RE: FpML-IRD40 Mandatory/Optional Early Termination date expressed as a tenor and mutual put break frequency

Here are some worked examples using the Schema too:

Partial snippet of FpML representing a mutual put where the break is at 5 years and every 1 year after (Bermuda style):

<swap>

...

</earliestTerminationDateTenor>

</earliestTerminationDateTenor>

</exerciseDateFrequency>

</optionalEarlyTerminationParameters >

</earlyTerminationProvision>

</swap>

Partial snippet of FpML representing a mutual put where the break is at 5 years and every day thereafter (American Style):

<swap>

...

</earliestTerminationDateTenor>

</earliestTerminationDateTenor>

</exerciseDateFrequency>

</optionalEarlyTerminationParameters >

</earlyTerminationProvision>

</swap>

Partial snippet of FpML representing a mutual put where the break is at 5 years only (European Style):

<swap>

...

</earliestTerminationDateTenor>

</earliestTerminationDateTenor>

</optionalEarlyTerminationParameters >

</earlyTerminationProvision>

</swap>

From: Guy Gurden
Sent: Thursday, September 30, 2004 7:44 AM
To: 'ird@xxxxxxxxxxxxxxxxxxxxx'
Subject: RE: FpML-IRD40 Mandatory/Optional Early Termination date expressed as a tenor and mutual put break frequency

Steven,

I’ve attached the IRD Schema that is affected (fpml-ird-4-1.xsd). I think the version I worked on is from the FpML 4.1 First Working Draft. Below is the snippet of Schema that is affected

<xsd:complexType name = "EarlyTerminationProvision">

<xsd:annotation>

<xsd:documentation xml:lang = "en">A type defining an early termination provision for a swap. This early termination is at fair value, i.e. on termination the fair value of the product must be settled between the parties.</xsd:documentation>

</xsd:annotation>

<xsd:sequence>

<xsd:choice minOccurs = "0">

<xsd:element name = "mandatoryEarlyTermination" type = "MandatoryEarlyTermination">

<xsd:annotation>

<xsd:documentation xml:lang = "en">A mandatory early termination provision to terminate the swap at fair value.</xsd:documentation>

</xsd:annotation>

</xsd:element>

<xsd:element name = "optionalEarlyTermination" type = "OptionalEarlyTermination">

<xsd:annotation>

<xsd:documentation xml:lang = "en">An option for either or both parties to terminate the swap at fair value.</xsd:documentation>

</xsd:annotation>

</xsd:element>

</xsd:choice>

<xsd:choice minOccurs = "0">

<xsd:element name = "mandatoryEarlyTerminationDateTenor" type = "Interval">

<xsd:annotation>

<xsd:documentation xml:lang = "en"></xsd:documentation>

</xsd:annotation>

</xsd:element>

<xsd:element name = "optionalEarlyTerminationParameters" type = "OptionalEarlyTerminationParameters">

<xsd:annotation>

<xsd:documentation xml:lang = "en"></xsd:documentation>

</xsd:annotation>

</xsd:element>

</xsd:choice>

</xsd:sequence>

<xsd:attribute name = "id" type = "xsd:ID"/>

</xsd:complexType>

<xsd:complexType name = "OptionalEarlyTerminationParameters">

<xsd:annotation>

<xsd:documentation xml:lang = "en">A type defining the adjusted dates associated with a particular exercise event.</xsd:documentation>

</xsd:annotation>

<xsd:sequence>

<xsd:element name = "earliestTerminationDateTenor" type = "Interval">

<xsd:annotation>

<xsd:documentation xml:lang = "en"></xsd:documentation>

</xsd:annotation>

</xsd:element>

<xsd:element name = "exerciseDateFrequency" type = "Interval" minOccurs = "0">

<xsd:annotation>

<xsd:documentation xml:lang = "en"></xsd:documentation>

</xsd:annotation>

</xsd:element>

</xsd:sequence>

<xsd:attribute name = "id" type = "xsd:ID"/>

</xsd:complexType>

From: steven.lord@xxxxxxx [mailto:steven.lord@xxxxxxx]
Sent: Thursday, September 30, 2004 7:23 AM
To: ird@xxxxxxxxxxxxxxxxxxxxx
Subject: RE: FpML-IRD40 Mandatory/Optional Early Termination date expressed as a tenor and mutual put break frequency

Guy,

Some members of the group have problems getting this document through - can you send the schema that you prepared so the diagrams can be viewed in XML Authority

Steven

-----Original Message-----
From: Guy Gurden [mailto:guy.gurden@xxxxxxxxxxxxx]
Sent: 30 September 2004 00:46
To: ird@xxxxxxxxxxxxxxxxxxxxx
Subject: RE: FpML-IRD40 Mandatory/Optional Early Termination date expressed as a tenor and mutual put break frequency

Here’s an updated proposal that addresses some of the limitations identified when we discussed this last time.

