Types of fixed income security

The following table shows how to model specific security types in FIA, using the systems's building blocks.

In many cases there is more than one way to set up a security, so these recommendations need not be taken as definitive.

Please note that this page is continually being revised and amended. If you need advice on how to model a particular security type that is not shown here, please contact Flametree.

Notes

Where a security's suggested type is PERTURBATIONAL, its pricing function should be left blank.

A

Security type	Function	Notes
Agency bond	FT_BOND_ZERO_CURVE FT_BOND_YTM Perturbational security	Treat as vanilla coupon-paying bond
Adjustable rate mortgage (ARM)	Perturbational security	Cashflows may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
Amortizing bond	FT_SINKER_ZERO_CURVE	Amortizing bonds may have repayment rates set to zero
Amortizing cap
Amortizing swap
Annuity indexed bond
Asset-backed security (ABS)	FT_SINKER_ZERO_CURVE
Asset swap
Asset swapped convertible option transaction (ASCOT)
AU/NZ capital indexed bond
Auto callable note

B

Security type	Treatment	Notes
Bank loan	Sinking security
Barrier cap
Barrier floor
Bank bill	FT_BILL
Basis swap	PORTFOLIO with two FT_FRN_ZERO_CURVE
Bill future	Bill future
Bond	FT_BOND_ZERO_CURVE FT_BOND_YTM Perturbational security
Bond fund	PORTFOLIO	Portfolio is made up of underlying assets
Bond future	Bond future
Bond future option	Option	Return can be assigned to 'Option' bucket
Bond option	Option	Return can be assigned to 'Option' bucket
Brazilian bond	FT_BOND_ZERO_CURVE FT_BOND_YTM Perturbational security

C

Security type	Treatment	Notes
Cap
Cash	FT_CASH FT_ZERO_INTEREST_CASH	Depending on the type of cash held, a cash holding may or may not generate interest. Cash deposits and margin equity typically generate interest, while futures offsets does not.
Cash flow stream
Capital indexed bond	Inflation-linked bond	Model as a bond where cash flows are discounted off the real yield curve, plus a inflation carry return
Cash interest accrual	FT_ZERO_INTEREST_CASH
Catastrophe bond	FT_ZERO_INTEREST_CASH
CDS	CDS
CDS option
CDS index
Certificate of deposit (CD)		Model as a bond with coupon equal to final payment and a zero coupon frequency
CFD
Cliquet option
CMBS	Perturbational security	The cashflows of a CMBS may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
CMO	Perturbational security	Cashflows may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
Collar
Commercial paper	BILL
Commodity Future	Zero interest cash
Commodity Index Future	FT_EQUITY	No interest rate exposure assumed
Contract for Difference (CFD)	FT_EQUITY	No interest rate exposure assumed
Convertible Bond	BOND/EQUITY	Use effective date feature to convert between two types
Corporate bond	FT_BOND_ZERO_CURVE FT_BOND_YTM Perturbational security
Coupon deferrable bond	FT_BOND_ZERO_CURVE FT_BOND_YTM Perturbational security	Effective date feature may be used to model varying coupons
Credit Default Swap	CDS	Return is assigned to CDS residual bucket
Credit Default Swaption	CDS	Return is assigned to CDS residual bucket
Currency Future	FORWARD
CDO (synthetic)
CMBS
Cross-currency swap

D

Security type	Treatment	Notes
Debenture	BOND/FRN
Deliverable swap future
Double strike cap
Double strike floor
Drop-in scenario instrument
Dual currency deposit
Dual-indexed floater	FRN

E

Security type	Treatment	Notes
Emerging market bond	BOND or EQUITY	If no reference yield curve data is available, or if an EM bond trades like an equity, a Brinson-style analysis may be preferred
Equity
Equity accumulator
Equity average rate option
Equity basket option
Equity correlation swap
Equity double barrier option
Equity future
Equity future option
Equity linked note
Equity rebate barrier option
Equity single barrier option
Equity ADR/GDR	EQUITY
Equity Index	EQUITY
Equity Index Future	EQUITY
Equity Index Option	OPTION
Equity Index Option-OTC	OPTION
Equity Option	OPTION
Equity Option-OTC	OPTION
Equity Ordinary Share	OPTION
Equity Preferred Share	EQUITY
Equity Swap	PORTFOLIO with one EQUITY and one FRN asset
Equity variance swap

