# FpML 4.2 Validation Rules - Rules for Interest Rate Derivatives (IRD)

This is the Interest Rate Derivatives part of the validation rule set accompanying the FpML 4.2 Trial Recommendation. The introductory section in the draft contains background information and documentation for this page.

The rules contained on this page contain links to cut down versions of valid and invalid test cases. These test cases have been analysed using Systemwire's xlinkit rule engine to highlight relevant document portions accessed by a rule. The cut down test cases are non-normative and are provided for the purpose of documentation only.

## Content

- Definitions
  - regular period
  - frequency equivalence
  - unadjusted calculation period dates
- Preconditions
  - isParametric
- Rules
- Rules marked as Work in Progress
  - ird-57
  - ird-58

## Definitions

Term: regular period
The regular period of a set of calculation period dates is the period between a start date and an end date. The start date is firstRegularPeriodStartDate, if present, or effectiveDate/unadjustedDate otherwise. The end date is lastRegularPeriodEndDate, if present, or terminationDate/unadjustedDate otherwise.
Term: frequency equivalence
A frequency is specified as a tuple of period, which is an integer, and periodMultiplier, which is one of D, M, Y, W or T, standing for day, month, year, week and term. Between any pair of frequencies, the following is the complete list of equivalences where the period multipliers differ:

- 12M=1Y
- 7D=1W

If the period multipliers of a pair of frequencies are equivalent, then they are equal if and only if the period elements are equal. For the purpose of calculating multiples of periods, the following additional rule holds:

- Any frequency > 0 is a multiple of 1D

Term: unadjusted calculation period dates
This applies in the context of an InterestRateStream. For the purpose of validation, the unadjusted calculation period dates are determined as follows:

- cashflows element not present: the unadjusted calculation period dates are calculated by stepping through the regular period at the frequency specified in calculationPeriodDates/calculationPeriodFrequency. The first date is the start date of the regular period and the last date is the end date of the regular period.
- cashflows element is present and cashflowsMatchParameters is true: the unadjusted calculation period dates are calculated from the regular period as in the previous case.
- cashflows element is present and cashflowsMatchParameters is false: rules that relate elements to unadjusted calculation period dates do not apply. Instead, the cash flows must be validated internally.

## Preconditions

The following preconditions are always to be executed relative to the root of the FpML document being validated. The context of the rule is NOT carried through to the precondition.

Precondition: isParametric
The ancestor element of type InterestRateStream contains no cashflows element, or cashflows/cashflowsMatchParameters contains true.

## Rules

#### Unique contexts:

- InterestRateStream (data type): ird-1 ird-2 ird-3 ird-4 ird-5 ird-6 ird-7 ird-8 ird-9
- calculationPeriodDates: ird-10 ird-11 ird-12 ird-14 ird-15 ird-16 ird-17 ird-18 ird-19 ird-20 ird-21 ird-22 ird-57 ird-58
- stubCalculationPeriodAmount: ird-23 ird-24
- Schedule (data type): ird-25
- businessCentersReference: ird-26
- MandatoryEarlyTermination (data type): ird-27 ird-28
- Calculation (data type): ird-29
- CalculationPeriod (data type): ird-30 ird-31
- Discounting (data type): ird-32
- Fra (data type): ird-33
- PaymentCalculationPeriod (data type): ird-34
- PaymentDates (data type): ird-35 ird-36
- StubCalculationPeriodAmount (data type): ird-38
- EarlyTerminationEvent (data type): ird-39 ird-40 ird-41
- ExtensionEvent (data type): ird-42
- FxLinkedNotionalAmount (data type): ird-43
- MandatoryEarlyTerminationAdjustedDates (data type): ird-44
- OptionalEarlyTermination (data type): ird-46 ird-47
- Swaption (data type): ird-48
- ResetFrequency (data type): ird-49
- notionalStepSchedule: ird-50
- fixedRateSchedule: ird-51
- capRateSchedule: ird-52
- floorRateSchedule: ird-53
- knownAmountSchedule: ird-54
- paymentDates: ird-55 ird-56
- Deprecated rules

