12-10
12.7
FRA Accounting ..............................................................................................................12-11
12.7.1 Specific rules for Trade Deals ......................................................................................12-11
12.7.2 General FRA rules ........................................................................................................12-12
12.7.3 Accounting entries on deal date - all contracts .............................................................12-13
12.7.4 Accounting entries from trade date to rate fixing .........................................................12-13
12.7.4.1
Open trade contracts............................................................................................12-13
12.7.4.2
Closed trade contracts .........................................................................................12-14
12.7.5 Rate fixing ....................................................................................................................12-15
12.7.6 Accounting entries on settlement date - trade contracts ...............................................12-16
12.7.7 Accounting entries on settlement date - hedge contracts ..............................................12-17
12.7.8 Accounting entries on late settlement date - trade contracts.........................................12-18
12.7.9 Accounting entries on late settlement date hedge contracts..........................................12-19
12.8
FRA Reports ....................................................................................................................12-20
12.9
FRA calculations..............................................................................................................12-21
12.9.1 Future Rate Calculation ................................................................................................12-21
12.9.2 FRA Valuation..............................................................................................................12-24
12.9.3 Calculation of Settlement Amount ...............................................................................12-26
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12 FUTURE RATE AGREEMENTS

12.1 Introduction
The Future Rate Agreement module (FRA) supports processing for both Hedging and Trading
purposes. The module is fully integrated with GLOBUS facilities such as Limits and Position
management. In addition, Trading FRAs can be monitored via separate FRA positions.
Accounting in the FRA module is flexible; the user can exercise a level of control over FRA
processing and Accounting rules.
Reports included with the module highlight transactions which remain unconfirmed, or due
for rate fixing.
It is useful to make clear the definitions used in this document for the following:
HEDGE
An FRA.DEAL booked by the bank to lock in a profit (or minimise a loss) to offset a Loan or
Deposit contract on the banks books.
TRADE
A speculative deal which is booked and usually offset against an opposite contract which
closes the first deal.
FRA Purchases:
PROFIT
Where the settlement rate is HIGHER than the FRA.DEAL contract rate
LOSS
Where the settlement rate is LOWER than the FRA.DEAL contract rate
FRA Sales:
PROFIT
Where the settlement rate is LOWER than the FRA.DEAL contract rate
LOSS
Where the settlement rate is HIGHER than the FRA.DEAL contract rate
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12.2 FRA.PARAMETER
Basic information for FRA processing is defined in the application FRA.PARAMETER. Each
COMPANY will have its own FRA.PARAMETER record; this allows FRA processing to be
specific to each business environment.
12.2.1 Future Rate Agreement Types

All FRAs must be classified as either Trade or Hedge on input. It is not possible to change the
classification of a FRA. If a FRA is booked incorrectly, it must be reversed and re-input.
Trading and Hedging FRAs are processed differently by GLOBUS. Trading FRAs are
included in FRA.POSITIONS and these positions are revalued regularly according to the rules
specified in FRA.PARAMETER. This profit/loss is booked as specified in FRA.PARAMETER.
Hedging FRAs do not appear in FRA positions. They only make Profit or Loss at settlement,
which is then accrued over the life of the contract.
FRA.PARAMETER contains Accounting and Processing rules: some of these are relevant to
all FRA contracts, but others are specific to Hedges or Trades.
Figure 12-1 FRA.PARAMETER - Defining major processing

characteristics
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Figure 12-2 FRA.PARAMETER - second screen
12.2.2 General processing information
Variance allowed for prices and interest

Periodic Interest rate to measure interest variance against
Whether confirmations are matched by Broker & Counterparty
Number of days in advance for rate fixing & report production
Settlement formula used for each currency
12.2.3 Accounting information

All Contracts
Category codes for Brokerage expense
First/last day accrual
Trading FRAs
Revaluation rates for Long/short positions & periods
Category codes & rules for booking realised & unrealised P&L from revaluing FRA
positions
Hedging FRAs
Transaction Category codes
Category codes for booking settlement P&L
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12.3 Inputting a FRA

