Hybrid and Interest determination date: Difference between pages

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imported>Doug Williamson
(Create page. Source: The Treasurer, Cash Management Edition April 2019, p28.)
 
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1.
An interest determination date is a date by reference to which an amount of interest is calculated.


Hybrid is a term used to describe a financial instrument which displays characteristics of both debt and equity.
There is normally a time lag between the interest determination date and the interest payment date.


Such instruments might be designed to be an intermediate (or mezzanine) category of capital between equity and debt, or to have some of the risk absorbing characteristics of equity and, ideally, the tax efficiency of debt.


These are 'hybrid' financial instruments.
:<span style="color:#4B0082">'''''Five-day lag'''''</span>


:"In SONIA referencing bonds, we have seen the Interest Determination Date set five days in advance of the interest payment date.


2. ''Tax''.
:This essentially creates a five-day lag between the interest period and the interest rate reference period.


The term 'hybrid' can also refer to an entity which is treated differently for tax purposes in different tax jurisdictions.
:For example, for a bond that is due to rollover on the 15th of the month, the final interest rate applicable in that period would be finalised on the 10th of that month, enabling market participants sufficient time for calculation of cash flow and settlement...


:It is possible that over time the five-day period could shorten as the market becomes more familiar with this change in convention."


3. ''Green finance - greener technology''.
:''The Treasurer magazine, Cash Management Edition April 2019 p28, Lloyds Bank.''
 
The use - in a single system - of both traditional and greener technologies.
 
For example, vehicles that can run either on electric batteries or more traditional fuels such as petrol or diesel.
 
 
4.
 
More broadly, any structure, instrument or entity with mixed, or intermediate, characteristics between two or more other, simpler or standardised structures.
 
 
:<span style="color:#4B0082">'''''Intra-day net settlement'''''</span>
 
:"There are two basic ways that domestic clearing systems settle:
 
:* end-of-period net settlement; and
:* real-time gross settlement.
 
 
:A third option is a hybrid of these two: intra-day net settlement. This is practised by a number of systems, such as the US Clearing House Inter-bank Payment System (CHIPS) and the Faster Payments Scheme in the UK."
 
:''Payments and payment systems - the Treasurer's Wiki.''
 
 
The term 'hybrid' originates from horticulture and farming, where hybrid plants and animals are a biological cross between two different species or breeds.




== See also ==
== See also ==
* [[Clearing House Interbank Payment System]]
* [[Bond]]
* [[Convertible debt]]
* [[Determination]]
* [[Faster Payments Service]]
* [[Green finance]]
* [[Hybrid debt]]
* [[Hybrid capital]]
* [[Hybrid clearing and settlement systems]]
* [[Hybrid cloud]]
* [[Hybrid entity]]
* [[Hybrid mismatch arrangement]]
* [[Hybrid pension scheme]]
* [[Hybrid working]]
* [[Mezzanine]]
* [[Payments and payment systems]]
* [[Preference shares]]
* [[Settlement]]
* [[Settlement]]
* [[Ten Point Plan for a Green Industrial Revolution]]
* [[SONIA]]
* [[Warrant]]
 
[[Category:Accounting,_tax_and_regulation]]
[[Category:Long_term_funding]]

Revision as of 15:43, 19 April 2019

An interest determination date is a date by reference to which an amount of interest is calculated.

There is normally a time lag between the interest determination date and the interest payment date.


Five-day lag
"In SONIA referencing bonds, we have seen the Interest Determination Date set five days in advance of the interest payment date.
This essentially creates a five-day lag between the interest period and the interest rate reference period.
For example, for a bond that is due to rollover on the 15th of the month, the final interest rate applicable in that period would be finalised on the 10th of that month, enabling market participants sufficient time for calculation of cash flow and settlement...
It is possible that over time the five-day period could shorten as the market becomes more familiar with this change in convention."
The Treasurer magazine, Cash Management Edition April 2019 p28, Lloyds Bank.


See also