The definition of adjustment methods is part of the Create or Edit Adjustments rule process. When you click Save in the Create Adjustments rule process, the rule is saved and the Adjustments rule summary page is displayed. However, adjustment assumptions have not yet been defined for any of your products at this point. Typically, you would start defining your adjustment assumptions for product-currency combinations before clicking Save.
Prerequisites
Performing basic steps for creating or editing an Adjustments rule
Procedure
This table describes key terms used for this procedure.
Term |
Definition |
|---|---|
Reference Term |
The associated term used for the add-on rate assignment. You can select one of the following types of reference terms: Original Term (the contractual term to the maturity of the account), Repricing Frequency (the frequency at which the account reprices) and Remaining Term (the number of months until the account matures). |
Lookup Method |
Method used to derive an add-on rate for different reference term values.
Specify Range as the lookup method if you want the application to apply the rates defined in the Adjustments rule to a range of reference term values, using the terms defined in the rule to specify the lower end of the range. Note that for values less than the lowest term point, the application uses the value associated with the lowest point.
Specify Interpolation as the lookup method if you want the application to interpolate add-on rate values for applicable reference terms falling between node points specified in the Adjustments rule, using straight line interpolation between the term points. |
Term |
In conjunction with the Multiplier, this field allows you to specify the value for the Reference Term, for a given lookup tier. |
Multiplier |
The unit of time applied to the Term. The choices are: Days, Months, Years. |
Rate |
The add-on rate to be applied to instruments where Reference Term is the product of the Term and Multiplier defined for the row. The rate should be in percentage form, for example, 1.25 percent should be input as 1.25. |
Assignment Date |
For BSP, the usage of TP Adjustment Rates is limited to assigning rates to new originations only. So, Origination Date is selected by default. |
Interest Rate Code |
Used for the rate lookup for the Formula Based Rate. |
Formula |
The mathematical formula used in the Formula Based Rate adjustment method to determine the Add-on rate: (Term Point Rate * Coefficient) + Rate Spread |
Term Point |
In conjunction with the Multiplier (day, month, or year), it is used in the Formula Based Rate method when looking up the rate for the designated Interest Rate Code. |
Coefficient |
Coefficient by which the Term Point rate should be multiplied. |
Rate Spread |
The spread added to the interest rate read from the selected Interest Rate Code. Rate Spread is used in the Formula Based Rate adjustment method. For the Formula Based Rate method, the spread is added to the result of the Term Point Rate * Coefficient. Enter the Rate Spread in percentage form, for example, 1.25 percent should be input as 1.25. |