I can walkthrough at tomorrow’s meeting.

Guy

From: steven.lord@xxxxxxx [mailto:steven.lord@xxxxxxx]
Sent: Thursday, May 27, 2004 5:48 AM
To: ird@xxxxxxxxxxxxxxxxxxxxx
Subject: RE: FpML-IRD40 Mandatory/Optional Early Termination date expressed as a tenor and mutual put break frequency

This looks good. Couple of questions / points

1. Is there an implicit rule here we should state that if the earlyTerminationDateTenor is present that the exerciseDateFrequency should be present if Bermuda Exercise ? In the other exercise types there is probably a rule as well since the earlyTerminationDateTenor is effectively saying when the date is for European Exercise and the start of the exercise period for American

2. In FpML_BermudaExercise would bermudaExerciseDates now need to be optional ? Would they be needed if exerciseDateFrequency is present ?

Lets discuss on the call.

Steven

-----Original Message-----
From: Guy Gurden [mailto:guy.gurden@xxxxxxxxxxxxx]
Sent: 26 May 2004 23:14
To: ird@xxxxxxxxxxxxxxxxxxxxx
Subject: FpML-IRD40 Mandatory/Optional Early Termination date expressed as a tenor and mutual put break frequency

A suggestion for how to deal with the request from the broker WG relating to be able to express break first dates and frequencies in the FpML structure. The way we tackled this at SwapsWire in our message was as follows:

Add a new optional element of type FpML_Interval (e.g. earlyTerminationDateTenor) into the existing type FpML_EarlyTerminationProvision, e.g.

<!ENTITY % FpML_EarlyTerminationProvision "earlyTerminationDateTenor?, (mandatoryEarlyTermination | optionalEarlyTermination)">

<!ELEMENT earlyTerminationDateTenor (%FpML_Interval;)>

Add a new optional element of type FpML_Interval (e.g. exerciseDateFrequency) into the existing type FpML_BermudaExercise

<!ENTITY % FpML_BermudaExercise "exerciseDateFrequency?, bermudaExerciseDates , relevantUnderlyingDate? , earliestExerciseTime , latestExerciseTime? , expirationTime , multipleExercise? , exerciseFeeSchedule?">

<!ELEMENT exerciseDateFrequency (%FpML_Interval;)>

The “break frequency” only needs to be captured as part of the Bermuda exercise structure as this is the only option style where a break frequency needs to be defined (for European style there is only a single possible exercise specified by the <earlyTerminationDateTenor> and for American the frequency is daily by definition).

So a partial snippet of FpML including the above representing a mutual put where the break is at 5 years and every 1 year after that would be:

<swap>

...

<earlyTerminationProvision>

    <earlyTerminationDateTenor>

      <periodMultiplier>5</periodMultiplier>

      <period>Y</period>

    </earlyTerminationDateTenor>

    <optionalEarlyTermination>

      <bermudaExercise>

        <exerciseDateFrequency>

          <periodMultiplier>1</periodMultiplier>

          <period>Y</period>

        </exerciseDateFrequency>

        ...

      </bermudaExercise>

      ...

    </optionalEarlyTermination>

</earlyTerminationProvision>

</swap>

Regards

Guy Gurden

This was the request in the broker WG doc:

2) Early Termination -

FpML quotes the actual unadjusted dates ie:-

10-Nov-2008

10-Nov-2009

10-Nov-2010

10-Nov-2011

Within FpML template require calculation to occur for dates to be represented as:-

“At X years and every Y years thereafter”.

N: B

X years = First Date (10-Nov-2008) minus Trade date of trade

Y years = Difference between subsequent dates 10-Nov-2009, 10-Nov-2010, 10-Nov-2011

Action – Require confirmation that calculation can be achieved and that data can be represented in the template as “at X years and every Y years thereafter”.

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