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Oracle Transfer Pricing User Guide
Release 12.1
Part Number E13524-03
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Prepayment Table Rules

This chapter describes the procedure to build prepayment tables using Prepayment Table Rules.

This chapter covers the following topics:

Overview of Prepayment Table Rules

The Prepayment Table rule allows you to build prepayment tables. These prepayment tables can be referenced by a Prepayment Rule to model prepayment behavior of instruments. See: Prepayment Table Method and Prepayment Rules.

The procedure for working with and managing the Prepayment Table rule is similar to that of other Oracle Transfer Pricing business rules. It includes the following steps:

Related Topics

Standard Navigation Paths

Creating Prepayment Table Rules

Creating a Prepayment Table rule comprises the following sub procedures:

Procedure to create a Prepayment Table Rule and Version

This table describes some terms in the pages used for this procedure.

Selected Terminology
Term Description
Dimension Influences the prepayment behavior of an instrument. You can build a prepayment table using up to three prepayment dimensions. Each dimension maps to an attribute of the underlying transaction (age/term or rate ) so the cash flow engine can apply a different prepayment rate based on the specific characteristics of the record.
Lookup method Used to calculate prepayment rates for the prepayment dimension values that do not fall on the defined prepayment dimension nodes. Oracle Transfer Pricing offers the following lookup methods:
  • Interpolation: Under this method, the prepayment rates are determined by calculating an exact value on an axis. This method assumes that prepayment speeds change on a straight-line basis between the two nodes and calculates accordingly.

  • Range: Under this method, the prepayment rates are determined by calculating a range of values on an axis. This method assumes that the prepayment speed will remain the same for the entire range.


The following example explains the differences between these two lookup methods. The following lists show the age and corresponding prepayment rates of instruments.

Age

  • 12

  • 24

  • 36

  • 60

Prepayment Rates

  • 5

  • 10

  • 15

  • 20


Under the Interpolation method, the prepayment speeds increase gradually. In this example, the Interpolated prepayment rate of an instrument aged 30 months is 12.5%. This is exactly halfway between the 10% and 15% rate. However, under the Range method, the Prepayment speeds increase in steps. Using the Range method, the prepayment rate is 10%, as this rate percentage would apply to the range from 24 months to 35.9999 months.
Nodes Exact points for each dimension where attribute information has been defined.
  1. Navigate to the Prepayment Table Rule home page.

  2. Complete standard steps for this procedure. See: Creating Rules.

Procedure to Define the Structure of the Prepayment Table

When you click Continue after defining a Prepayment Table version, the Define Dimensions page is displayed. The Prepayment Table consists of the Prepayment Dimensions and the Node Values for these Dimensions which you select on this page. To model the prepayment behavior, you can select a maximum of three prepayment dimensions. Once the dimensions and the number of nodes are defined, you need to assign values to the nodes.

Note: You can use the analogy of a three dimensional table to understand how to deal with the prepayment dimensions. The first dimension you select would resemble the row (X-axis). The second dimension would act as the column (Y-axis). The final third dimension will be the page (Z-axis).

  1. Select the first Dimension.

  2. Select a lookup method for that Dimension.

  3. Enter the number of Nodes for the Dimension.

    This number may vary from dimension to dimension.

  4. If required, repeat the previous three steps for up to two additional Dimensions.

    Important: There are certain restrictions while defining Dimensions:

  5. Click Go.

    The Define Dimensions page is refreshed. You can now assign the Node Values for each dimension. At this point, you can also modify the structure of the table, if required.

    Modifying the Table Structure

Procedure to Assign Node Values

  1. Assign values for each of the Nodes.

  2. Click Apply.

    The Rule, Version, Prepayment Dimensions, and Nodes are saved. You cannot change the Dimensions once the Prepayment Table rule has been saved.

    Note: At this point, only the structure of the Prepayment Table has been defined. The Prepayment Speeds for all the Nodes still need to be defined. See: Adding Prepayment Speeds to the Prepayment Table.

  3. Enter the Prepayment Speeds in the Prepayment Table.

    Node values for the row and column dimensions are displayed as a table, while the node values for the page dimensions (if selected) are shown in the drop down list.

  4. Repeat the process for all node values of the page driver. To change the node value along the page driver, select the required node value from the drop-down list.

    Note: Node values will be displayed in the drop-down list only if you selected three drivers.

  5. Click Apply. The Prepayment Rates are saved and the Prepayment Table Rule home page is displayed.

Related Topics

Prepayment Table Method

Standard Navigation Paths

Overview of Prepayment Table Rules

Updating Prepayment Tables

As part of updating Prepayment rules, you can modify Prepayment speeds and the structure of the Prepayment Table to a certain extent. You can also modify the lookup methods (Range or Interpolation) used for calculating, the number of Nodes, and the actual values of the Nodes. However, you cannot update the dimensions.

Prerequisites

Procedure

  1. Search for the Prepayment Table rule, which you want to update. See: Searching for Rules.

  2. Click Update corresponding to the required version.

    The Update Prepayment Table version page is displayed.

    Procedure to Update Speeds

    1. Modify the Prepayment Speeds in the table as required. See Updating Prepayment Rates in a Prepayment Table.

  3. Click Apply.

    The Prepayment Table rule home page is displayed.

Related Topics

Prepayment Table Method

Standard Navigation Paths

Overview of Prepayment Table Rules

Updating Prepayment Rates in a Prepayment Table

Once the basic structure of the prepayment table has been created, prepayment rates can be added to, or modified for, each of the node values along the chosen dimensions. Use this procedure to add or update annual prepayment rates in the prepayment table.

Procedure

  1. Search for the Prepayment Table rule, for which you want define prepayment rates. See: Searching for Rules.

  2. Click Update corresponding to the required version.

    The Update Prepayment Table version page is displayed.

  3. Enter the Prepayment Speeds in the Prepayment Table.

    Node values for the row and column dimension are displayed as a table on the Update Prepayment Table version page, while the node values for page dimension (if selected) are shown in the drop down list.

  4. Repeat the process for all node values of the page dimension. To change the node value along the page dimension, select the required node value from the drop-down list.

    Note: Node values will be displayed in the drop-down list only if you selected three dimensions.

  5. Click Apply.

    The table with updated prepayment rates is saved and the Prepayment Table home page is displayed.

Related Topics

Prepayment Table Method

Standard Navigation Paths

Overview of Prepayment Table Rules