#### Context: InterestRateStream (data type)

ird-1 (Mandatory)
resetDates must be present if and only if a fixedRateSchedule element is not present in the calculationPeriodAmount/calculation element.
Test cases: [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid]
ird-2 (Mandatory)
Preconditions: isParametric
paymentDates/paymentFrequency must be an integer multiple (could be 1) of calculationPeriodDates/calculationPeriodFrequency. See also: frequency equivalence.
Test cases: [Valid] [Valid] [Valid] [Invalid] [Invalid]
ird-3 (Mandatory)
Preconditions: isParametric
paymentDates/firstPaymentDate must match one of the unadjusted calculation period dates.
Test cases: [Valid] [Valid] [Valid] [Invalid] [Invalid] [Invalid]
ird-4 (Mandatory)
Preconditions: isParametric
paymentDates/lastRegularPaymentDate must match one of the unadjusted calculation period dates
Test cases: [Valid] [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid]
ird-5 (Mandatory)
Preconditions: isParametric
The frequency in calculationPeriodDates/calculationPeriodFrequencymust be an integer multiple of the frequency in resetDates/resetFrequency. See also: frequency equivalence
Test cases: [Valid] [Valid] [Invalid] [Invalid]
ird-6 (Mandatory)
Preconditions: isParametric
paymentDates/firstPaymentDate > calculationPeriodDates/effectiveDate/unadjustedDate.
Test cases: [Valid] [Invalid]
ird-7 (Mandatory)
Preconditions: isParametric
calculationPeriodAmount/calculation/compoundingMethod is present if and only if the frequencies in paymentDates/paymentFrequency and calculationPeriodDates/calculationPeriodFrequency are different. See also: frequency equivalence.
Test cases: [Valid] [Valid] [Invalid] [Invalid]
ird-8 (Mandatory)
payerPartyReference/@href and receiverPartyReference/@href must not be the same.
Test cases: [Valid] [Invalid]
ird-9 (Mandatory)
calculationPeriodAmount/calculation/compoundingMethod can only be present if a resetDates element is present.
Test cases: [Valid] [Invalid]

#### Context: calculationPeriodDates

ird-10 (Mandatory)
Preconditions: isParametric
This rule applies when calculationPeriodFrequency/rollConvention is a number. Let the start date be firstRegularPeriodStartDate if it exists, or effectiveDate/unadjustedDate otherwise: If calculationPeriodFrequency/rollConvention is less than or equal to the last day of the month in the start date, then the day of the start date must match it. Otherwise the day of the start date must be the last day of the month of that date.
Test cases: [Valid] [Valid] [Valid] [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid]
ird-11 (Mandatory)
Preconditions: isParametric
This rule applies when calculationPeriodFrequency/rollConvention is a number. Let the end date be lastRegularPeriodEndDate if it exists, or terminationDate/unadjustedDate otherwise: If calculationPeriodFrequency/rollConvention is less than or equal to the last day of the month in the end date, then the day of the end date must match it. Otherwise the day of the end date must be the last day of the month of that date.
Test cases: [Valid] [Valid] [Valid] [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid] [Invalid]
ird-12 (Mandatory)
Preconditions: isParametric
The frequency specified in calculationPeriodFrequency must divide the regular period precisely. This means that by stepping through the period from the start date at the specified frequency, it must be possible to reach the end date.
Test cases: [Valid] [Valid] [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid] [Invalid] [Invalid]
ird-14 (Mandatory)
Preconditions: isParametric
terminationDate/unadjustedDate > effectiveDate/unadjustedDate.
Test cases: [Valid] [Invalid] [Invalid]
ird-15 (Mandatory)
Preconditions: isParametric
terminationDate/unadjustedDate > firstPeriodStartDate/unadjustedDate.
Test cases: [Valid] [Invalid] [Invalid]
ird-16 (Mandatory)
Preconditions: isParametric
terminationDate/unadjustedDate > firstRegularPeriodStartDate.
Test cases: [Valid] [Invalid] [Invalid]
ird-17 (Mandatory)
Preconditions: isParametric
terminationDate/unadjustedDate > lastRegularPeriodEndDate.
Test cases: [Valid] [Invalid]
ird-18 (Mandatory)
Preconditions: isParametric
lastRegularPeriodEndDate > firstRegularPeriodStartDate.
Test cases: [Valid] [Invalid] [Invalid]
ird-19 (Mandatory)
Preconditions: isParametric
lastRegularPeriodEndDate > firstPeriodStartDate/unadjustedDate.
Test cases: [Valid] [Invalid] [Invalid]
ird-20 (Mandatory)
Preconditions: isParametric
lastRegularPeriodEndDate > effectiveDate/unadjustedDate
Test cases: [Valid] [Invalid]
ird-21 (Mandatory)
Preconditions: isParametric
firstPeriodStartDate/unadjustedDate < effectiveDate/unadjustedDate
Test cases: [Valid] [Invalid] [Invalid]
ird-22 (Mandatory)
Preconditions: isParametric
firstPeriodStartDate/unadjustedDate < firstRegularPeriodStartDate
Test cases: [Valid] [Invalid] [Invalid]
ird-57 (Mandatory)
Preconditions: isParametric
If rollConvention is neither NONE nor SFE, nor a day of the week ( MON, TUE, WED, THU, FRI, SAT or SUN) then the period must be M or Y.
Test cases: [Valid] [Valid] [Valid] [Valid] [Invalid]
ird-58 (Mandatory)
Preconditions: isParametric
If rollConvention is a day of the week ( MON, TUE, WED, THU, FRI, SAT or SUN) then the period must be W.
Test cases: [Valid] [Valid] [Valid] [Valid] [Invalid]