FRA transactions are input via the application FRA.DEAL.
12.3.1 Basic Information

Many of the details required to input an FRA.DEAL are similar to those for a Money Market
deal:
Counterparty
Principal (notional)
Currency
Rate
Commission
Brokerage
Settlement details, etc
The field which is essential to FRA input is the FRA.TYPE. This specifies whether the deal is a
TRADE or a HEDGE. FRA.DEAL will not accept input of a transaction unless the FRA.TYPE is
specified, as this tells the module how to process the accounting for the deal. The following
screens show the input fields for a trade deal:
Figure 12-3 FRA.DEAL - opening a trading position
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Figure 12-4 FRA.DEAL - 2nd screen
Figure 12-5 FRA.DEAL - 3rd screen
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12.3.2 Additional Information

Additional information for FRA contracts is needed because there is a second stage of input on Rate fixing date the prevailing rate should be input so the settlement amount can be
calculated. Rate fixing date is taken to be the deal start date. The following table summarises
the main dates for FRA events:
Deal event
Trade date
Spot date
Start date
Rate fixing date
Maturity date
LCY
Today or earlier
Trade date
Spot date + period (1)
Start date
Start date + period (2)
FCY, if different
Trade date + 2
Start date - 2
Table 12-1 Main event dates
A number of rates are input on a FRA. Key rates are the INTEREST.RATE - the rate agreed
when the FRA is input and the SETTLEMENT.RATE the prevailing rate on rate fixing date. The
difference between these two rates determines the settlement amount. In addition, the
REFERENCE.RATE and REFERENCE.PRICE are used to for tolerance checking.
12.3.3 Related Deals

Both Hedging and Trading FRA contracts may have related deals.
Hedge transactions must, by definition, be hedging another deal. You can track this by
entering the deal id in HEDGE.TRANS.ID.
Trade FRAs may be closing an existing FRA position for profit taking. The
POSN.OPEN.CLOSE flag indicates whether a trade opens or closes a position. The
CLOSED.FRA.IDS shows which FRAs have been closed out.
Finally, a FRA may be replacing an earlier deal which has been reversed and re-input. For
instance, if a trade has been erroneously input as a hedge, it must be backed out and re-input
to make sure that all the accounting entries made so far are removed. The field
REPL.DEAL.REF can be used to track the original deal reference.
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12.4 FRA positions

12.4.1 Position Definition
The FRA module automatically updates Position Management, but in addition a separate FRA
position file is maintained. FRA.POSITION contains position information about all Trade
contracts. (Hedge transactions usually remove a position or risk for the bank, and so are not
included in this file.)
FRA positions are held by currency, dealer desk and period. Each position records
information about the deals which make up the position, in addition to combined and profit
data.
For an explanation of how positions and profit are calculated, see the section FRA Formulae
later in this chapter.
Figure 12-6 FRA.POSITION - for USD, Dealer desk 01, period Feb 8th - April 7th
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12.4.2 Information held

For each FRA position you can see:
Current position, position at start of business today, cost of position

Profit realised today from FRA closures. Closure profit from previous days, and from
backvaluations
Revaluation of total open position
Each position also keeps information about constituent deals. Trades done today are kept
separate from previous business, but the following information is stored for both:
Deal id
Trade date
Principal
FRA rate
Profit, if closed.
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12.5 FRAs and Limits

FRAs are not subject to a centralised exchange regulatory authority or to a centralised
clearing body to act as guarantor. As a result FRAs carry counterparty credit risk; that is there
is a risk that monies due for payment from one party to another will not be forthcoming.
As principal is never exchanged, exposure to credit risk is limited to the actual payments, ie
interest variation. Thus the potential credit risk is dependant upon the volatility of interest
rates. You can monitor this reduced risk by defining a percentage risk on the
LIMIT.REFERENCE file for the FRA products.
Limits apply to both Hedging and Trading FRAs and to both sales and purchases. The
exposure will be liquidated at deal start, rather than deal maturity, as settlement is on deal
start date.
See the Limit section of this User Guide for full details of the LIMIT application.
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12.6 FRA Position Management Interface

