Questions on ALM Modified Duration Calculation

(Doc ID 2331286.1)

Last updated on DECEMBER 14, 2017

Applies to:

Oracle Financial Services Asset Liability Management - Version 8.0.4 and later
Information in this document applies to any platform.
Oracle Financial Services Asset Liability Management (ALM)
Oracle Financial Services Analytical Applications (OFSAA)

Goal

Question 1: What is the correct formula to validate Modified Duration?  When attempting to calculate the modified duration for two deals using the formula from cash flow engine guide, it appears that the adjusted Yield to Maturity (YTM) is calculated differently between the two deals, with one using cur_par_bal while the second appears to use market value.

What is the right way to validate the results? Which approach is the correct one?

Question 2: Based on "Answer 1 below", if there are more lines in payment schedule with different payment frequencies, what number of days is used?  Is an average used in the calculation?
 

Solution

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