#### Context: stubCalculationPeriodAmount

ird-23 (Mandatory)
initialStub should only be present if the calculationPeriodDates element referenced by calculationPeriodDates/@href contains at least one of:

- firstPeriodStartDate
- firstRegularPeriodStartDate

Test cases: [Valid] [Valid] [Invalid]
ird-24 (Mandatory)
finalStub should only be present if the calculationPeriodDates element referenced by calculationPeriodDates/@href contains a lastRegularPeriodEndDate element.
Test cases: [Valid] [Invalid]

#### Context: Schedule (data type)

ird-25 (Mandatory)
If there are no step elements then initialValue must be non-zero.
Test cases: [Valid] [Valid] [Invalid]

#### Context: businessCentersReference

ird-26 (Mandatory)
The @href attribute must match the @id attribute of a businessCenters element somewhere within the document.
Test cases: [Valid] [Valid] [Invalid] [Invalid]

#### Context: MandatoryEarlyTermination (data type)

ird-27 (Mandatory)
cashSettlement/cashSettlementPaymentDate must not be present.
Test cases: [Valid] [Invalid]
ird-28 (Mandatory)
In cashSettlement/cashSettlementValuationDate/dateRelativeTo, the @href attribute must point to the @id attribute of mandatoryEarlyTerminationDate.
Test cases: [Valid] [Invalid]

#### Context: Calculation (data type)

ird-29 (Mandatory)
If compoundingMethod is present then fixedRateSchedule must not be present.
Test cases: [Valid] [Invalid]

#### Context: CalculationPeriod (data type)

ird-30 (Mandatory)
Must contain unadjustedStartDate and/or adjustedStartDate.
Test cases: [Valid] [Valid] [Invalid]
ird-31 (Mandatory)
Must contain unadjustedEndDate and/or adjustedEndDate.
Test cases: [Valid] [Valid] [Invalid]

#### Context: Discounting (data type)

ird-32 (Mandatory)
If discountRate is absent then discountRateDayCountFraction must also be absent.
Test cases: [Valid] [Valid] [Invalid]

#### Context: Fra (data type)

ird-33 (Mandatory)
adjustedTerminationDate> adjustedEffectiveDate.
Test cases: [Valid] [Invalid]

#### Context: PaymentCalculationPeriod (data type)

ird-34 (Mandatory)
Either unadjustedPaymentDate or adjustedPaymentDate must be present.
Test cases: [Valid] [Valid] [Invalid]

#### Context: PaymentDates (data type)

ird-35 (Mandatory)
firstPaymentDate < lastRegularPaymentDate.
Test cases: [Valid] [Invalid] [Invalid]
ird-36 (Mandatory)
If both firstPaymentDate and lastRegularPaymentDate are present then the period defined by these dates must be an integer multiple of paymentFrequency.
Test cases: [Valid] [Invalid]