The FRA application is fully integrated within the Position Management (PM) facility. All
updates will take place at time of first input after successful validation.
The following rules apply for the interface to the various components of the PM module:
12.6.1 Cash-Flow/Liquidity
For both trade and hedge contracts, from the input of the FRA contract, until the rate fix date
each end of day a projected cash-flow is calculated, using the PERIODIC.INTEREST table,
similar to the Trade contract revaluation process. This figure is passed each day to the cash-flow
enquiry until rate fix date, when the projected figure is replaced by the true value.
On rate fixing day, as determined by the FRA.PARAMETER Table, but which is normally for
foreign currency two days before, and for local currency equal to settlement date, the settlement
amount is calculated, and the resulting profit ("IN") or loss ("OUT") will be included in the cash
flow under the settlement value date.
12.6.2 Interest Gap

Only "hedging" contracts are included and feed the PM module. The REFERENCE.PRICE on the
FRA.DEAL contract is used for the LONG period rate. The SHORT period rate is calculated
according to the standard formula.
12.6.3 FX Position
The standard FX position call is done within the accounting process, whenever entries impact the
foreign exchange position. This will be the case for example on:
Foreign currency charges & commission
Accruals on hedge contracts in foreign currency etc
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12.7 FRA Accounting

This module has been designed to give a high level of flexibility in accounting for FRA
transactions. Many accounting decisions are controlled by the user, by defining the
appropriate values on the FRA.PARAMETER table. For example, this is where you can decide
whether to book unrealised profit, whether to recognise realised profit on trade date or FRA
start date, to make customer charges on trade or start date etc.
FRA.PARAMETER should be set up to reflect your business environment. FRA accounting
must also reflect the results of management decisions: different rules will apply if a contract is
classified as a Hedge or a Trade.
12.7.1 Specific rules for Trade Deals

Entries are raised at the following times:
End of day when closure deals are input, or deals are reversed
Revaluation time
Settlement date
Profit entries can be raised:
Realised profit can either be posted on trade date or deal start date
Unrealised profit can either be posted, or not posted.
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12.7.2 General FRA rules

1. Positions (both total and contract level) are reversed each day and re-posted. Even if the
posting leaves the figures unchanged. This is far easier for audit purposes than
adjustments.
2. At the end of each day, the adjustments to the profit and loss for closed trades are posted.
This P&L is taken as realised Profit or Loss. This adjustment can be split into two todays P&L and an adjustment to yesterdays figure. Each part is processed separately. A
net P&L amount is kept on the FRA.POSITION file. If this is Profit, daily entries are
processed according to Profit accounting rules.
3. The net open position (ie total position rather than deal-by-deal) is also revalued. Any
previous revaluation is reversed, and the new revaluation is posted as unrealised P&L.
4. When rate fixing date is reached, the position P&L entries are reversed out and booked to
the individual deals.
5. Between rate fixing date and settlement (start) date, the P&L for each deal is reversed and
recalculated daily to keep the posted P&L converging to the settlement amount.
6. On settlement date, the deal P&L is again reversed, and the actual settlement amount
posted as realised P&L.
7. When the total realised profit and loss figure changes from a loss to a profit (or vice versa),
then the accounting entries will bring the loss category to zero and raise the profit position
(or vice versa).
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12.7.3 Accounting entries on deal date - all contracts

