Workbook
For
Money Markets
Version: 1.0
© 2001 by i-flex solutions limited
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Money Markets
Table of Contents
Money Market
1. Money Market Terminology
1.1 Principal and interest
1.2 Currency of the placement
1.3 Interest schedule
1.4 Schedule type
1.5 Holiday treatment
1.6 Security requirements
1.7 Interest rate basis
1.8 Type of interest rate
1.9 Interest payment method
1.10
Accrual frequency
1.11
Main/penalty components
1.12
Fees/Charges
1.13
Prepayment penalty
1.14
Amendments
1.15
Maturity date
1.16
Rollover
1.17
Status change and provisioning
1.18
Liquidation order
1.19
Acquired interest
2. FLEXCUBE specific concepts
2.1 Settlement account
2.2 Notice days
2.3 Grace days
2.4 Automatic/Manual liquidation
2.5 Auto forward/reverse movement amongst statuses
2.6 Future dated and back valued placements
3. Features Of Money Market Module In FLEXCUBE
Annexure
4
4
4
5
5
5
5
6
6
6
8
10
12
12
12
13
13
13
13
14
15
17
17
17
17
17
18
18
19
20
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Money Market
Money Market refers to the market in which banks and financial institutions borrow
and lend money for tenors not exceeding one year. Money market deals are done in
order to meet short-term liquidity requirements.
If a bank borrows from the money market, it is called a money market borrowing. If
a bank lends money, it is called a money market placement. The main characteristics
of money market deals are as under:
● They are typically short term in nature – the most common tenor being in days,
or at most weeks.
● The principal is usually repaid at the end of the tenor as a bullet repayment.
There are no principal schedules. Though uncommon, there may be
intermediate interest schedules.
● The repayment schedule is normal, i.e., there are no capitalized and amortized
schedules in money market.
● There may be deals that settle on the same day. Such deals are called intra-day
deals.
● In view of the short time frame and the nature of players involved in the
market, all messages on money market deals are sent and received through
SWIFT.
Apart from the aforesaid features, the characteristics of money market deals and the
terminology used are similar to that of placements and deposits.
1.
Money Market Terminology
1.1
Principal and interest
The amount of money that is outstanding with the borrower at any given point in
time is called ‘Principal’. The cost of borrowing the money is called ‘Interest’.
Interest rate payable is expressed as percentage per annum.
For instance, the interest rate on a one-year placement of Rs. 10,000 could be 10%
per annum (or 10% p.a.). Assume that the borrower has to repay the principal amount
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of the placement (Rs. 10000) along with interest at the end of one year. The amount
of interest due is calculated using the formula
Interest = Principal X interest rate (in % p.a.) X time period (in years) / 100
This is also expressed as
Interest = P n r / 100
The interest to be paid by the borrower at the end of one year is calculated as
Interest = Rs. 10,000 X 10% p.a. X 1 year / 100 = Rs. 1000
Accordingly, the borrower has to pay to the lender an amount of Rs. 11,000 (Rs.
10,000 towards principal and Rs. 1000 towards interest).
1.2
Currency of the placement
Placements could be provided in either the local currency or in a foreign currency.
1.3
Interest schedule
As a part of the terms and conditions of the placement, the bank and the borrower
agree on a schedule by which the interest on the placement would be repaid to the
bank. These may be regular in nature or irregular.
To illustrate, consider a one-year placement of Rs. 10,000 by the bank on Jan 1, 2001
at an interest rate of 10% p.a. The total principal and interest due to the bank are Rs.
10,000 and Rs. 1,000 respectively. The bank may want the entire interest to be paid
on Dec 31, 2001 or may want the borrower to pay in equal installments at the end of
each quarter. Principal is usually due at the end of the tenor, i.e. a bullet payment.
1.4
Schedule type
Money market deals usually have a normal schedule only. There are no capitalized or
amortized schedule variations in money market deals.
