Non-cumulative compounded rate
From ACT Wiki
Reference rates - risk-free rates - compounded rates - cumulative compounded rate (CCR).
(NCCR).
The non-cumulative compounded rate is derived from the cumulative compounded rate (CCR).
The NCCR for a given day is the CCR for that day minus the CCR for the previous day.
This generates a daily compounded rate which allows the calculation of a daily interest amount.
These daily interest amounts are added up to provide a rate over the required period, enabling accurate calculation of accrued interest at any point in time.
- Sterling Loan Conventions recommend NCCR
- "ISDA uses the CCR method in its IBOR fallbacks for derivatives. The CCR method is also used in capital markets products.
- The Sterling Loan Conventions however, recommend the NCCR method for loans, because it better supports intra-period events such as prepayments and trading."
- The ACT Borrower’s Guide to the LMA’s Investment Grade Agreements - 6th edition - 2022 - p31.
See also
- Capital market
- Compound
- Cumulative compounded rate (CCR)
- Derivative instrument
- Fallback
- IBOR
- International Swaps and Derivatives Association (ISDA)
- Prepayment
- Principal
- Reference rate
- Risk-free rates (RFR)
- Sterling Loan Conventions
- Trading
Other resource
The ACT Borrower’s Guide to the LMA’s Investment Grade Agreements