F

Security type	Treatment	Notes
Fixed Bond	BOND
Fixed indexed annuity	BOND or INFLATION_LINKED	Model as a bond where cash flows are discounted off the real yield curve, or as an indexed bond with given CPI rates
Floating Rate Note	FRN	Use effective date feature to update coupon
Forward FX	FORWARD
FRA	CASH	Can be modelled in more detail
Fund	PORTFOLIO
FX option (all types)	OPTION	Return may be assigned to 'Option' instead of 'Residual'
FX spot	CASH
FX Swap	PORTFOLIO with one CASH and one FORWARD asset
F	FX forward
FX future
FX future option
FX digital option
FX forward volatility agreement
FX option
FX correlation swap
FX variance/volatility swap
FX average rate option
FX double barrier option
FX rebate barrier option
FX single barrier option
Flip-flop bond

G

Security type	Treatment	Notes
Generic inflation indexed
Generic barrier option

I

Security type	Treatment	Notes
Inflation Linked Bond	INFLATION_LINKED
Inflation Swap	PORTFOLIO with one INFLATION_LINKED and one BOND/FRN asset
Interest Rate Future	BILL_FUTURE/BOND_FUTURE
Interest Rate Future Option	OPTION
Interest rate swap	PORTFOLIO with one BOND and one FRN asset
Inverse FRN	FRN
Interest rate swap option	OPTION
Islamic bond	EQUITY
Inflation cap
Inflation floor
Inflation indexed bond
Inflation indexed liability
Inflation indexed swap
Inflation swap
Interest rate digital option
Interest rate future
Interest rate future option
Interest rate spread option

L

Security type	Treatment	Notes
Leveraged lease	CASH
Loan	CASH	Interest on loan may be set using cash rate

M

Security type	Treatment	Notes
Mandatory convertible bond
Money market deposit
Mutual fund
MBS	SINKER
Mortality bond	EQUITY
Multi-currency Interest Rate Swap	PORTFOLIO with two BOND assets, representing each currency leg
Muni	BOND	Munis often have extensive optionality features, hence residual return may be assigned to a global 'Option' bucket or to muni-specific optionality returns

O

Security type	Treatment	Notes
Overnight Index Average Swap	EQUITY
Overnight Indexed swap	EQUITY

P

Security type	Treatment	Notes
Pass-through	Perturbational security	Cashflows may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
Payment-in-kind (PIK) loan	CASH
Perpetual bond	BOND	Modelled by setting maturity to, eg, 100 years in future
Prepay FRN	FRN
Promissory note	BILL

R

Security type	Treatment	Notes
Range accrual note
Reverse convertible

S

Security type	Treatment	Notes
Stepped FRN	FRN
Step-up bond	BOND
Step-up recovery FRN	FRN
Straddle
Securitized products

T

Security type	Treatment	Notes
TBA	Perturbational security	Cashflows may be unknown or very complex, so it is usually easier to use risk numbers (modified duration, convexity) as a proxy for a full pricing model
TIPS	BOND or INFLATION_LINKED	Model as a bond where cash flows are discounted off the real yield curve, or as an indexed bond with given CPI rates
Total Return Swap	PORTFOLIO	Portfolio is made up of underlying assets
Treasury	BOND
Treasury bill (TBILL)	BILL
Treasury lock
Treasury note	BOND

U

Security type	Treatment	Notes
UK inflation-linked gilt CMO
US agency MBS
US non-agency MBS

V

Security type	Treatment	Notes
Vanilla FRN	FRN
Variable rate FRN	FRN

W

Security type	Treatment	Notes
Warrant	CASH

Y

Security type	Treatment	Notes
Year-on-year inflation swap

Z

Security type	Treatment	Notes
Zero-coupon bond
Zero-coupon swap	PORTFOLIO with one FRN and one BILL