1.5
Holiday treatment
Holiday treatment refers to the treatment that needs to be done to a schedule that falls
on a holiday. The bank could deal with this by either of the following:
● Moving the due date backward to the previous working day, or
● Moving the due date forward to the next working day, or
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● Ignoring the holiday and letting the due date remain on a holiday
There could be further refinements to the aforesaid treatment. To illustrate, if moving
the due date forward to the next working day results in movement of the due date
across months, the bank may want to move the due date to the previous working day.
1.6
Security requirements
The borrower could be asked to provide collateral as security for the placement. The
collateral is typically shares, securities and government bonds held by the borrower.
1.7
Interest rate basis
There are various conventions in which ‘n’ -- the time period in years between the
start date and end date of a placement in the interest formula (Pnr/100) – is
calculated. These methods are discussed below.
The start date is included in calculating the interest days while end date is excluded
in calculating the interest days.
These methods fall into three broader categories:
1.7.1 Actual: The actual number of days between the start date and end date is
used. This convention hence recognizes a year to consist of 365 days (366 in a leap
year).
1.7.2 30 Euro basis: This method takes 30days in every month. A detailed
explanation of the rules with some examples is given in the Annexure.
1.7.3 30 US basis: The 30US method differs from the 30Euro only when the
contract period crosses over the month of February. The month of February is treated
on the actual basis wherein, there are 28 days for a non-leap year and 29 days in a
leap year. A detailed explanation of the rules with some examples is given in the
Annexure.
1.8
Type of interest rate
The interest rate could be floating, fixed or ‘special’.
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1.8.1 Fixed: In this case, the interest rate remains constant throughout the life of
the placement and in expressed as X% p.a. As in the earlier example, the interest rate
was agreed to be 10% p.a. This rate was constant throughout the life of the
placement.
1.8.2 Floating: The interest rate is changed at mutually agreed intervals of time.
Once changed, it remains the same for the agreed period, till the time of next
revision. The applicable interest rate can be expressed as a spread over a base
floating rate.
Base rate is typically a rate that is well known in the market. For instance, it could be
LIBOR (London Inter Bank Offer Rate), interest rate on a 365 days T-bills, etc. This
is expressed as X% p.a.
Spread is the additional charge or a premium over the base rate that the bank wants
to charge. It is also expressed in % p.a. terms. This spread could be negative – for
example, LIBOR minus 1 %.
For floating interest rate placements, the period at which the base rate would be reset
(or changed) is also mutually agreed. The spread, however, remains constant
throughout the life of the placement.
There are two variations in floating interest rate placements based on the periodicity
of interest rate change - ‘truly floating’ and ‘periodic floating’. In truly floating
interest rate placements, the applicable interest rate is changed whenever there is a
change in the base rate. In periodic floating interest rate placements, the base rate is
changed after agreed intervals of time.
Consider a placement of Rs. 10,000, which is agreed to be lent for a period of one
year on Jan 1, 2000 at an interest rate of LIBOR + 2%. Here, the base rate is LIBOR
and the spread is 2%. Further, consider that the LIBOR was 4% p.a. on Jan 1, 6%
p.a. on Apr 1, 8% p.a. on Jul 1 and 7% p.a. on Oct 1.
In case the placement was provided as a ‘truly floating interest rate placement’, the
interest rate that would need to be paid by the borrower at the end of one year would
be calculated as follows:
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Period
From
To
8
Time
LIBOR
Spread
Applicable
interest rate
Principal
(Months)
(% p.a.)
A
B
Interest amount
(% p.a.)
(% p.a.)
(Rs.)
(Rs.)
C
D = B+C
E
E X (A/12) years X D/100
1-Jan-01
31-Mar-01
3
4
2
6
10000
150
1-Apr-01
30-Jun-01
3
6
2
8
10000
200
1-Jul-01
30-Sep-01
3
8
2
10
10000
250
1-Oct-01
31-Dec-01
3
7
2
9
10000
225
Total
12
825
Consider the same placement given as a ‘periodic floating interest rate’ placement
and that the base rate would be reset at the end of every six months after Jan 1. So,
the next date at which the base rate would be changed would be Jul 1. The interest
rate that would need to be paid by the borrower at the end of one year would be
calculated as follows:
Period
From
To
Time
LIBOR
Spread
Applicable Principal
interest rate
Interest amount
(Months)
(% p.a.)