Recognition of the FRA contract by the creation of a contingent CRF record. This will be
reported as an off-balance sheet item:
Charges/commissions, taxes on commission/charges and brokerage will be booked on Deal
date if so defined on the FRA.PARAMETER table. Otherwise they will be booked on the
settlement date of the FRA contract. The entries will be identical only the timing is different.
Accounting type
DR/CR
Details
CONTINGENT (CRB)
DR
SALE - (Notional Principal)
CR
PURCHASE - (Notional Principal)
DR
P&L - (FRA.PARAMETER)
CR
BROKER - (ACCOUNT.CLASS)
CR
P&L - FT.CHARGES
DR
CUSTOMER A/C - (CONTRACT)
BROKERAGE
CHARGES/COMMISSION
Table 12-2 Deal date accounting
12.7.4 Accounting entries from trade date to rate fixing

12.7.4.1 Open trade contracts
Between deal date and rate fixing date, for trade contracts only, revaluation takes place
determined by the frequency specified in the FRA.PARAMETER, with the resulting profit or
loss optionally booked or not to unrealised profits. Again this is determined by the field
BK.UR.PFT in FRA.PARAMETER input. See the FRA.PARAMETER helptext for a more
detailed explanation of the options on profit/loss booking.
The revaluation is based on the net FRA.POSITION by currency until rate fixing day, from
whence the deals are re-valued individually until settlement day. Each new revaluation will
result in the previous days calculation being reversed, and the updated figure being posted to
the internal asset or liability account.
Accounting type
DR/CR
Details
PROFIT
CR
DR
DR
CR
INTERNAL ASSET A/C - (FRA.PARAMETER)
INTERNAL LIAB A/C - (FRA.PARAMETER)
LOSS
Table 12-3 ACCOUNT for posting Profit
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12.7.4.2 Closed trade contracts
Profit or Loss for Closed contracts is locked in when the closing trade is made. According
to the setting of REAL.PFT.T/S in FRA.PARAMETER this realised Profit can either be taken
on trade date, or on settlement date.
If Profit is to be taken on Trade date, the following additional postings are made on Trade
date;
Accounting type
DR/CR
Details
PROFIT
CR
DR
DR
CR
LOSS
Table 12-4 ACCOUNT for posting Profit
There are no revaluation entries between Trade date and Rate setting date for Closed trades,
as the Profit from the contracts cannot change.
If the Profit is to be taken on Settlement date, the above entries will only be made in the case
of closing out a Loss. If the closure has made a Profit, no entries will be made to reflect this
until settlement date, when the money is actually received from the counterparty.
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12.7.5 Rate fixing

At Rate fixing date, the Profit or Loss for all contracts in the position is known. Up till now,
all P&L postings have been net for the total position. This net Position P&L is reversed out:
Accounting type
DR/CR
Details
PROFIT
DR
CR
CR
DR
LOSS
Table 12-5 Reversing the position postings
and replaced by individual realised P&L postings for each trade:

Accounting type
DR/CR
Details
PROFIT
CR
DR
DR
CR
LOSS
Table 12-6 Postings for each trade
(Unless realised profit is deferred till settlement date, in which case no entries are made for
trades in profit until then.)
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12.7.6 Accounting entries on settlement date - trade contracts

On settlement date the profit or loss entries are generated as appropriate, with the offset to
customer or nostro.
Existing off balance sheet accounting entries (reporting the deal as contingent) are removed
by application of the opposite accounting entries.
Accounting type
DR/CR
Details
PROFIT
CR
DR
CUSTOMER/NOSTRO
-ORLOSS
CONTINGENT (CRB)
DR
CR
CUSTOMER/NOSTRO
CR
DR
Table 12-7 Settlement date accounting - trade contracts
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12.7.7 Accounting entries on settlement date - hedge contracts

