Date

10 Mar 2020

Attendees

Agenda

1) Use Case reminder

2) Where we are on our road map.

3) Open Action Items

4) JIRA Issues Review - https://jira.edmcouncil.org/projects/DER/issues/DER-10?filter=allopenissues

5) Todays content discussion.

6) For next week.

Proceedings:

This week John Gemski and John Nowlin attempted to explain to Elisa (and Pete) the difference between an underlier for an interest rate swap leg and the details of that leg of the swap. Motivation for this is that in the model, although we link a derivative instrument to its underlier(s), we don't have that connection at the leg level, which is a gap. Some of the details in restrictions at the leg level should come from the underlier, and others may be specific to the swap. For example, a given swap leg might only represent the cashflow from a portion of the cashflow of its underlier. But at a minimum, we need to connect the dots somehow. What we have in the model now allows for a completely separate stream of payments for some swap leg from the actual payments associated with the underlying debt, for example, which isn't right. They are connected, even if any report submitted to an SDR leaves out the information about that connection, and leaves out the identifiers for the underliers.

John Gemski will look for some diagrams that he may have to help tease out what these connections are, as perhaps we need some sort of property chain or other similar idea to connect the percentage of the cashflows (100 or less) for a given leg to the cashflows of the underlier, including payment events, etc. The ontology currently duplicates this information and should not, in other words, unless the details are unique to the swap leg and distinct from the underlying instruments.

And, even if there is no physical instrument, per se, for example on the fixed rate side of the swap, there is a 'synthetic' or virtual instrument whose behavior the leg simulates. At a minimum, we need a property on each leg linking it to its underlier, and the two notional properties should be at the swap level not at the leg level. Each leg has an effective date, termination date, maturity date, the assumption is that the maturity date for the leg is the same as for the underlier. There should be a face value / principal amount for the underlying instruments as well - there is currently no restriction on debt instrument for that and there should be - at least on principal repayment terms if not at the very top level defining the instrument. Then the starting point face value for the leg needs to be the same or less than that of the underlier. Characteristics such as currency for the leg probably should be pulled through from the underlier ...

Elisa and Pete will look at the model, come up with a list of specific questions, and work with John and John to tease out what should be there in the model, what should come from the underlier, etc., at least in the case of an interest rate swap. The same issues may not apply to other kinds of swaps.

Decisions:

Action items

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