(% p.a.)
(% p.a.)
(Rs.)
(Rs.)
A
B
C
D = B+C
E
E X (A/12) years X D/100
1-Jan-01
30-Jun-01
6
4
2
6
10000
300
1-Jul-01
31-Dec-01
6
8
2
10
10000
500
Total
12
800
1.8.3 Special: The borrower and lender mutually agree upon the interest amount
that would be charged on the placement. This interest may be arrived at based on a
different interest basis (for e.g. Actual/364, etc.). Such interest is called ‘special’
interest.
1.9
Interest payment method
The amount of interest on a placement may be payable either at the time of start date
of each interest schedule or on the end date.
1.9.1 Bearing placements: Placements on which interest amount is payable at the
end of the interest period.
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1.9.2 Discounted placements: Placements on which interest amount is payable at
the beginning of each interest schedule.
To illustrate the above concept, let us consider a one-year placement of Rs. 10,000
given on Jan 1, 2001 and carrying a fixed interest rate of 10% p.a. The repayment
schedule is quarterly.
If the contract were to be a bearing placement, the repayment would look as follows
Component Period
Interest
Interest
Interest
Interest
Principal
Principal Time
From
To
(Rs.)
1-Jan-01
1-Apr-01
1-Jul-01
1-Oct-01
31-Mar-01
30-Jun-01
30-Sep-01
31-Dec-01
10000
10000
10000
10000
Interest Amount
rate
due
(Months) (%
p.a.)
3
10%
3
10%
3
10%
3
10%
Due date
(Rs.)
250
250
250
250
10000
31-Mar-01
30-Jun-01
30-Sep-01
31-Dec-01
31-Dec-01
If the contract were to be a discounted placement, the repayment would look like
this:
Principal Time Interest Amount due Due date
rate
Component Period
Interest
Interest
Interest
Interest
Principal
From
To
(Rs.)
1-Jan-01
1-Apr-01
1-Jul-01
1-Oct-01
31-Mar-01
30-Jun-01
30-Sep-01
31-Dec-01
10000
10000
10000
10000
(Mo
nths)
3
3
3
3
(% p.a.) (Rs.)
10%
10%
10%
10%
250
250
250
250
10000
1-Jan-01
1-Apr-01
1-Jul-01
1-Oct-01
31-Dec-01
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As can be seen in the above example for a discounted placement, the amount of
interest for the first schedule – of Rs. 250 – is due on Jan 1, 2001 itself, which is the
date on which placement is being given to the borrower. The bank therefore gives
only a net amount of Rs. 9750 to the borrower on Jan 1, 2001.
1.9.3 True discounted placements: There is variation in discounted placements
called true discounted placements. In this case, the amount of interest that would
have been earned on the amount of interest paid upfront by the borrower is also taken
into account.
To illustrate this concept, consider a one-year placement of Rs. 10,000 given at a
fixed interest rate of 10% p.a. There are no intermediate schedules, only a bullet
schedule for both interest and principal. If the payment schedule was discounted, the
amount of interest due on the placement for the one year period (Rs. 10000 X 10% X
1 = Rs. 1000) would be collected upfront from the borrower. This would result in a
net amount of Rs. 9,000 being lent to the borrower. The borrower would have to
repay Rs. 10,000 on Dec 31, 2001.
If the above placement were to be a true discounted placement, the amount of interest
that would be earned on the interest amount of Rs. 1,000 paid by the borrower on Jan
1, 2001 is also taken into account. This amount of interest would be (Rs. 1000 X
10% X 1 year = Rs. 100). This interest on interest is deducted from the amount of
interest due from the borrower on Jan 1, 2001. Therefore, the borrower has to pay
only Rs. 900 on Jan 1, 2001 (Rs. 1000 – Rs. 100). Accordingly, the bank lends Rs.
