Calculating Cross, Triangulated, and Reciprocal Rates

This section discusses how to run the EOP_RATECALC Application Engine process to calculate cross, triangulated, and reciprocal rates.

Page Used to Run the EOP_RATECALC Process

Page Name	Definition Name	Navigation	Usage
Calculate Cross/Reciprocal Rate - Parameters	RUN_EO9030	select Set Up Financials/Supply Chain, then select Common Definitions, then select Market Rates, then select Cross/Reciprocal Rate Calc select Set Up HCM, then select Foundation Tables, then select Currency and Market Rates, then select Calculate Cross/Reciprocal Rt select Set Up CRM, then select Common Definitions, then select Market Rates, then select Cross/Reciprocal Rate Calc	Set run control parameters and run the EOP_RATECALC Application Engine process that calculates cross, triangulated, and reciprocal rates.

Understanding the EOP_RATECALC Process

Run the EOP_RATECALC process to calculate rates and update the market rates table.

The process performs three functions:

Generates cross rates for non-triangulated currency pairs.

For example, an organization subscribes to a rate service that provides all rates respective to USD. Starting with a USD to Canadian dollar rate and a USD to Mexican peso rate, the system can calculate a new Canadian dollar to Mexican peso cross rate.
Generates triangulated rates for triangulated currency pairs.

For example, the EUR to an EPC (euro participating currency) fixed rate has been established on the market rate table and a new EUR to USD rate has just been entered. Using this information, the process can create a new USD to EPC triangulated rate. The difference between triangulated rates and cross rates affects how the data is stored in the database. When calculating a cross rate, you actually create a new rate. When calculating a triangulated rate, the individual components of the source rates are stored on the target.
Generates reciprocal rates for those currency pairs that are not automatically reciprocated.

For example, using a USD to CAD rate as the source, the process calculates the CAD to USD reciprocal. If currency quote methods are in place, the visual rate remains the same and there is a difference in how the data is stored in the database (RATE_MULT and RATE_DIV are inverse). If currency quote methods are not used, the process actually calculates an inverse rate, meaning that the visual rates will differ.

Calculate Cross/Reciprocal Rate - Parameters Page

Use the Calculate Cross/Reciprocal Rate - Parameters page (RUN_EO9030) to set run control parameters and run the EOP_RATECALC Application Engine process that calculates cross, triangulated, and reciprocal rates.

Navigation

select Set Up Financials/Supply Chain, then select Common Definitions, then select Market Rates, then select Cross/Reciprocal Rate Calc
select Set Up HCM, then select Foundation Tables, then select Currency and Market Rates, then select Calculate Cross/Reciprocal Rt
select Set Up CRM, then select Common Definitions, then select Market Rates, then select Cross/Reciprocal Rate Calc

Image: Cross/Reciprocal Rate - Parameters page

This example illustrates the fields and controls on the Cross/Reciprocal Rate - Parameters page. You can find definitions for the fields and controls later on this page.

Oracle supports the use of Oracle Business Intelligent Publisher (BI Publisher or BIP) to generate the Cross/Reciprocal Rate Calc (EO9030) report.

Important! This calculation process includes two SQR reports - Cross/Reciprocal Rate Calc (EO9030) and Update History Rates (EO9031). Select to run EO9030 if you do not implement Application Integration Architecture (AIA) in your system. Select to run EO9031 if you are an AIA customer and wish to update history rates via this process.

Market Rate Index

Select a market rate index. Applications other than PeopleSoft Treasury should use the default index that you select for the exchange rate.

Term

This value defaults from the value entered on the Market Rate Definition page.

From Common Currency

Select a currency code to calculate a reciprocal rate.

Exchange Rate Type

Select the exchange rate type to use for this calculation.

As of Date

Select the effective date of the newly created exchange rates, which are the output of the process. The as of date also determines the rates used as the basis for the calculations, which are the input of the process.

The report uses the most current currency quotation method for the currency pair as the input to the process. If the as of date is the current effective rate on the specified date, it can affect triangulation. For example, a USD to EPC (euro participating currency) triangulated rate effective April 1, 2004 might be comprised of the EUR to USD rate also effective April 1, 2004 and the fixed EUR to an EPC rate effective on the date the newly participating EPC officially becomes a euro participating currency.

Generate Report

Select to generate a report that displays the cross, triangulated, and reciprocal rate calculations performed by the process.

Override Existing Rates

Select to have the calculated rates override rates for the exchange rate type, regardless of the as of date.

Generate Reciprocal Rate

Select to calculates reciprocal rates for currency pairs that do not have the Auto Reciprocate option select on the Currency Quotation Method page.

You can select this option alone, or in combination with the Generate Cross Rates and Rate Triangulate options.

This process does not directly manipulate the exchange rates. The system uses numerator and denominator values instead, such that the following is true:

(from-currency / RATE_DIV) × RATE_MULT = to-currency

Fro example, suppose you want a reciprocal rate between USD and CHF and assume a two-to-one ratio. If the exchange rate for USD to CHF is quoted directly (either using a direct quote method that you selected or using the system default), this rate is stored as RATE_MULT = 2 and RATE_DIV = 1. The rate is represented as 1 USD = 2 CHF, with a visual rate of 2.

In turn, the CHF to USD rate must be indirect. The reciprocal is a simple exchange, storing the rate as RATE_MULT = 1 and RATE_DIV = 2. The visual rate remains 2.

If quote methods are not being used, the CHF to USD rate must be quoted directly (the default), so the reciprocal rate is actually a calculated inverse. This rate is stored as RATE_MULT = 0.5 and RATE_DIV = 1, with a visual rate of 0.5.

In this example between USD and CHF, using a quote method and using a calculated inverse produced the same end result, 1/2 equals 0.5. But in actual practice, the manipulation of exchange rates is a major task and is one of the reasons for establishing the currency quote method.

Generate Cross Rates

Select to automatically generate cross rates. For example, to generate cross currency rates for USD, CAD, and MXP, you enter USD to CAD = 1.473 and USD to MXP = 9.8793. The system automatically generates CAD to MXP = 9.8793/1.473 = 6.7069246.

If you choose to generate cross rates, the From Cur (from-currency) and To Cur (to-currency) fields display and you must select a from-currency and a to-currency. You can enter a wild card of % in either or both fields to indicate from all or to all currencies.

Rate Triangulate

Select to convert two currencies through a third currency.

Select to convert two currencies through a third currency. If you select Rate Triangulate, the From Cur (from-currency) and To Cur (to-currency) fields display and you must select a from-currency and a to-currency. You can enter a wild card of % in either or both fields to indicate from all or to all currencies.

Quote Method Required

Select to indicate that you want the process to perform selected calculations only if the currency pairs have an existing currency quotation method definition.