Can Maturity Date Be Used As Reference Period End Date in the FTP Method Reference Period for Accounts Getting Matured Before As of Date? (Doc ID 3006973.1)

Last updated on MARCH 07, 2024

Applies to:

Goal

On 8.1.2.2 version, can enhancement be made to use other dates as Reference Period End Date in the FTP Method Reference Period?

Currently, the FTP Method Reference Period Compound Rate is using As of Date as Reference Period End Date by default, which is only correct for daily processing.

In the case of monthly processing, it is not correct because a deal with ON SOFR might have a Maturity Date less than As of Date if it matured during the month, while it should still receive FTP because it had an average balance during the month. In such cases the compounding should stop at Maturity Date, it should not go until As of Date.

For example, if there is a deal maturing on 5th of June, you are getting the deal when processing June end of month and the compounding end date has to be 5th of June, while beginning date has to be Origination Date (for taking the effect of ON compounding for the whole life of the loan, from origination till 5th June). Compounding end date should not be 30th of June because the deal was matured at that time.

Moreover, considering the case of a UAT setup, Banks are usually testing on historical data let’s say April 2023, May 2023, June 2023, monthly processing only.
If one deal matures on 5th of June, while processing May end of month data, the compounding for this deal should still be happening from origination until as of date (which is end of May). Even if users are selecting Maturity Date as Reference Period End Date from the screen, the engine should actually take the minimum between (As Of Date, Maturity Date) and apply the compounding from origination until the minimum date. Because since it is historical testing, the index for June would be already loaded in OFSAA when processing May. So discussion is not about the normal behavior while live on Production, when future indexes do not exist yet. Concern is about preventing the engine from picking up any rate/index from the future.

Solution

My Oracle Support provides customers with access to over a million knowledge articles and a vibrant support community of peers and Oracle experts.