9,100 to the borrower on Jan 1, 2001 and the borrower pays back Rs. 10,000 to the
bank on Dec 31, 2001.
1.10 Accrual frequency
Consider a one-year placement of Rs. 10000 given by bank to a borrower on Jan 1,
2001. This placement caries an interest rate of 10% p.a. As per the terms and
conditions of the placement, the borrower has to pay the interest amount (of Rs.
1,000) together with principal amount (Rs. 10,000) on Dec 31, 2001. The interest
amount of Rs. 1,000 earned by bank would be considered as its income.
Let us consider that the bank generates a Profit & Loss account every month. Accrual
frequency is the frequency at which the bank wants to recognize the income earned
by it. In this case, the accrual frequency is one month. For this purpose, the bank has
to arrive at the income that has been earned by it every month on the above
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placement by way of interest, irrespective of the fact that the cash inflow on account
of interest only happens at the end of the year. The interest amount that is earned
each month is arrived at based on the ‘Interest calculation basis’ that has been
adopted by the bank as its ‘Income recognition’ policy. Let us assume that the bank
has adopted the ‘Actual/Actual’ method of income recognition.’
Accordingly, the income that the bank would report in each of the months would be
as under:
Month
No. of days
Income earned
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
31
28
31
30
31
30
31
31
30
31
30
31
365
85
77
85
82
85
82
85
85
82
85
82
85
1000
As can be seen from the above table, the a portion of the total interest of Rs. 1,000
that is to be paid by the borrower to the bank on Dec 31, 2001 has been progressively
recognized as income each month from Jan to Dec.
The accounting entries that would be passed at the time of accrual in Jan would be
Dr.
Cr.
Interest receivable GL
Rs. 85
Income from placements GL Rs. 85
Similar entries would be passed at the end of each month. It may be noted that after
passing the accrual entries for Dec, the total balance in the Interest receivable GL
would be Rs. 1000.
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As can be seen from the above accounting for income, it may be noted that income
recognition is independent of the payment by the borrower. The payment by
borrower is called ‘liquidation’. On liquidation, the balance in Interest receivable GL
would be 0. This may be done on or after the schedule date.
On payment by the borrower on Dec 31, 2001, the accounting entries passed would
be:
Cr.
Dr.
Interest receivable GL
Borrower’s account
Rs. 1000
Rs. 1000
1.11 Main/penalty components
The bank would want to charge additional interest on the payments that are overdue.
These are called penalty components. Penalty interest may be applicable for both
principal and interest components.
To illustrate, consider a placement of Rs. 10,000 on which interest of Rs. 250 is due
on Mar 31, 2001. The interest rate on the placement is 10% p.a. The borrower delays
this payment. The bank may want to charge an additional 2% p.a. as penalty for this
interest payment that is overdue. Accordingly, from Apr 1 onwards, the bank would
charge an interest of 12% p.a. (main interest of 10% p.a. + additional interest of 2%
p.a. as penalty for delayed payment) on Rs. 250 till payment of the same by the
borrower.
1.12 Fees/Charges
Bank typically charge various fees/charges on the placement availed by the
borrower. These may be in the form of processing fees, front-end fee,
communication charges, etc. Some of these fees may be a percentage of the
placement amount while some may be flat amounts irrespective of the placement
amount.
1.13 Prepayment penalty
The bank may to charge a penalty in case the borrower wants to repay (either a part
of the principal or the complete principal) prior to the agreed due date of the
principal. This is because, the bank may not find alternate avenues to deploy the
amount of principal pre-paid by the borrower. Banks impose this penalty in order to
compensate for the estimated loss in their income (interest) due to the prepayment.