The amount to be paid or received by the bank on settlement day will be deferred to an internal
asset or liability account (IPIA/IRIA), and appropriated to profit and loss over the fixed rate
period, (i.e. from settlement to maturity date) on a straight line basis.
Accounting type
DR/CR
Details
PROFIT
CR
* IRIA - (FRA.PARAMETER)
DR
CUSTOMER/NOSTRO
-ORLOSS
CONTINGENT (CRB)
DR
* IPIA - (FRA.PARAMETER )
CR
CUSTOMER/NOSTRO
CR
DR
Table 12-8 Settlement date accounting - hedge contracts
*Daily amortising of Profit or Loss to P&L from Settlement to Maturity Date
Accounting type
DR/CR
Details
PROFIT
DR
* IRIA - (FRA.PARAMETER)
CR
P&L (FRA.PARAMETER)
-ORLOSS
CR
* IPIA - (FRA.PARAMETER)
DR
P&L (FRA.PARAMETER)
Table 12-9 Daily accrual of interest
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12.7.8 Accounting entries on late settlement date - trade contracts

In the event of late rate fixing of trade contracts, entries are booked to P&L as normal, with
the offset to suspense accounts. The handling of the payment or receipt of funds is a manual
activity, after consultation with the counterparty.
Accounting type
DR/CR
Details
PROFIT
CR
DR
* SUSPENSE A/C (ACCOUNT.CLASS)
-OR
LOSS
CONTINGENT (CRB)
DR
CR
CR
DR
Table 12-10 Accounting on late settlement trade contracts
*Manual entry to clear SUSPENSE A/C and Pay or Receive funds
Accounting type
DR/CR
Details
PROFIT
DR
CUSTOMER/NOSTRO
CR
-OR
LOSS
CR
CUSTOMER/NOSTRO
DR
Table 12-11 Manual accounting entries
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12.7.9 Accounting entries on late settlement date hedge contracts

In the event of late rate fixing of hedge contracts, entries are booked to P&L as normal, with
the offset to suspense accounts. The handling of the transfer to an internal asset/liability
account is handled manually.
From the internal account, the profit or loss is dripped to P&L over the life of the contract i.e.
from settlement to maturity date.
Accounting type
DR/CR
Details
PROFIT
CR
IRIA - (FRA.PARAMETER)
DR
*SUSPENSE A/C (ACCOUNT.CLASS)
DR
IPIA - (FRA.PARAMETER)
CR
*SUSPENSE A/C (ACCOUNT.CLASS)
CONTINGENT
CR
(CRB)
DR
LOSS
Table 12-12 Late settled hedge contract accounting
*daily amortising of P&L
Accounting type
DR/CR
Details
PROFIT
DR
IRIA - (FRA.PARAMETER)
CR
CR
IPIA - (FRA.PARAMETER)
DR
LOSS
Table 12-13 Interest accruals
Accounting type
DR/CR
Details
PROFIT
DR
CUSTOMER/NOSTRO
CR
-OR
LOSS
CR
CUSTOMER/NOSTRO
DR
Table 12-14 Manual accounting entries
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12.8 FRA Reports

The following reports are released with this module:
Report
FRA.REVAL
FRA.HEDGE.DEALS
FRA.MTH.ACCRUALS
FRA.RATE.SETTING.REPORT
FRA.OVERDUE.REPORT
OUTSTANDING.FRAS
UNFIXED.FRAS
CUS.UNCONFIRMED.FRAS
BROK.UNCONFIRMED.FRAS
FRA.REALISED.PL.REPORT
Description
FRA positions revalued
List of outstanding hedges
Accruals on hedge deals
FRAs where rate has to be fixed soon (as specified on
FRA.PARAMETER)
FRAs where start date has passed, but rate not fixed
List of all live transactions
FRAs where rate not fixed yet
List of FRAs still to be confirmed by the counterparty
List of FRAs still to be confirmed by the broker
P&L breakdown for each position
Table 12-15 FRA reports
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12.9 FRA calculations

The FRA revaluation involves:
1. Future Rate Calculation; and
2. FRA Valuation.
12.9.1 Future Rate Calculation

