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BSP Incorrect Transfer Rates With Cash Flow Duration FTP (Doc ID 2595904.1)

Last updated on OCTOBER 04, 2019

Applies to:

Oracle Financial Services Balance Sheet Planning - Version 8.0.5 and later
Information in this document applies to any platform.
Oracle Financial Services Analytical Applications (OFSAA)
Oracle Financial Services Funds Transfer Pricing (FTP)
Oracle Financial Services Balance Sheet Planning (BSP)
Oracle Financial Services Enterprise Performance Management (EPM)


On BSP 8.0.5, it appears that the generated New Add Transfer Rate for the Duration FTP calculation is incorrect.

Currently use the Cash Flow: Duration FTP method in BSP for fixed rate loans. Reviewing FTP results, it does not appear that the duration based calculation is working correctly. The new add transfer rates are showing what looks like overnight FTP rates instead of duration based FTP results.

Expecting a new add transfer rate that is higher than the overnight rate in bucket 1 (AUG18). Assuming a calculated duration of 1.77 years, it is expected for a transfer rate in between the 1 Year rate and the 2 year rate from the forecast rates. Per copy of the given forecast rates file, refer to estimated transfer rate for buckets 1-3, (Aug - Oct18) using a calculated duration from the sample instruments of 1.774959 years. Interpolated between the 1Y and 2Y term points from the forecast rates as indicated in the file.

One more note currently using a conditional prepayment rate (CPR) based prepayment speed assumption of 19.9% CPR in both OFSAA and BSP, so the cash flows generated in the duration calculation would reflect that. Without a prepayment assumption, the duration and resulting transfer rate would be even higher. Not sure how much, maybe more like 3 years for an instrument with a 60 month term, but definitely higher. It should not be necessary to define a prepayment assumption to test the issue.

The issue is occurring with all products setup as fixed rate. This is not a current position processing issue - it is for new business processing. The use case is for a product that has no current position data. (Note - the issue occurs when running product with current position data as well - for simplicity have provided a dimension member combo with none.). For the test case, using a 60 Month default maturity (100%), Conventional Fixed amortization (100), monthly payment frequency. For similar instruments from OFSAA production, FTP duration generated is of 1.77 - 1.78 years.


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