BROWSE

Range Accrual

Definition

In finance, a range accrual is a type of derivative product very popular among structured-note investors. It is estimated that more than US$160 billion of Range Accrual indexed on interest rates only have been sold to investors between 2004 and 2007. It is one of the most popular non-vanilla financial derivatives. In essence the investor in a range accrual is betting that the reference "index" - usually interest rates or currency exchange rates - will stay within a predefined range.

What is 'Range Accrual'

A form of interest accrual in which the coupon rate is only earned on days when another rate from which the coupon is derived falls within a specified range. As such, there is no standard coupon rate that can be counted on for interest payments.

Explaining 'Range Accrual'

Range accrual notes are complex instruments that are valued and adjusted in a similar manner to American style options. They are typically used by large institutions as a hedge of another position. No official market exists for range accrual notes trading or valuation.


Further Reading


Pricing and hedging of quanto range accrual notes under Gaussian HJM with cross‐currency Levy processes
onlinelibrary.wiley.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

Pricing Range Accrual Interest Rate Swap employing LIBOR market models with jump risksPricing Range Accrual Interest Rate Swap employing LIBOR market models with jump risks
www.sciencedirect.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

Pricing Deposit Product of Exchange Rate Range AccrualPricing Deposit Product of Exchange Rate Range Accrual
en.cnki.com.cn [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

Generalized affine transform on pricing quanto range accrual noteGeneralized affine transform on pricing quanto range accrual note
www.sciencedirect.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

Pricing of payment deferred vulnerable options and its application to vulnerable range accrual notesPricing of payment deferred vulnerable options and its application to vulnerable range accrual notes
papers.ssrn.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

Financial status, corporate governance quality, and the likelihood of managers using discretionary accrualsFinancial status, corporate governance quality, and the likelihood of managers using discretionary accruals
www.emerald.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

The economics of short-term performance obsessionThe economics of short-term performance obsession
www.tandfonline.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

Comparing abnormal accruals estimates across samples: An international testComparing abnormal accruals estimates across samples: An international test
www.tandfonline.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

Accounting accruals and stock returns: Evidence from European equity marketsAccounting accruals and stock returns: Evidence from European equity markets
www.tandfonline.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …

Accrual accounting in EU local governments: One method, several approachesAccrual accounting in EU local governments: One method, several approaches
www.tandfonline.com [PDF]
… in Das (2002), a number of researchers have found that the announcements of economic news and … the underlyings of RANs are usually interest rates in inter- national financial markets, such … be used to develop a hedg- ing strategy for quanto floating range accrual note (QFRAN …



Q&A About Range Accrual


Who typically uses range accruals?

Large institutions use them as hedges for other positions.

What does it mean to say that there are no standard coupon rates for range accruals?

There are no standard coupons rates because they depend on other factors.

Is there an official market for trading or valuing range accruals?

No, there isn't one.

What is range accrual?

Range accrual is a form of interest accrual in which the coupon rate is only earned on days when another rate from which the coupon is derived falls within a specified range.

Leave a Reply

Your email address will not be published. Required fields are marked *