Effective Interest Rate Calculation Validation Formula (Doc ID 2171987.1)

Last updated on AUGUST 12, 2016

Applies to:

Oracle Financial Services Hedge Management and IFRS Valuations - Version 6.1.1 and later
Information in this document applies to any platform.
Oracle Financial Services Analytical Applications (OFSAA)
Oracle Financial Services Hedge Management and IFRS Valuations (HM/IFRS)

Goal

Currently checking the HM-IFRS Effective Interest Rate (EIR) calculation performed by the system in comparison to the Excel Goal Seek feature (that applies the Newton Raphson method to determine the EIR). By validating using the Cash Flow calculated by the Cash Flow Edits (CFE) (Financial Element FE 210 Total Runoff + FE 430 Interest Income), there is a variance in EIR result (0,2867) than the system (0,25473).

In the documentation, there is a formula, but there is no physical evidence (like the cash flow elements) regarding the calculation process.

The questions are:

Does the System have any log available regarding the calculations steps for the EIR, like CFE has ?
What are the right FEs for the cash flow, that means the ones utilized by the CFE for EIR calculation ?
Is it possible to have for the attached example (see data into sheet EIR for financial instrument ID Number = 1) the EIR formula development)?

Solution

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