Calculate account interest
Overview
This documentation tells you how to calculate the interest accrued on your bank accounts. Interest is calculated based on the daily settled balance.
Note
Note, that system does not require calculation for account interest. It is only helping tool for creating interest transaction. If you for example get these transactions from custody, you can directly record these to the portfolio.
The formula uses the following parameters from the accounts
Calendar (day count convention) - this defines the day count convention used by the bank. The most typical choice is Act/360, eg. thtransacite daily interest is calculated as interest p.a. / 365 and the number of days is based on the actual number of days.
Fixing - this field is used to enter a fixed yearly interest rate in percent
OR
Base instrument - this field defines the reference index used for variable interest AND
Spread - this filed defines how many percent is added on top of the base instrument value to get the variable interest
Calculation logic
Depending on the account parameters the calculation formula is either:
Daily interest = Amount (p,t) * Fixing-% / 100 * day fraction (from Strata based on day count convention)
OR
Daily interest = Amount (p,t) * (Base instrument latest market value on the day + spread-%) / 100 * day fraction (from Strata based on day count convention)
Total interest for the period is calculated as the sum of daily interests. Account interest is calculated separately for each account in the portfolio with the required parameters defined. The account interest transactions are stored in account currency with the latest report fx rates in the system.
Getting started
Define Calendar (day count convention) and Fixing - this field is used to enter a fixed yearly interest rate in percent or Base instrument and Spread
Calculation flow
When it is time to calculate account interest, define calculation details in fee calculation view. Select, if you want to calculate this to the group of portfolio. This should be done with similar periods, how bank pays interest out. You do not need to do this daily, calculation does use daily values.
