Hierarchy
SAP_BS_FND (Software Component) SAP Business Suite Foundation⤷
CA-FS-MKD (Application Component) Basic Market Data⤷
/BA1/F4_YC (Package) Market Data: Yield Curves
Basic Data
| Data Element | /BA1/F4_DTE_PAR_CALC_METH |
| Short Description | Process for Calculating Par Bond Yields |
Data Type
| Category of Dictionary Type | D | Domain |
| Type of Object Referenced | No Information | |
| Domain / Name of Reference Type | /BA1/F4_PAR_CALC_METH | |
| Data Type | CHAR | Character String |
| Length | 1 | |
| Decimal Places | 0 | |
| Output Length | 1 | |
| Value Table |
Further Characteristics
| Search Help: Name | ||
| Search Help: Parameters | ||
| Parameter ID | ||
| Default Component name | ||
| Change document | ||
| No Input History | ||
| Basic direction is set to LTR | ||
| No BIDI Filtering |
Field Label
| Length | Field Label | |
| Short | 10 | ParBondMth |
| Medium | 15 | Par Bond Method |
| Long | 20 | Par Bond Method |
| Heading | 15 | Par Bond Meth. |
Documentation
Definition
This field determines how par bond yields are calculated from a yield curve. There are two possibilities here:
Linear interest calculation, broken periods at maturity:
If you make this setting, the calculation of par bond yields is based on linear interest calculation in broken interest rate periods and an incomplete final interest rate period.
Example:
Key date: 01/01/2000
Interest rate: 6%
Desired maturity: 07/01/2001
Start of term for 1st period: 01/01/2000
Due date for 1st period: 01/01/2001
Due date for 2nd period: 07/01/2001
On 01/01/2001, the full coupon of 6% is paid. On 07/01/2001 only half is paid because the term of the second interest rate period is half that of the term of the first interest rate period.
The calculation of the par bond yield is based on the assumption that this interest-bearing transaction has a net present value of 100%.
2) Exponential accrued interest, full coupons
In this procedure, a final repayment bond is constructed, and accrued interest is calculated exponentially. The final maturity of the bond matches that of the desired maturity.
Example:
Key date: 01/01/2000
Interest rate: 6%
Desired maturity: 07/01/2001
Start of term for 1st period: 07/01/1999
Due date for 1st period: 07/01/2000
Due date for 2nd period: 07/01/2001
On 01/01/2000, the bond issued on 07/01/1999 is sold, and the accrued interest falls due. It is assumed that on 01/01/2000 the bond has a clean price of 100%. The dirty price (net present value on key date 01/01/2000) results from the fact that between 07/01/1999 and the key date 01/01/2000, the interest on the capital is calculated exponentially using the par bond yield that is to be determined. It is also assumed that the two payments on 07/01/2000 and 07/01/2001 are discounted back to 01/01/2000 by the par bond yield to be determined so as to calculate their net present values. The system can calculate the par bond yield on the basis of these assumptions.
You should note that, in this case, the system has to reconstruct all of the payment dates every time you request the calculation of a par bond yield. If you have long maturities, this can result in very slow system response times. In this case, you might like to use the following procedure instead.
If the interest rate term exceeds the residual maturity, the bond is constructed in such a way that the start of the term is the same as the desired start of the term.
Example:
Key date: 01/01/2000
Interest rate: 6%
Desired maturity: 07/01/2001
Start of term for 1st period: 01/01/2000
Due date for 1st period: 01/01/2001
Due date for 2nd period: 01/01/2002
In order to calculate the yield, it is now assumed that the interest on the nominal of the bond is also calculated exponentially for the period between 01/01/2001 and the desired maturity (07/01/2001) on the basis of the yield that is to be determined. It is also assumed that the capital accumulated up until then will be paid back early on 07/01/2001. The interest earned is calculated in such a way that if the capital remains invested until the due date of the bond, then the capital due on 01/01/2002 (including interest) is calculated precisely.
This procedure is also suitable for longer interest payment periods because the system can make an internal note of the payment timeframe (01/01/2001, 01/01/2002, and so on) when it processes the information.
Differences between 1) and 2):
In procedure 1), if the continuous compounding zero bond rate remains constant throughout the term, then the curve showing the par bond yield will not be flat, but will have term-dependent fluctuations. This is because the net present value for every future payment is always calculated exponentially using the same interest rate, whereas the interest payments from the broken up periods are calculated using a linear method of interest calculation. The exponential and the linear calculation give different results, which causes the effect shown above.
In procedure 2), if the continuous compounding zero bond rate remains constant throughout the term, then the curve showing the par bond yield will also be flat. Moreover, if procedure 2) is used to determine the par bond yield for a very short term (for example, 1 day residual maturity) at the end of a month with 31 days, the result is reliable. If, on the other hand, procedure 1) is used, the par bond yield can, for example, sometimes be twice as large as it should be because specific Customizing settings have been made for yield curves.
Use
Dependencies
Example
History
| Last changed by/on | SAP | 20110908 |
| SAP Release Created in | 20 |
