How is Breakage Charge Calculated in FTP? (Doc ID 2719930.1)

Last updated on NOVEMBER 13, 2024

Applies to:

Goal

Question 1: How is the Breakage Charge amount calculated in FTP?

How can the break charge formula given in the FTP User Guide be used to verify same, based on the Process Cash Flows output?

Using full break charges has been tested, using both Fixed amount and Fixed Percentage methods of Break Cost calculation, and it resulted in getting same process cash flow output.
Why are the cash flows identical in both methods of calculation: Fixed Amount and Fixed Percentage?
 
Question 2: Upon selecting Economic Loss as breakage charge calculation, the BREAK_FUNDING_AMT_CHG, BREAK_FUNDING_AMT and BREAK_FUNDING_MV columns returned value of "0" in FSI_D_BREAK_FUNDING_CHARGES.
When Economic Loss method of break funding charges is selected, the columns mentioned above should be populated with the calculated values as per provided Interest Rate Curve (IRC).

Please clarify why these columns returned "0", as well as provide the logic of calculation for these columns.
 
Question 3: For Break Charges, the result gets stored in FSI_D_BREAK_FUNDING_CHARGES table. In which instrument record fields does this Charge/Cost get included? Eg: Charge_Credit_TRATE, BASIS_RISK_CHARGE_CREDIT, LIQUIDITY_PREM_CHARGE_CREDIT OR OTHER_ADJ_CHARGE_CREDIT etc.

Question 4: FTP application doesn't have corresponding ALL_IN_TP_RATE_CHARGE_CREDIT column but their is ALL_IN_TP_RATE. Please help clarify.
 
Question 5: How & where does Bank Treasury pass the cost to Line of Business? As known, Base-TP, LP, Other Add-ons -- once charged they remain same throughout the life of the contract. So, under which FTP components, does Treasury charge LOB for this Break event?

Question 6. If Break Event happens in middle of month, how do Break charges get reported in Daily FTP Reporting & Monthly FTP Reporting?

Solution

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