Interpolation Methods Used by CFE when Calculating Discount Rates Under Implied Forward Forecast Remaining Term Scenarios

(Doc ID 2304245.1)

Last updated on OCTOBER 06, 2017

Applies to:

Oracle Financial Services Asset Liability Management - Version 8.0.0 and later
Information in this document applies to any platform.
Oracle Financial Services Asset Liability Management (ALM)
Oracle Financial Services Analytical Applications (OFSAA)
Cash Flow Engine (CFE)

Goal

What is the interpolation method used by OFSAA Cash Flow Engine (CFE) for Forecast Remaining Term (as Discount Method for the specific <Product, Currency>) + Implied Forward (as Forecast Rate method for the Discount Curve)?

When using Linear Interpolation as stated in the OFSAA ALM User Guide, Chapter 21 Discount Methods (page 362), there seem to be differences between the amount computed by OFSAA and the expected calculated one.  When applying the rate obtained using cubic spline, the calculated Market Value is the same as the one generated by OFSAA.

Solution

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