FTP Straight Term Methodology with Original Term Selection
(Doc ID 2999137.1)
Last updated on JANUARY 25, 2024
Applies to:
Oracle Financial Services Funds Transfer Pricing - Version 8.1.2.2 and laterInformation in this document applies to any platform.
Oracle Financial Services Analytical Applications (OFSAA)
Oracle Financial Services Funds Transfer Pricing (FTP)
Extract Transform Load (ETL)
Goal
On FTP 8.1.2.2 version, looking for information on FTP calculations for the FTP Methodology: Straight Term with Original Term selected.
The business use case is as follows:
There is a specific money market product which has floating interest rate, and the base transfer rate FTP methodology is based on the repricing frequency from last repricing date. However, the same product has early termination rights (i.e., optional duration) allowing for early contract cessation prior to contractual maturity. The second FTP component is that the liquidity premium must match the rate from origination date corresponding to the optionality tenor instead of original tenor. Optionality tenor refers to early withdrawal date – origination date.
The idea is to accommodate the liquidity premium by applying straight term using original term, and use the extract, transform, and load (ETL) to populate the ORG_TERM column as the difference between withdrawal date – origination date instead of the usual maturity date – origination. So basically, looking for the FTP engine to assign from origination date the value on account level using the column ORG_TERM / ORG_TERM_MULT, regardless of the account being fixed or floating.
The following tests were done for each scenario and it seems not to correspond with expectations for business use case above:
1) Adjustable account (adjustable type 50 or 250): Even if FTP method specified for the product is straight term using original term and not standard term, the FTP engine still uses the repricing frequency tenor from last repricing date.
2) Fixed account (adjustable type 0): Desired behavior is output by FTP.
Selecting straight term method with original term selected, the value loaded into ORG_TERM is used. FTP engine does not recompute the maturity date – origination.
Question: Based on the above, for adjustable accounts, why does FTP Straight term method using original term use the repricing frequency tenor from last repricing date instead of original term? Currently, it seems that FTP straight term output gives the same regardless if original term or standard term is selected. The desired behavior is that if original term is selected, even if the account is floating, the rate will still be picked up from origination date based on ORG_TERM.
Solution
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