#### Context: StubCalculationPeriodAmount (data type)

ird-38 (Mandatory)
Either initialStub or finalStub must be present.
Test cases: [Valid] [Valid] [Valid] [Invalid]

#### Context: EarlyTerminationEvent (data type)

ird-39 (Mandatory)
adjustedExerciseDate <= adjustedEarlyTerminationDate
Test cases: [Valid] [Valid] [Invalid]
ird-40 (Mandatory)
adjustedExerciseDate <= adjustedCashSettlementValuationDate
Test cases: [Valid] [Valid] [Invalid]
ird-41 (Mandatory)
adjustedCashSettlementValuationDate <= adjustedCashSettlementPaymentDate
Test cases: [Valid] [Valid] [Invalid]

#### Context: ExtensionEvent (data type)

ird-42 (Mandatory)
adjustedExerciseDate < adjustedExtendedTerminationDate
Test cases: [Valid] [Invalid] [Invalid]

#### Context: FxLinkedNotionalAmount (data type)

ird-43 (Mandatory)
At least one element must be present
Test cases: [Valid] [Invalid]

#### Context: MandatoryEarlyTerminationAdjustedDates (data type)

ird-44 (Mandatory)
adjustedEarlyTerminationDate <= adjustedCashSettlementValuationDate <= adjustedCashSettlementPaymentDate
Test cases: [Valid] [Invalid] [Invalid] [Invalid] [Invalid] [Invalid]

#### Context: OptionalEarlyTermination (data type)

ird-46 (Mandatory)
In cashSettlement/cashSettlementValuationDate/dateRelativeTo, the @href attribute must point to the @id attribute of cashSettlement/cashSettlementPaymentDate.
Test cases: [Valid] [Invalid]
ird-47 (Mandatory)
In cashSettlement/cashSettlementPaymentDate/relativeDate/dateRelativeTo, the @href attribute must point to the @id attribute of americanExercise, bermudaExercise or europeanExercise, whichever one is present.
Test cases: [Valid] [Invalid]

#### Context: Swaption (data type)

ird-48 (Mandatory)
In cashSettlement/cashSettlementPaymentDate/relativeDate/dateRelativeTo, the @href attribute must point to the @id attribute of americanExercise, bermudaExercise or europeanExercise, whichever one is present.
Test cases: [Valid] [Invalid]

#### Context: ResetFrequency (data type)

ird-49 (Mandatory)
weeklyRollConventionshould be present if and only if the period is W
Test cases: [Valid] [Valid] [Invalid] [Invalid]

#### Context: notionalStepSchedule

ird-50 (Mandatory)
Preconditions: isParametric
The dates in step/stepDate must be unadjusted calculation period dates in ../../../../calculationPeriodDates.
Test cases: [Valid] [Valid] [Invalid] [Invalid] [Invalid]

#### Context: fixedRateSchedule

ird-51 (Mandatory)
Preconditions: isParametric
The dates in step/stepDate must be unadjusted calculation period dates in ../../../calculationPeriodDates.
Test cases: [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid]

#### Context: capRateSchedule

ird-52 (Mandatory)
Preconditions: isParametric
The dates in step/stepDate must be unadjusted calculation period dates in ../../../../calculationPeriodDates.
Test cases: [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid]

#### Context: floorRateSchedule

ird-53 (Mandatory)
Preconditions: isParametric
The dates in step/stepDate must be unadjusted calculation period dates in ../../../../calculationPeriodDates.
Test cases: [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid]

#### Context: knownAmountSchedule

ird-54 (Mandatory)
Preconditions: isParametric
The dates in step/stepDate must be unadjusted calculation period dates in ../../calculationPeriodDates.
Test cases: [Valid] [Valid] [Invalid] [Invalid] [Invalid] [Invalid]

#### Context: paymentDates

ird-55 (Mandatory)
If calculationPeriodDatesReference exists it shall match with calculationPeriodDates in the nearest containing element of type InterestRateStream
Test cases: [Valid] [Invalid]
ird-56 (Mandatory)
If resetDatesReference exists then it shall match with resetDates in the nearest containing element of type InterestRateStream.
Test cases: [Valid] [Invalid]

#### Deprecated rules