Oracle Financial Services Reference Guide

Contents

Title and Copyright Information

Send Us Your Comments

Preface

Transfer Pricing Concept

Overview of Transfer Pricing

Traditional Approaches to Transfer Pricing

A New Approach to Transfer Pricing

How Matched Rate Transfer Pricing Works

Evaluating Interest Rate Risk

Transfer Pricing Option Costs

Overview of Transfer Pricing Option Costs

Understanding the Option Cost Calculation Architecture

      Defining the Static and Option-Adjusted Spreads

      Option Cost Calculations Example

      Option Cost Calculations Process Flow

      Calculating Forward Rates

      Calculating Static Spread

      Calculating OAS

Option Cost Theory

      Equivalence of the Option Adjusted Spread and Risk-Adjusted Margin

      Equivalence of the Static Spread and Margin

Option Cost Model Usage Hints

      Nonunicity of the Static Spread

      Calibrating the Accuracy of Option Cost Calculations

The Ledger Migration Process

Overview of the Ledger Migration Process

Understanding Ledger Migration

      Transfer Rate and Option Cost Calculation

      Charge/Credit Generation

      Direct Transfer Pricing of Ledger Balances

      Ledger Migration and the Management Ledger Table

      Ledger Migration and the Virtual Memory Table

Requirements for Successful Ledger Migration

      Transfer Pricing Parameters

      Dimensions

      Entered and Functional Currency

      Transfer Pricing Rule

      Conditions and Table Selection

      Ledger Migration and Line Item Dimension Set Up

      Offset Organization Unit

      Transfer Pricing Process Rule

      Calculation Mode

Example of Transfer Rate Ledger Migration

      Account Tables Accumulation

      Management Ledger Table Processing

      Transfer Pricing Accounts with Ledger-Only Data Source

      Transfer Pricing Unpriced Accounts

      Calculation of Overall WATR (Financial Element 170)

      Generation of Charge/Credit for Funds (Financial Element 450)

      Ledger Migration of Transfer Rates Under Remaining Term Calculation Mode

Ledger Migration of Option Costs

Rate Conversion

Overview of Rate Conversion

Characteristics of Interest Rates Codes

Rate Format Usage

      Monte Carlo Rate Path Generation

      Rate Index Calculation from Monte Carlo Rate Paths

      Use in Transfer Pricing Methods

Rate Conversion Algorithms

      Conversion From Yield-to-Maturity to Zero-Coupon Yield

      Conversion From Zero-Coupon Yield to Yield-to-Maturity

Cash Flow Edit Logic

Overview of Cash Flow Edit Logic

Cash Flow Edit Logic

Cash Flow Calculations

Overview of Cash Flow Calculations

Cash Flow Calculations Characteristics and Concepts

      Instrument Level Modeling

      Modeling Flexibility

      Daily Cash Flows

      Event-Driven Logic

      Financial Elements

The Cash Flow Calculation Process

      Initialization of Modeling Data and Parameters

      Determination of Account Type

      Initialization of Interface Data

      Initialization of Cash Flow Data

      Initialization of Schedule Records

      Initialization of Pattern Records

      Determination of Modeling Start and End Dates

      Initialization of Additionally Derived Data

      Processing Modeling Events

      Payment Calculation Event

      Payment Calculation Steps

      Payment Event

      Payment Event Steps

      Payment Event Steps for Interest-in-Advance Instruments

      Prepayment Event

      Prepayment Event Steps

      Reprice Event

Detail Cash Flow Data

Financial Element Calculations

Example of the Rule of 78

Cash Flow Dictionary

Overview of Cash Flow Columns

Cash Flow Column Descriptions

      Accrual Basis Code (ACCRUAL_BASIS_CODE)

      Adjustable Type Code (ADJUSTABLE_TYPE_CODE)

      Amortization Type Code (AMRT_TYPE_CODE)

      Amortization Term (AMRT_TERM)

      Amortization Term Multiplier (AMRT_TERM_MULT)

      Calendar Period End Date (CAL_PERIOD_ID)

      Compounding Basis Code (COMPOUND_BASIS_CODE)

