Forward Contracts mimic the cash-flow of the underlying instruments. Therefore KODIAK Derivatives needs to generate the correct cash-flows for all forward contracts. For contracts with underlying bonds, the system needs to generate and attach all interest payments to the correct forward contracts. For contracts with underlying shares, the system needs to generate and attach all dividend payments to the correct forward contracts.
Interest Payments
The Interest payment schedule for bonds is calculated by Kóði based on information published by the NOMXI Stock Exchange. Kóði also calculates the size of each payment (principal + interests + index adjustment). The KODIAK Derivatives system uses these calculations to attach those interest payments to each bond forward contract.
Dividend Payments
According to the Icelandic Security Depository: Ex-dividend date is the day on which all shares bought and sold no longer come attached with the right to be paid the most recently declared dividend.
Dividend payments are added to forward contracts in two steps.
- First they are entered into a Back Office Interface that saves them to a database table.
- After the dividend payments are inserted into the database, the same job that insert interest payments on bond contracts picks them up and adds them to all open contracts with that particular underlying share.
Back office interface
In the back office web interface, users can insert/edit and disabled dividend payments. Users have to provide
- Symbol: market symbol of the share
- Ex Dividend Date
Calculation Date:the day on which all shares bought and sold no longer come attached with the right to be paid - Payment Date: When is the dividend payment paid out (and starts bearing interests).
- Dividend per share: Monetary value paid out per share of stock
Payments Job
The payments job has two roles. Firstly to attach interest payments to contracts with underlying bonds and secondly to attach dividend payments to contracts with underlying shares.
Attaching dividend payments
The job goes through all enabled dividend payments that have Ex Dividend Date (CalcDate in the Database) less or equal today and attaches payments to all open forward contracts with the same underlying share and with SettlementDate less than the CalcDate.
Attaching interest payments
The job goes through all underlying bonds that have open forward contracts. For each interest payment that has occurred in the bond's cash flow it attaches a payment to each open forward contract (rightsDate <= ExpiryDate && !x.IsClosed && SettlementDate < rightsDate)) where rightsDate is the previous bank day of the interest date of the interest payment.