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Maintaining Reference Interest Rate Types
Transaction DBIIRT
This transaction is used to maintain reference interest rate types.
It is used to define interest rate types used in calculating interest for loans, purchases and discounts, for example. Accordingly, interest rate types need to be maintained together with the definitions of rules for the respective business transactions. Interest rates themselves are maintained separately.
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Reference interest rate type (Reference interest rate types).
Interest Calculation Methods
The method of calculating interest rates required can be selected using values stored in the IRTMIC - Method of Interest Calculation codetable.
An appropriate calculation method must be implemented for each code stored.
These calculations methods can be adapted and extended for each specific project.
The amount (i.e. interest or fee amount) is calculated for a given base amount, rate, number of units, and calculation method.
These values are determined extrinsically to the current calculation.
The number of times the calculation is used is also controlled extrinsically.
Input values for the calculation include:
| Parameter(s) | Interpretation |
|---|---|
| Amount | Base amount for which the fee or interest amount is to be calculated “(negative base amounts are not supported or the absolute value is used)” |
| Rate | Rate - depending on calculation method, this can be in percent, permille or base points |
| Number of units | For most calculation methods this would be the number of days, but can also be the number of months or quarters. For some calculation methods this is also irrelevant (e.g. if the amount is to be calculated only on the basis of the base amount and rate). |
| Calculation method | Code for the actual algorithm/formula to be used |
Implemented calculation methods include:
| Code | Name | Unit | Rate in | Calculation(*) |
|---|---|---|---|---|
| 365 | Floating Rate per year, year = 365 days | day | per year in % | result = (amount * rate / 100) / 365 * units |
| F65 | Fixed Rate per year, year = 365 days | day | per year in % | result = (amount * rate / 100) / 365 * units |
| 360 | Floating Rate per year, year = 360 days | day | per year in % | result = (amount * rate / 100) / 360 * units |
| F60 | Fixed Rate per year, year = 360 days | day | per year in % | result = (amount * rate / 100) / 360 * units |
| BPQ | Base Points per Quarter (each call returns the amount for one quarter) | per call in base points | result = amount * rate / 10000 | |
| BPY | Base Points per Year (each call returns amount for one year) | per call in base points | result = amount * rate / 10000 | |
| BP3 | Base Points per 90 days | day | per 90 days in base points | result = (amount * rate / 10000) / 90 * units |
| B65 | Base Points per year, year = 365 days | day | per year in base points | result = (amount * rate / 10000) / 365 * units |
| B60 | Base Points per year, year = 360 days | day | per year in base points | result = (amount * rate / 10000) / 360 * units |
| DY0 | Simple Discount to Yield, Year = 360 days | day | rate per year in % | $quot = 1 + rate / 100 * units / 360 $NV = amount / $quot result = amount - $NV |
| DY5 D65 | Simple Discount to Yield, Year = 365 days | day | rate per year in % | $quot = 1 + rate / 100 * units / 365 $NV = amount / $quot result = amount - $NV |
| DA0 | Discount to Yield, Compounded Annually, Year = 360 days “(=DY0 for units < 365)” | day | rate per year in % | $CompleteYears = Int( units / 365 ) $RemainingDays = units - $CompleteYears * 365 $quot = 1 + rate / 100 * $RemainingDays / 360 for $yearidx = 1 to $CompleteYears $quot = ( 1 + rate / 100 * 365 / 360 ) * $quot next $yearidx $NV = amount / $quot result = amount - $NV |
| DA5 | Discount to Yield, Compounded Annually, Year = 365 days “(=DY5 for units < 365)” | day | rate per year in % | $CompleteYears = Int( units / 365 ) $RemainingDays = units - $CompleteYears * 365 $quot = 1 + rate / 100 * $RemainingDays / 365 for $yearidx = 1 to $CompleteYears $quot = ( 1 + rate / 100 ) * $quot next $yearidx $NV = amount / $quot result = amount - $NV |
| DFL | Discount rate flat | Unit | rate per unit in % | $quot = 1 + rate / 100 $effrate = rate / $quot $year = amount * $effrate / 100 result = $year * units |
| PRM | Permille | rate in per mille | result = amount * rate / 1000 |
(*) “actual order of calculation steps may differ from formula in order to avoid computational precision problems.”
There is an option to use some other interest calculation method for the surcharge/margin than for the reference rate. If this is required, then the calculation method differing from the interest calculation method of the reference interest rate must be defined in the “Special Method for Margin” field.
In addition, it is possible to define whether the selected reference interest rate can be interpolated. This may be required for variable interest rates, such as a successor of LIBOR, if the financing term falls between two reference interest rates terms and a linear interpolated interest rate is to be calculated. The interest rates and the period of validity for the relevant rate type are saved using the transaction “Maintaining Reference Interest Rates”'.
An example of a linear interpolated reference interest rate, which is used as the base interest rate for the calcuation of the relevant definition of the fee in business transaction:
Reference interest rate 30 days: 1% (validity up to 30 Tage)
Reference interest rate 60 days: 2% (validity 31 - 60 days)
Reference interest rate 90 days: 3% (validity 61 - 90 days)
| Interpolation formula | For a financing term of x = 45 Tagen, the result is | For a financing term of x = 74 Tagen, the result is |
| Y = y0 + (y1-y0) / (x1-x0) * (x - x0) | Y = 1 + (2-1) / (60-30) * (45 -30) Y= 1.5 (linear interpolated reference interest rate) | Y = 2 + (3-2) / (90-60) * (74- 60) Y= 2.46 (linear interpolated reference interest rate) |
Transaction Panels
Interest Rate Type
Datafields
| Datafield | Description |
|---|---|
| Interest Rate Type Code | cf Appendix A, Table IRT field COD |
| Currency | cf Appendix A, Table IRT field CUR |
| Calendar calculation method | cf Appendix A, Table IRT field IRTMCC |
| Interest calculation method | cf Appendix A, Table IRT field IRTMIC |
| Method for Margin | cf Appendix A, Table IRT field IRTMICMAR |
| Interpolated | cf Appendix A, Table IRT field INTPOL |
| Sequence in Rate Entering Tool (0: not in) | cf Appendix A, Table IRT field SEQ |