      Current Book Balance (CUR_BOOK_BAL)

      Current Gross Rate (CUR_GROSS_RATE)

      Current Net Rate (CUR_NET_RATE)

      Current Option-Adjusted Spread (CUR_OAS)

      Current Par Balance (CUR_PAR_BAL)

      Current Payment (CUR_PAYMENT)

      Current Static Spread (CUR_STATIC_SPREAD)

      Current Transfer Pricing Period Average Daily Balance (CUR_TP_PER_ADB)

      Deferred Current Balance (DEFERRED_CUR_BAL)

      Deferred Original Balance (DEFERRED_ORG_BAL)

      Gross Margin (MARGIN_GROSS)

      Historic Option-Adjusted Spread (HISTORIC_OAS)

      Historic Static Spread (HISTORIC_STATIC_SPREAD)

      ID Number (ID_NUMBER)

      Instrument Type Code (INSTRUMENT_TYPE_CODE)

      Interest Type Code (INT_TYPE_CODE)

      Interest Rate Code (INTEREST_RATE_CODE)

      Issue Date (ISSUE_DATE)

      Last Payment Date (LAST_PAYMENT_DATE)

      Last Repricing Date (LAST_REPRICE_DATE)

      Last Reprice Date Balance (LRD_BALANCE)

      Margin (MARGIN)

      Matched Spread (MATCHED_SPREAD)

      Maturity Date (MATURITY_DATE)

      Negative Amortization Amount (NEG_AMRT_AMT)

      Negative Amortization Equalization Date (NEG_AMRT_EQ_DATE)

      Negative Amortization Equalization Frequency (NEG_AMRT_EQ_FREQ)

      Negative Amortization Equalization Frequency Multiplier (NEG_AMRT_EQ_MULT)

      Negative Amortization Limit (NEG_AMRT_LIMIT)

      Net Margin Code (NET_MARGIN_CODE)

      Next Payment Date (NEXT_PAYMENT_DATE)

      Next Repricing Date (NEXT_REPRICE_DATE)

      Original Payment Amount (ORG_PAYMENT_AMT)

      Original Par Balance (ORG_PAR_BAL)

      Original Term (ORG_TERM)

      Original Term Multiplier (ORG_TERM_MULT)

      Origination Date (ORIGINATION_DATE)

      Payment Adjustment Date (PMT_ADJUST_DATE)

      Payment Change Frequency (PMT_CHG_FREQ)

      Payment Change Frequency Multiplier (PMT_CHG_FREQ_MULT)

      Payment Decrease Limit - Cycle (PMT_DECR_CYCLE)

      Payment Decrease Limit - Life (PMT_DECR_LIFE)

      Payment Frequency (PMT_FREQ)

      Payment Frequency Multiplier (PMT_FREQ_MULT)

      Payment Increase Limit - Cycle (PMT_INCR_CYCLE)

      Payment Increase Limit - Life (PMT_INCR_LIFE)

      Percent Sold (PERCENT_SOLD)

      Prior Transfer Pricing Period Average Daily Balance (PRIOR_TP_PER_ADB)

      Rate Cap Life (RATE_CAP_LIFE)

      Rate Change Minimum (RATE_CHG_MIN)

      Rate Change Rounding Code (RATE_CHG_RND_CODE)

      Rate Change Rounding Factor (RATE_CHG_RND_FAC)

      Rate Decrease Limit - Cycle (RATE_DECR_CYCLE)

      Rate Floor Life (RATE_FLOOR_LIFE)

      Rate Increase Limit - Cycle (RATE_INCR_CYCLE)

      Rate Set Lag (RATE_SET_LAG)

      Rate Set Lag Multiplier (RATE_SET_LAG_MULT)

      Remaining Number of Payments (REMAIN_NO_PMTS)

      Repricing Frequency (REPRICE_FREQ)

      Repricing Frequency Multiplier (REPRICE_FREQ_MULT)

      Teaser-rate End Date (TEASER_END_DATE)

      Transfer Rate (TRANSFER_RATE)

      Transfer Rate Remaining Term (TRAN_RATE_REM_TERM)

Index