ACT/365 Accrual Used Instead of Expected 30/360 Accrual for FE 430 Interest Cashflow Calculation for Daily Repricing Instrument
Last updated on NOVEMBER 01, 2016
Applies to:Oracle Financial Services Asset Liability Management - Version 8.0.2 and later
Oracle Financial Services Balance Sheet Planning - Version 8.0.2 and later
Information in this document applies to any platform.
Oracle Financial Services Analytical Applications (OFSAA)
Oracle Financial Services Asset Liability Management (ALM)
Oracle Financial Services Balance Sheet Planning (BSP)
On ALM 8.0.2, when REPRICE_FREQ < PMT_FREQ and the ACCRUAL_BASIS_CD = 1 (30/360), it appears that the interest cash flow (FE 430) is not using the accrual_basis_cd 30/360. It instead appears to be using incorrectly ACT/365.
The FE 430 Interest Cash Flow is using ACT/365 for accrual for a daily repricing instrument that is has a monthly payment freq. Other instruments where REPRICE_FREQ = PMT_FREQ with accrual_basis_cd = 30/360 appear to use the correct accrual.
Expect that the FE 430 Interest Cash Flow = Current Balance * Rate Per Payment:
In the "Rate Per Payment" calculation, use the ACCRUAL_BASIS_CD to adjust the annual current rate to reflect what the rate will be for one payment period.
Should not be using ACT/365 should be using 30/360 as it is the accrual on the record.
The issue can be reproduced at will with the following steps:
1. Load instrument record with ACCRUAL_BASIS_CD = 1 and REPRICE_FREQ < PMT_FREQ
2. Run ALM process and check the results.
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