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1.14 Amendments
During the tenor of a placement, there may be some changes to the characteristics of
the placement. These changes may be in both financial and non-financial details of
the placement. Such changes are called ‘amendments’.
The financial data that could be changed include the rate of interest, the repayment
schedule, amount of the placement, the currency of the placement, etc. The changes
in non-financial data could be the officer handling the placement, the department to
which the placement belongs, etc.
The bank may or may not levy charges/fees for such amendments.
1.15 Maturity date
The date on which the complete principal is repaid to the bank is called the maturity
date.
1.16 Rollover
On the maturity date of the placement, the borrower may not have adequate funds to
repay the placement. Further, the borrower feels it may not be in a position to repay
the placement in the near future. In such cases, the borrower requests the bank to
‘roll-over’ its placement.
The bank then decides on the fees/charges payable by the borrower, the amount of
rollover (could be a part or full of the outstanding principal amount, or the
outstanding principal + interest), the interest rate, etc. The process adopted by the
bank is similar to the borrower negotiating a new placement. However, the purpose
of the new placement would be to repay the existing placement.
1.17 Status change and provisioning
As discussed before, the income on a placement is recognized on an accrual basis
irrespective of payment from the borrower. If the borrower is meeting all its
obligations to the bank on time, the placement is called a ‘good’ asset or a ‘standard’
asset. In case the borrower in not paying its dues to the bank after specified periods
of time, the bank would have to start downgrading the quality of the asset to ‘substandard asset’, ‘doubtful asset’ and ‘bad’ asset. It may be noted that the
nomenclature of various statuses, the time frame in each status, etc., differs from
country to country and is laid down by the central bank of the country.
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In case the borrower does not pay an overdue component after a specified amount of
time, banks would have to stop accruals (stop recognizing income from the
placement). If the borrower still does not pay the overdue component after some
more specified amount of time, the bank would have to reverse the accruals (pass
accounting entries to deduct the amount of accrual recognized against unpaid
components). If the component remains unpaid after a further specified period of
time, bank has to make a provision for a part of the principal. Provisioning means
that the bank has to consider that it would not be in a position to recover the amount
of provision from the borrower. Finally, after a further period of time if the
component remains unpaid, bank would have to write off the outstanding placement
from its books (or assets). Each of these changes in the quality of the asset is called a
status change.
The time that can elapse between each status change, the amount of placement that
has to be provided for is a function of the central bank’s policies, industry norms and
the bank’s own accounting policies.
1.18 Liquidation order
The order in which the amount paid by the borrower needs to be appropriated
amongst overdue components of principal, interest and other fees/charges is called
‘liquidation order’.
To illustrate, consider a placement on which Rs. 200 of principal, Rs. 100 of interest,
Rs. 80 of penalty interest on interest and Rs. 50 of penalty interest on principal are
overdue as of Jan 1, 2001. On Jan 1, 2001, the borrower pays an amount of Rs. 300.
The bank has to decide on the appropriation of this money amongst the overdue
components of principal, interest, penalty interest on interest, and penalty interest on
principal.
Consider that the liquidation order decided by the bank is
● Penalty interest on principal
● Penalty interest on interest
● Interest
● Principal
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Based on the above order, the bank would appropriate the Rs. 300 paid by the
borrower as under:
Component
Amount due (Rs.) Appropriation
(Rs.)
Penalty interest on principal 50
Penalty interest on interest 80
Interest
100
Principal
200
50
80
100
70
Status
Settled
Settled
Settled
Rs. 130 overdue
If the liquidation order had been principal, interest, penalty interest on interest and
penalty interest on principal, the appropriation of the amount paid by the borrower
amongst the various overdue components would be as under:
Component
Amount due (Rs.) Appropriation
(Rs.)
Penalty interest on principal 50
Penalty interest on interest 80
Interest
100
Principal
200
100
200
Status
Rs. 50 overdue
Rs. 80 overdue
Settled
Settled
As can be seen from the above examples, in case of part payment against overdues
by the borrower, the components that still remain overdue is a function of the
liquidation order.
