The Interest Payment per bucket is the sum of interest payments within a bucket ]d₁,d₂].

IP(]d₁,d₂])  = ∑ IP_i, where:

• IP_i are interest payments within ]d₁,d₂]

   

Interest payments can occur at the beginning (pre) of the interest period or at the end (post).

Concerning the calcultation of interests, several methods can be applied:

1. Simple: I = OP x r, where:

• I: interest payment of the interest period,
• OP: outstanding principal during the interest period,
• r: rate adjusted with the basis

2. Compounding: I = OP x [ (1 + r / P_c) ^P_cP_i - 1 ], where:

• I: interest payment of the interest period,
• OP: outstanding principal during the interest period,
• Pc is the annual compounded period frequency, for instance, for 3 month, 12/3=4,
• P_i is the interest period expressed with the basis

3. Linear Compouding: the interest is calculated on the basis pf the outstanding principal and the accrued interests. The interest is compounded at each compounded period. I = OP x r^*, where:

• I: interest payment of the interest period
• OP: outstanding principal during the interest period
• r^*: rate defined as follow: r^* = (1 + r / P_c) P_c -1

4. Continuous: I = OP x [e ^r* - 1]