The future rate calculation is best illustrated by the diagram below.
R3
R1
Today
Spot
R2
FRA Start
Maturity
Assuming there are two futures contracts on the market with quoted rates R1 and R3,
covering the period from Spot to FRA Start and from Spot to Maturity respectively, the
formula to calculate the forward rate R2 is as follows:
R1 * D1
R2 * ( D3 D1)
R3 * D3
Nominal * 1 +
* 1 +
= Nominal * 1 +
B *100
B *100
B *100
where
R1 = rate for short period (the period between Spot and FRA Start)
D1 = number of days in short period
R3 = rate for long period (the period between Spot and Maturity)
D3 = number of days in long period
B = interest day basis
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Simplifying the above formula gives:
1+
( R2 * ( D3 D1))
R3 * D3
= 1 +
B * 100
B * 100
R1 * D1
1 +
B * 100
R3 * D3
1 + B * 100
B * 100
R2 =
1 *
1 + R1 * D1
D3 D1
B * 100
B * 100 + ( R3 * D3) ( B * 100 + ( R1 * D1)) B * 100

R2 =
* D3 D1
B * 100 + ( R1 * D1)
R2 =
( R3 * D3) ( R1 * D1)
B * 100
*
D3 D1
( B * 100) + ( R1 * D1)
R2 =
( R3 * D3) ( R1 * D1) R1 * D1
+ 1
B * 100
D3 D1
Figure 12-7 FRA future rate calculation formula
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Example
Today is August 8th 1996 (spot date 10th August 1996) and we wish to revalue an existing
contract.
Contract
Purchase USD 250,000,000.00 FRA 1 against 4.
Contract rate =
Start date
=
Maturity date =
9.40
20 Sept 1996
20 Dec 1996
R1
R3
Periodic rate from 10 Aug to 20 Sept

Period rate from 10 Aug to 20 Dec
=
=
=
=
9.40
9.45
These rates are found or, when necessary, interpolated from the PERIODIC.INTEREST rate
table.
D1
D3
=
=
No of days between 10 Aug and 20 Sept

No of days between 10 Aug and 20 Dec
=
=
41 days
132 days
(Note that number of days is always calculated from the spot date)
Substituting in the above formula we find:
(9.45 132) (9.40 41)

132 41
R2 =
9.40 41
+ 1
360 100
(1,247.40) (385.40)
=
862
= 91
91
385.40
+ 1
36000
([0.0105589041] + 1)
= 9.47252747 10105589041
.
R2 = 9.37% to 2dpl
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12.9.2 FRA Valuation

The Profit/Loss of a FRA contract is:
Profit.or.Loss = Nominal *
( Mkt. Rate Deal. Rate) * NDays

B *100
where
Nominal
nominal amount of FRA deal
Mkt.Rate
market rate
Deal.Rate =
rate on FRA deal
NDays
number of days in FRA deal
interest day basis
Since the FRA contract is settled up-front the formula for the present value of the Profit/Loss
is as follows:
Present.Value =
Present.Value =
Profit.or.Loss
Mkt. Rate * NDays
1+
B * 100
Nominal * NDays * ( Mkt. Rate Deal. Rate)
( B * 100) + ( Mkt. Rate * NDays)
Figure 12-8 FRA valuation formula
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Example
Position & Profit calculation: example using above formula
1) Purchase
100M GBP FRA, 3 against 6 at 9%

100M GBP FRA, 3 against 6 at 9.5%
Gives a Position of
200M GBP
2) Then Sell
at 9.25%
Profit
P=
[(9.5 9.25) (91 50,000,000)]

36000 + (9.50 91)
Therefore there is a profit of 0.25 at 50 million for 3 months

3) Then Sell
Profit of 0.35 at 150 million for 3 months, and a new position of Short 50 million at 9.6%.
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12.9.3 Calculation of Settlement Amount

The settlement amount for an existing FRA is calculated using:
S=
( I F ) ( N P)
B 100 + ( I N )
Figure 12-9 Settlement formula
where
I
F
N
P
B
= prevailing rate at rate fixing date, eg LIBOR