1.19 Acquired interest
Acquired interest is the amount of interest that has already accrued on a contract but
is not yet due. This component becomes relevant when a contract is bought/sold
from/to another bank / financial institution during the tenor of the contract.
To illustrate, consider a one-year placement that is lent by bank A on Jan 01, 2001.
The amount of the placement is Rs. 10,000 and the placement carries a fixed interest
rate of 10% p.a. The interest of Rs. 1,000 together with the principal of Rs. 10,000 is
payable by the borrower to Bank A on Dec 31, 2001. On Jul 1, 2001, Bank A sells
the placement to Bank B. Bank B would have to pay Bank A a sum of Rs. 10,000
towards the principal of the placement and Rs. 500 towards the acquired interest.
This is because an interest of Rs. 500 has accrued on the placement in the six-month
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period from Jan 1, 2001 to Jun 30, 2001. However, this amount of interest is not yet
due.
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2.
FLEXCUBE specific concepts
2.1
Settlement account
17
The account to which the various debit and credit entries need to be passed is called
the ‘settlement account’.
2.2
Notice days
’Notice days’ is the number of days in advance of the due date that a notice has to be
sent to the borrower carrying an intimation of the component falling due.
2.3
Grace days
‘Grace days’ is the number of days after the due date that is allowed by the bank to
the borrower to pay its dues to the bank. In case the borrower pays within the date
arrived at after adding grace days to the due date, the bank does not charge penalty
on the overdue components. If the borrower fails to pay even on the date arrived after
adding the grace days to the due date, the bank charges penalty on the overdue
component from the original due date to the actual date of payment by the borrower.
Consider that an amount of Rs. 100 is due to be paid by the borrower to the bank on
Jan 1, 2001 towards principal. The grace days allowed by the bank are 2. If the
borrower pays on or before Jan 3, 2001, there is no penalty charged for the late
payment. If, however, the borrower pays on Jan 5, 2001, the bank would charge a
penalty for 4 days (Jan 1, 2001 to Jan 5, 2001).
2.4
Automatic/Manual liquidation
This is an indicator that tells FLEXCUBE whether the system should automatically
debit the borrower’s account for the component(s) that have fallen due on a given
day. In case the indicator is manual, the system would not process the component
that is due automatically. This processing has to be done manually by the bank.
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2.5
18
Auto forward/reverse movement amongst statuses
This indicator instructs that system whether it should move the placement from one
status to another automatically. This movement is done by the system, provided the
placement meets the conditions that have been prescribed for such a movement.
2.6
Future dated and back valued placements
Value date of a placement is the date from which the placement is considered to be
effective in the system. This is the date from which the system starts processing the
placement -- like calculating the interest, updating GL balances, etc.
The value date of a placement could any of the following:
Less than the system date: These placements are called back-valued placements. The
probable reasons for entering the placement into the system on a date after the value
date of the placement could be due to procedural error, conversion from one system
to another, etc.
Equal to the system date: This is expected to be the normal scenario in the day-to-day
operations of a bank.
Greater than the system date: These are called future dated placements. These are
placements which are effective only from a date that is greater than the system date,
and hence in the future. The processing of such placements is started automatically
by the system when the system date moves to the value date of the placement.
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3.
19
Features Of Money Market Module In FLEXCUBE
● Ability to define different payment types. The payment can be
Bearing

Discounted

True discounted
● Support for different interest type. Interest can be

Fixed

Floating

A special amount
● Facility for automatic rollover of contracts

The parameters for the rollover are user defined and can be pre-set

The system would automatically roll over the same on the due dates
● Facility to create future dated and back dated contracts

● Facility to amend contracts based on a specific value date. The amendments can
be
Change in principal

Change in maturity date

Change in interest rate

Change in schedules
● The value date of the amendments can be today, a future date or a past date.

