Incorrect ALM FE 465 Total Currency Gain/Loss Principal Results for Forecast Currency Rate Scenarios (Doc ID 2245361.1)

Last updated on MARCH 17, 2017

Applies to:

Oracle Financial Services Asset Liability Management - 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)

Symptoms

On ALM 8.0.2, the generated FE 465 Total Currency Gain/Loss (Principal) appear to be incorrect for a couple of scenarios.

ACTUAL BEHAVIOR
After running an ALM Static Deterministic process it is noticed that the FE 465 is generated incorrectly across scenarios.

The current forecast rates scenarios definition contains 6 scenarios for the exchange rate between the currency of the source record and the reporting currency with the following methods:
Scenario 1: Flat
Scenario 2: Structured Change
Scenario 3: Structured Change
Scenario 4: Flat
Scenario 5: Flat
Scenario 6: Flat
For the “Flat” scenarios it is expected that FE 465 is equal to 0 across all buckets because the difference [(1/Current Exchange rate) - (1/ Previous Exchange Rate)] will always be 0 since the Current Exchange Rate equals the Previous Exchange Rate (the exchange rate is Flat).

When the results are checked it is found:
Scenario 1: does not generate FE 465 since it is equal with 0 for all buckets - ok
Scenario 2: does generate FE 465 and we could replicate the value - ok
Scenario 3: does generate FE 465 but we could not replicate the value - not ok
Scenario 4: does generate FE 465 although it should not since it is flat - not ok
Scenario 5: does not generate FE 465 since it is equal with 0 for all buckets - ok
Scenario 6: does not generate FE 465 since it is equal with 0 for all buckets - ok

Also, another strange observation, if adding the amounts from Scenario 2 and 3 from the original output, it appears equal to the amount validated for Scenario 3

EXPECTED BEHAVIOR
For the “Flat” scenarios it is expected that FE 465 is equal to 0 across all buckets because the difference [(1/Current Exchange rate) - (1/ Previous Exchange Rate)] will always be 0 since the Current Exchange Rate equals the Previous Exchange Rate (the exchange rate is Flat).

The issue can be reproduced at will with the following steps:
1. Create a record as in the file “Deal_Data”
2. Create a “Product Characteristics” assumption for the source product by leaving the Currency Gain/Loss basis as “None” (by default the method will be “Temporal”)
3. Define historical exchange rates for TRY/USD as in the file “Historical_Rates”
4. Create a forecast rates scenarios definition having the reporting currency “TRY” and the details for structured change method as it can be found in the file "Structured_Change_details"
For the rest of the scenarios (1, 4, 5, 6) define “Flat” method.
5. Create an ALM process having reporting currency “TRY”

Cause

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