Settlements are calculated like this:
amount buyer pays seller = (index quote–100)/100*notional amount) + accrued coupon.
For example: A trade went into effect on March 21 for a $10 million ABX.he 07-1 AAA at 99.51. Accrued from March 15 with a coupon of 9bp, the settled amount would be –$31500, meaning that the seller would owe the buyer $31,500. If the index value was above 100, the buyer would get paid.
A) index level = 99.51
B) Notional amount = $10 mill
C) Coupon rate= 0.09%
D) Settlement date = 3/21/2007
E) Accrued from = 3/15/2007
F) Days accrued = 7
G) Coupon accrued = (( C*B*F)/360) = 175
H) Net value of contract B*((A-100)/100) = –49,000
I) Buyer pays seller (if negative, seller pays buyer)= –48,825
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