● Automatic generation of payment messages (MT100, MT202), receive notices
(MT210) & counter party confirmations (MT320)
● Automatic confirmation matching for a confirmation from a counterparty in
case of MT320
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Workbook – Money Market
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Annexure
CONVENTIONS USED IN COMPUTING NUMBER OF DAYS BETWEEN
TWO GIVEN DATES FOR CALCULATION OF INTEREST
Interest rates that are specified on annual basis are used according to conventions
formed by the following combinations:
I) Actual/Actual
II) Actual/365
III) Actual/360
IV) 30Euro/Actual
V) 30Euro/365
VI) 30Euro/360
VII) 30US/Actual
VIII) 30US/365
IX) 30US/360
Denominator:
1. Denominator = Actual: The interest rate quoted is taken to be based on the concept
of actual number of days in a year (365/366).
When the interest period crosses from a non-leap year to a leap year, the basis of
actual days has to be treated separately in each year.
For period crossing from 1995 to 1996:
Interest1 = (Principal) x (Interest Rate) x (interest days in 1995/365)
Interest2 = (Principal) x (Interest Rate) x (interest days in 1996/366)
The total interest payment = Interest1 + Interest2.
2. Denominator = 365: Interest rate quoted is taken as based on 365 days for a year
(irrespective of leap year/non-leap year).
3. Denominator = 360: Interest rate quoted is taken as based on 360 days for a year
(irrespective of leap year/non-leap year).
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Numerator
It represents the method of calculating the number of days between the start date and
the end date of the placement.
1. 30 Euro Method
Month of the start date
If the start date is greater than or equal (>=) 30th of a month, the start date becomes
equal to 30th of the month. So, count one day for the month of the start date.
Start date= 31 Jan => 1 day in Jan.
Start date= 30 Apr => 1 day in Apr.
If the start date is less than the 30th of the month, then treat the month as a 30-day
month and calculate interest days accordingly
Start date= 1st of any month => 30 days in the month.
Start date= 29 Jan => 2 days in Jan
Start date= 29 Feb 1996 => 2 days in Feb (leap year)
Start date= 28 Feb 1995 => 3 days in Feb (non-leap year)
Start date= 28 Feb 1996 => 3 days in Feb (leap year)
In the 30Euro method, the day count calculation for February is same, irrespective of
leap or non leap year.
If the start date is the same as the end date, then interest days is zero.
Month of the end date
If end date = 30th of any month, then take 29 interest days for that month.
End date = 30 Apr => 29 days in April
End date = 30 Jan => 29 days in Jan
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If end date = 31st of a month, then it becomes 30th of that month and then take 29
interest days for that month.
End date = 31 Jan = 30 Jan => 29 days in Jan.
End date = 30 Jan => 29 days in Jan
If end date < 30th of any month, then take end date less one interest days in that
month.
End date = 29 Jan => 28 days in Jan
End date = 01 Jan => 0 days in Jan.
End date = 29 Feb 1996 => 28 days in Feb.
End date = 28 Feb 1995/1996 => 27 days in Feb.
End date = 27 Feb 1995/1996 => 26 days in Feb.
Some peculiar cases (30Euro Basis):
30 Jan 95 - 31 Jan 95 => 0 interest days
29 Jan 95 - 31 Jan 95 => 1 interest day.
27 Feb - 1 Mar => 4 interest days (leap year and non-leap year).
31 Dec 95 - 31 Jan 96 => 30 interest days.
31 Dec 95 - 30 Jan 96 => 30 interest days.
2. 30 US Method
The 30US method differs from the 30Euro only when the contract period crosses
over the month of February.
In 30US, the month of February is treated on the actual basis, wherein there are 28
days for a non-leap year and 29 days in a leap year.
Start date= 27 Feb 1995 => 2 days in Feb.
Start date= 28 Feb 1995 => 1 day in Feb.
Start date = 27 Feb 1996 => 3 days in Feb.
Start date= 28 Feb 1996 => 2 days in Feb.
Start date= 29 Feb 1996 => 1 day in Feb.