= FRA rate (deal rate)
= Number of days in deal
= Principal
= Basis for currency
To settle the contract in the first example, i.e. a purchase of 1 against 4 FRA for 250M USD at
9.4%, when LIBOR is at 9.37%;
S=
(9.37 9.40) (91 250,000,000)

360 100 + (9.37 91)
(0.03) (22,750,000,000)
36000 + (852.67)
= -18,519.69
Ref : FR
July 1999
12-26
Release G10.0
GLOBUS USER GUIDE
Index of Tables & Figures

Table 12-1 Main event dates............................................................................................................................12-6
Table 12-2 Deal date accounting ...................................................................................................................12-13
Table 12-3 ACCOUNT for posting Profit ....................................................................................................12-13
Table 12-4 ACCOUNT for posting Profit ....................................................................................................12-14
Table 12-5 Reversing the position postings ..................................................................................................12-15
Table 12-6 Postings for each trade................................................................................................................12-15
Table 12-7 Settlement date accounting - trade contracts ............................................................................12-16
Table 12-8 Settlement date accounting - hedge contracts ...........................................................................12-17
Table 12-9 Daily accrual of interest ..............................................................................................................12-17
Table 12-10 Accounting on late settlement trade contracts ........................................................................12-18
Table 12-11 Manual accounting entries........................................................................................................12-18
Table 12-12 Late settled hedge contract accounting....................................................................................12-19
Table 12-13 Interest accruals ........................................................................................................................12-19
Table 12-14 Manual accounting entries........................................................................................................12-19
Table 12-15 FRA reports ...............................................................................................................................12-20
Figure 12-1 FRA.PARAMETER - Defining major processing characteristics..........................................12-2
Figure 12-2 FRA.PARAMETER - second screen ..........................................................................................12-3
Figure 12-3 FRA.DEAL - opening a trading position ...................................................................................12-4
Figure 12-4 FRA.DEAL - 2nd screen..............................................................................................................12-5
Figure 12-5 FRA.DEAL - 3rd screen ..............................................................................................................12-5
Figure 12-6 FRA.POSITION - for USD, Dealer desk 01, period Feb 8th - April 7th.................................12-7
Figure 12-7 FRA future rate calculation formula........................................................................................12-22
Figure 12-8 FRA valuation formula..............................................................................................................12-24
Figure 12-9 Settlement formula.....................................................................................................................12-26
Ref : FR
July 1999
12-27
Release G10.0

FR

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GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

FUTURE RATE AGREEMENTS

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

FUTURE RATE AGREEMENTS ......................................................................12-1

FRAs and Limits................................................................................................................12-9

FRA Reports ....................................................................................................................12-20

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12 FUTURE RATE AGREEMENTS

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.2.1 Future Rate Agreement Types

Figure 12-1 FRA.PARAMETER - Defining major processing

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

Figure 12-2 FRA.PARAMETER - second screen

12.2.2 General processing information

Variance allowed for prices and interest

12.2.3 Accounting information

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.3 Inputting a FRA

12.3.1 Basic Information

Figure 12-3 FRA.DEAL - opening a trading position

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

Figure 12-4 FRA.DEAL - 2nd screen

Figure 12-5 FRA.DEAL - 3rd screen

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.3.2 Additional Information

Table 12-1 Main event dates

12.3.3 Related Deals

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.4 FRA positions

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.4.2 Information held

Current position, position at start of business today, cost of position

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.5 FRAs and Limits

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.6 FRA Position Management Interface

12.6.2 Interest Gap

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.7 FRA Accounting

12.7.1 Specific rules for Trade Deals

Profit entries can be raised:

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.7.2 General FRA rules

GLOBUS USER GUIDE

FUTURE RATE AGREEMENTS

12.7.3 Accounting entries on deal date - all contracts

SALE - (Notional Principal)

PURCHASE - (Notional Principal)

CUSTOMER A/C - (CONTRACT)