Term Deposit

A Term Deposit is a financial instrument that provides a fixed rate of interest on an amount for a specific term. For example, investing GBP 1,000 for 3 months at a 1% interest rate.

The instrument has two payments, one at the start date and one at the end date. For example, investing GBP 1,000 for 3 months implies an initial payment to the counterparty of GBP 1,000 and a final payment from the counterparty of GBP 1,000 plus interest.

Key classes

A Term Deposit is represented in Strata using the TermDeposit class. The TermDeposit class stores details of the product that was agreed. The trade details are stored in TermDepositTrade class.

A TermDeposit can be created using a builder as follows:

TermDeposit td = TermDeposit.builder()
  .buySell(BuySell.BUY)
  .currency(Currency.USD)
  .notional(10_000_000)
  .startDate(LocalDate.of(2014, 9, 12))
  .endDate(LocalDate.of(2014, 12, 12))
  .dayCount(DayCounts.THIRTY_360_ISDA)
  .rate(0.013)
  .build();
Tip: The strata-loader project provides the ability to load a term deposit from FpML.

Risk measures

The strata-measure module provides high-level risk measures for Term Deposits. The main entry point is TermDepositTradeCalculations.

The following measures are available:

  • present value, and associated sensitivity
  • par rate
  • par spread
  • currency exposure
  • current cash

These measures are also available using the calculation API.

The strata-pricer module provides lower-level pricing support for Term Deposits:

  • DiscountingTermDepositTradePricer, see Javadoc.
  • DiscountingTermDepositProductPricer, see Javadoc.

Product model

The following table summarizes the fields on TermDeposit that can be used to control the product. For more detail on the meaning of each field, see the Javadoc;

Property name Description Required/Optional
buySell Whether the deposit is buy or sell Required
currency The primary currency Required
notional The notional amount Required
startDate The start date Required
endDate The end date Required
businessDayAdjustment The holiday adjustment to the start/end date Optional
dayCount The day count Required
rate The fixed rate of interest Required

The fixed interest rate must be specified in decimal form. A 5% rate is specified as 0.05.