28 Feb 95 - 1 Mar 1995 => 1 day in Feb = 1 interest day.
28 Feb 96 - 1 Mar 1996 => 2 days in Feb = 2 interest days.
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1 Feb 1995 - 30 Mar 1995 => 28 days in Feb + 29 days in March = 57
interest days.
1 Feb 1996 - 30 Mar 1996 => 29 days in Feb + 29 days in March = 58
interest days.
When the start date < 30 and end date is equal to the 31st of a month, the end date
becomes equal to 1st of next month.
End date = 31 Dec becomes 1st Jan => 1 interest day in Dec.
1 Dec 1995 - 31 Jan 1996 => 30 days in Dec + 30 days in Jan = 60 days and
end date becomes 1st Feb.
15 March 1995 - 31 May 1995 => 16 days in March + 30 days in April + 30
days in May = 76 interest days and end date becomes 1st June.
When February is an included month, the same rule is applied, except that the actual
number of days in Feb of that year is used in the calculation.
1 Feb 1995 - 31 Mar 1995 => 28 days in Feb + 30 days in March = 58 days
and end date becomes 1st April.
1 Feb 1996 - 31 Mar 1996 => 29 days in Feb + 30 days in March = 59, days
and end date becomes 1st April.
1 Dec 1995 - 31 Mar 1996 => 30 days in Dec + 30 Days in Jan + 29 Days in
Feb + 30 days Mar = 119 interest days and end date becomes 1st April.
For interest periods when either of the above rules does not hold true, the rules for
calculations in the US method are the same as the Euro method.
The following table gives examples of calculations as per the rules applicable for the
30Euro and 30US basis discussed above.
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From
To
US30 - US30 - Normal Euro30 - Euro30 Leap yr yr
Leap yr Normal yr
30-Nov
30-Nov
30-Nov
30-Nov
30-Nov
30-Nov
01-Dec
01-Dec
31-Dec
31-Dec
28-Feb
29-Feb
01-Mar
03-Mar
30-Mar
31-Mar
31-Jan
31-Mar
28-Feb
29-Feb
88
89
90
92
119
119
60
119
58
59
From
To
US30 - US30 - Normal Euro30 - Euro30 Leap yr yr
Leap yr Normal yr
31-Dec
31-Dec
31-Dec
31-Dec
15-Jan
15-Jan
15-Jan
15-Jan
15-Jan
01-Feb
15-Feb
15-Feb
28-Feb
28-Feb
28-Feb
28-Feb
28-Feb
29-Feb
30-Dec
29-Jan
29-Jan
01-Mar
03-Mar
30-Mar
31-Mar
28-Feb
29-Feb
01-Mar
30-Mar
31-Mar
28-Feb
28-Feb
29-Feb
29-Feb
01-Mar
03-Mar
30-Mar
31-Mar
31-Mar
31-Dec
31-Jan
01-Feb
60
62
89
90
43
44
45
74
75
27
13
14
1
2
4
31
32
31
0
2
2
88
NA
89
91
118
118
60
118
58
59
59
61
88
89
43
NA
44
73
74
27
13
NA
NA
1
3
30
31
NA
0
2
2
88
89
91
93
120
120
59
119
58
59
61
63
90
90
43
44
46
75
75
27
13
14
1
3
5
32
32
31
0
1
2
88
NA
91
93
120
120
59
119
58
NA
61
63
90
90
43
NA
46
75
75
27
13
14
NA
3
5
32
32
NA
0
1
2
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A few more cases:
28-Feb-1996 - 27-Feb-1997: (US) = 358; (EURO) = 359
15-Feb-1996 - 31-Jan-1997: (US) = 345; (EURO) = 345
15-Feb-1994 - 31-Jan-1995: (US) = 344; (EURO) = 345
01-Apr-1995 - 31-Mar-1996: (US) = 359; (EURO) = 359
01-Apr-1996 - 31-Mar-1997: (US) = 358; (EURO) = 359
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