ALM Discount Rate Rule Not Applied if Defined at the Node Level With Default Currency

(Doc ID 2263950.1)

Last updated on MAY 09, 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, when checking the results for Market Value, duration and DV01, it appears that a discount method rule setup at top node on default currency is not read and applied. If the Discount Method is defined on the top node in AUD currency instead of Default Currency, then market value, duration and DV01 look much more sensible.

ACTUAL BEHAVIOR
Discount method set at TOP Node for Default CCY = ’LAH Sconto’ (203689). Using this discount method the Market Value = principal (210) + interest (430) for product 1003 = 1,040,000, and for product 3001 = 1,025,000, duration = 1 and DV01 = 1.04 and 1.025 respectively which is not expected. Discount method does not appear to be applied.

EXPECTED BEHAVIOR
If using discount method set at TOP node for AUD = ‘LAH test AUD’ (204347), then market value = 1009191.40 for 1003 Person Loan and 994635.76 for 3001 – Term Deposit. These results make sense because the market rate from IRC 40101 for 365d is 3.0528, compared to customer rates of 4% and 2.5% respectively for the loan and TD. The duration and DV01 then make sense at 0.97 and DV01 = 97.93 etc

The issue can be reproduced at will with the following steps:
1. Create Discount Method rule and define at the top node for the default currency. Check Market Value, Duration and DV01 results.
2. Create Discount Method rule and define at the top level node for specific currency. Check Market Value, Duration and DV01 results ==> confirm these are expected.

Cause

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