Description of Reference Entity & Reference Obligation from the Product Architecture Document

Description of Reference Entity & Reference Obligation from the Product Architecture Document

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The full expansion of the referenceInformation element appears in figure 4. Two of its child elements, referenceEntity and referenceObligation, are used to represent the Reference Entity and Reference Obligation(s) terms respectively.

The referenceEntity element is of type LegalEntity and is required. The LegalEntity type requires an entityName and/or an entityId to be provided. Both the entityName and the entityId are represented using schemes, which allow the source (e.g. reference database) of the information to be recorded.

A referenceObligation element has either a bond or a convertibleBond as one of its child elements. The bond and convertibleBond elements are shared FpML elements. In other words, they were not created specifically to support credit derivatives and are also used in other asset classes. For a credit default swap one of these elements is used to specify a Reference Obligation's CUSIP/ISIN, Maturity and Coupon values. The instrumentId element is used to specify CUSIP/ISIN. The optional instrumentIdScheme is used to specify whether the id provided is a CUSIP or an ISIN. Since multiple occurrences of instrumentId are allowed, the schema supports the specification of both the obligation's CUSIP and ISIN, if they both exist. The couponRate and maturity elements are used to represent the Coupon and Maturity terms respectively.

To represent the Primary Obligor term a referenceObligation element may optionally have either a primaryObligor or a primaryObligationReference element. If the Primary Obligor is the Reference Entity, then primaryObligorReference should be used. Its href attribute will contain the id attribute of the referenceEntity. Otherwise, the primaryObligor element, which is of type LegalEntity, should be used.

Similarly, to represent the Guarantor term a referenceObligation element may optionally have either a guarantor or a primaryObligationReference element. If the Guarantor is the Reference Entity, then guarantorReference should be used. Its href attribute will contain the id attribute of the referenceEntity. Otherwise, the guarantor element, which is of type LegalEntity, should be used.

The optional allGuarantees and referencePrice are used to represent the terms All Guarantees and Reference Price respectively.

Figure 4: referenceInformation element

Although the structure of referenceInformation appears to be somewhat complex, the specification of Reference Entity and Reference Obligation information in FpML documents is quite simple, straightforward and flexible. An example bears this out:

Reference Entity: Bundesrepublic Deutschland
Primary Obligor: Reference Entity
Guarantor: None
Coupon Rate: 5%
Date Maturity: 2012-7-4
ISIN/Cusip: DE0001135200
Reference Price: 100%

In order to support the full credit default swap trade lifecycle, the schema allows this information to be expressed in various degrees of detail:

Example 1 - Reference Entity only:

<entityName>Bundesrepublic Deutschland</entityName>

</referenceEntity>

</referenceInformation>

Example 2 - Reference Entity and ISIN of the Reference Obligation with optional scheme attributes:

<entityName>Bundesrepublic Deutschland</entityName>

</referenceEntity>

<bond>

<instrumentId instrumentIdScheme =

</bond>

</referenceObligation>

</referenceInformation>

Example 3 - Full Representation of Reference Entity and Reference Obligation terms:

<entityName>Bundesrepublic Deutschland</entityName>

</referenceEntity>

<bond>

<instrumentId

instrumentIdScheme =

</bond>

<primaryObligorReference href =

"DBR"/>

</referenceObligation>

</referenceInformation>