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Questions on How Interest Rate Forecasting Works Based on Change from Base, Structured Change and Implied Forward Forecasting Methods (Doc ID 2547529.1)

Last updated on SEPTEMBER 29, 2020

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)
Oracle Financial Services Enterprise Performance Management (EPM)
Implied Fwd

Goal

Question 1: Need clarification on how the Interest Rate Forecasting works based on the forecasting methods :

I. Change from Base: When the base forecast method is implied forward, does “change from base” forecast method
  a. Apply the change to the base spot curve and compute the implied forward using changed spot curve OR
  b. Compute the implied forward then apply the change from base to the implied forward computed using the base spot curve.

II. Structured change: when using “structured change” forecast method, does the cash flow engine compute
  a. Implied forward rate : if the base scenario has implied forward OR
  b. Spot Rate: Does ALM just use the spot rate, apply the structured change to spot rate and not compute implied forward.

III. Implied forward: When using implied forward forecast method and defining a shock for implied forward, is
  a. Implied forward computed first and defined change applied on top of the implied forward curve OR
  b. Spot curve shocked first using the defined change and then implied forward computed using the shocked spot curve
 
Question 2: Is it possible to apply ramp up of the rates by buckets. That is currently, change from base when base is implied allows for parallel shift for each spot curve tenor point.  However, business would like to apply ramp up and ramp down for rates for each ALM bucket on ALM 8.0.2?

Solution

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