Types of fixed income security

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The following table shows how to model specific security types in FIA, using the systems's building blocks.

In many cases there is more than one way to set up a security, so these recommendations need not be taken as definitive.

Please note that this page is continually being revised and amended. If you need advice on how to model a particular security type that is not shown here, please contact Flametree.

Contents

Notes

Where a security's suggested type is PERTURBATIONAL, its pricing function should be left blank.

A

Security type Function Notes
Agency bond FT_BOND_ZERO_CURVE

FT_BOND_YTM

Perturbational security

Treat as vanilla coupon-paying bond
Adjustable rate mortgage (ARM) Perturbational security Cashflows may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
Amortizing bond FT_SINKER_ZERO_CURVE Amortizing bonds may have repayment rates set to zero
Amortizing cap
Amortizing swap
Annuity indexed bond
Asset-backed security (ABS) FT_SINKER_ZERO_CURVE
Asset swap
Asset swapped convertible option transaction (ASCOT)
AU/NZ capital indexed bond
Auto callable note

B

Security type Treatment Notes
Bank loan Sinking security
Barrier cap
Barrier floor
Bank bill FT_BILL
Basis swap PORTFOLIO with two FT_FRN_ZERO_CURVE
Bill future Bill future
Bond FT_BOND_ZERO_CURVE

FT_BOND_YTM

Perturbational security

Bond fund PORTFOLIO Portfolio is made up of underlying assets
Bond future Bond future
Bond future option Option Return can be assigned to 'Option' bucket
Bond option Option Return can be assigned to 'Option' bucket
Brazilian bond FT_BOND_ZERO_CURVE

FT_BOND_YTM

Perturbational security

C

Security type Treatment Notes
Cap
Cash FT_CASH

FT_ZERO_INTEREST_CASH

Depending on the type of cash held, a cash holding may or may not generate interest. Cash deposits and margin equity typically generate interest, while futures offsets does not.
Cash flow stream
Capital indexed bond Inflation-linked bond Model as a bond where cash flows are discounted off the real yield curve, plus a inflation carry return
Cash interest accrual FT_ZERO_INTEREST_CASH
Catastrophe bond FT_ZERO_INTEREST_CASH
CDS CDS
CDS option
CDS index
Certificate of deposit (CD) Model as a bond with coupon equal to final payment and a zero coupon frequency
CFD
Cliquet option
CMBS Perturbational security The cashflows of a CMBS may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
CMO Perturbational security Cashflows may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
Collar
Commercial paper BILL
Commodity Future Zero interest cash
Commodity Index Future FT_EQUITY No interest rate exposure assumed
Contract for Difference (CFD) FT_EQUITY No interest rate exposure assumed
Convertible Bond BOND/EQUITY Use effective date feature to convert between two types
Corporate bond FT_BOND_ZERO_CURVE

FT_BOND_YTM

Perturbational security

Coupon deferrable bond FT_BOND_ZERO_CURVE

FT_BOND_YTM

Perturbational security

Effective date feature may be used to model varying coupons
Credit Default Swap CDS Return is assigned to CDS residual bucket
Credit Default Swaption CDS Return is assigned to CDS residual bucket
Currency Future FORWARD
CDO (synthetic)
CMBS
Cross-currency swap

D

Security type Treatment Notes
Debenture BOND/FRN
Deliverable swap future
Double strike cap
Double strike floor
Drop-in scenario instrument
Dual currency deposit
Dual-indexed floater FRN

E

Security type Treatment Notes
Emerging market bond BOND or EQUITY If no reference yield curve data is available, or if an EM bond trades like an equity, a Brinson-style analysis may be preferred
Equity
Equity accumulator
Equity average rate option
Equity basket option
Equity correlation swap
Equity double barrier option
Equity future
Equity future option
Equity linked note
Equity rebate barrier option
Equity single barrier option
Equity ADR/GDR EQUITY
Equity Index EQUITY
Equity Index Future EQUITY
Equity Index Option OPTION
Equity Index Option-OTC OPTION
Equity Option OPTION
Equity Option-OTC OPTION
Equity Ordinary Share OPTION
Equity Preferred Share EQUITY
Equity Swap PORTFOLIO with one EQUITY and one FRN asset
Equity variance swap

F

Security type Treatment Notes
Fixed Bond BOND
Fixed indexed annuity BOND or INFLATION_LINKED Model as a bond where cash flows are discounted off the real yield curve, or as an indexed bond with given CPI rates
Floating Rate Note FRN Use effective date feature to update coupon
Forward FX FORWARD
FRA CASH Can be modelled in more detail
Fund PORTFOLIO
FX option (all types) OPTION Return may be assigned to 'Option' instead of 'Residual'
FX spot CASH
FX Swap PORTFOLIO with one CASH and one FORWARD asset
F FX forward
FX future
FX future option
FX digital option
FX forward volatility agreement
FX option
FX correlation swap
FX variance/volatility swap
FX average rate option
FX double barrier option
FX rebate barrier option
FX single barrier option
Flip-flop bond

G

Security type Treatment Notes
Generic inflation indexed
Generic barrier option

I

Security type Treatment Notes
Inflation Linked Bond INFLATION_LINKED
Inflation Swap PORTFOLIO with one INFLATION_LINKED and one BOND/FRN asset
Interest Rate Future BILL_FUTURE/BOND_FUTURE
Interest Rate Future Option OPTION
Interest rate swap PORTFOLIO with one BOND and one FRN asset
Inverse FRN FRN
Interest rate swap option OPTION
Islamic bond EQUITY
Inflation cap
Inflation floor
Inflation indexed bond
Inflation indexed liability
Inflation indexed swap
Inflation swap
Interest rate digital option
Interest rate future
Interest rate future option
Interest rate spread option

L

Security type Treatment Notes
Leveraged lease CASH
Loan CASH Interest on loan may be set using cash rate

M

Security type Treatment Notes
Mandatory convertible bond
Money market deposit
Mutual fund
MBS SINKER
Mortality bond EQUITY
Multi-currency Interest Rate Swap PORTFOLIO with two BOND assets, representing each currency leg
Muni BOND Munis often have extensive optionality features, hence residual return may be assigned to a global 'Option' bucket or to muni-specific optionality returns

O

Security type Treatment Notes
Overnight Index Average Swap EQUITY
Overnight Indexed swap EQUITY

P

Security type Treatment Notes
Pass-through Perturbational security Cashflows may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
Payment-in-kind (PIK) loan CASH
Perpetual bond BOND Modelled by setting maturity to, eg, 100 years in future
Prepay FRN FRN
Promissory note BILL


R

Security type Treatment Notes
Range accrual note
Reverse convertible

S

Security type Treatment Notes
Stepped FRN FRN
Step-up bond BOND
Step-up recovery FRN FRN
Straddle
Securitized products

T

Security type Treatment Notes
TBA Perturbational security Cashflows may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
TIPS BOND or INFLATION_LINKED Model as a bond where cash flows are discounted off the real yield curve, or as an indexed bond with given CPI rates
Total Return Swap PORTFOLIO Portfolio is made up of underlying assets
Treasury BOND
Treasury bill (TBILL) BILL
Treasury lock
Treasury note BOND

U

Security type Treatment Notes
UK inflation-linked gilt CMO
US agency MBS
US non-agency MBS

V

Security type Treatment Notes
Vanilla FRN FRN
Variable rate FRN FRN

W

Security type Treatment Notes
Warrant CASH

Y

Security type Treatment Notes
Year-on-year inflation swap

Z

Security type Treatment Notes
Zero-coupon bond
Zero-coupon swap PORTFOLIO with one FRN and one BILL
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