Forecast Rate Scenario Assumptions allow you to define future interest rates, future economic indicators, and future currency exchange rates. Use Interest Rate Forecasts to project Cash Flows, including Pricing New Business, Re-pricing Existing Business, Calculating Prepayments, and determining Discount Methods. Use Economic Indicator Forecasts to include in Behavioral Modeling and Scenario/Stress Analysis. Use Currency Exchange Rate Forecasts to account for the effects of currency fluctuations on income.
The Forecast Rate Assumptions use Interest Rate, Economic Indicator, and Currency Codes defined in Rate Management, including all the active and reporting currencies and the primary, or functional, currency at your institution. See OFSAA Rate Management for information on how to define Interest Rates, Economic Indicators, andCurrency Exchange Rates.
This Module describes how to create a Forecast Rates Assumption rule to forecast Cash Flows and, if you work with multiple currencies, to model relationships between Interest Rates and Exchange Rates.
This chapter covers the following topics:
· Creating a Forecast Rates Assumption Rule
· Economic Indicator Forecast Methods
· Interest Rate Forecast Methods
· Behavior Pattern Rule Mapping
1. From the Forecast Rates bar, select the “Add” icon.
2. Type a descriptive name for the rule.
3. Type a description for the rule. This is an optional field.
4. Select a Reporting Currency.
5. Select a folder.
6. Select the Access Type Option.
7. Click Save.
The Reporting Currency you selected when creating the Forecast Rates Assumption Rule appears in the title bar. Each Forecast Scenario you create, up to ninety nine will appear under Current Scenarios. Forecast Scenarios use the date buckets specified in the active Time Bucket Rule. You can also set minimum rates (or floors) on any rule created for Currency, Economic, or Interest Rate. For example, if you want to run a -200bp rate scenario, with short-term rates <2%, you can set the minimum rate to the floor at 0%, although negative rates are allowed if desired.
Here, you have the following options available for defining Forecast Rate Scenario:
· Standardized Approach
· Enhanced Approach
IRRBB Standardized Approach Shocks allows users to select one of the six Standardized Approach Shocks (SAS) in a Forecast Rates Scenario for certain currency IRCs. You can select the following shock scenarios:
· Standardized Approach Shock - Parallel UP
· Standardized Approach Shock - Parallel DOWN
· Standardized Approach Shock - Short UP
· Standardized Approach Shock - Short DOWN
· Standardized Approach Shock - Flattener
· Standardized Approach Shock - Steppener
These options will be available for supported currencies. If an IRC is for a non-supported currency, then these would not display.
For more information, see the Cash Flow Engine Reference Guide.
The Active Currencies defined under Rate Management > Currencies, are listed under the Currency Codes Section. The selection under Currency Codes defaults to the reporting currency when you are not forecasting exchange rates. The list of IRCs under the Interest Rate Codes section is dependent on the selected currency. The IRCs, including a reference IRC for each currency, are loaded from Rate Management. When you select a currency other than the Reporting Currency, the options under Currency Forecast Method provide several ways to model relationships between Exchange Rates and Interest Rates.
The Economic Indicators for all active indices are listed in the Economic Indicator Section. These indices are not dependent on the currency selected. Use these indicators to set up scenarios around changing economic conditions that will affect the forecast outcome of another variable. For example, if you forecast a higher GDP, you may have a scenario where new business volume is tied to that GDP outcome, which could be different than a lower GDP Scenario. The Economic Indicators are created and maintained from Rate Management.
The IRCs for all Active Currencies (and Reporting Currencies, a subset of the Active Currencies) are listed under Interest Rate Codes. The options under Interest Rate Code Forecast Method provide several ways to model the effects on portfolio Cash Flows due to Interest Rate changes.
You can map your Forecast Scenario with Behavior Pattern Rule. For more information, see the Behavior Pattern Mapping Section.
The following Currency Forecast Methods are available when you select a currency (other than the reporting currency) from the Currency Codes List.
· Flat: Forecast no change in the exchange rate for all dates beginning with the As-of Date.
· Structured Change: Forecast Exchange rates as an incremental change from the previous period.
· Direct Input: Type exchange rates to use in forecasting.
· Parity *: Forecast the Exchange Rate between two currencies based on interest rate forecasts for the reference IRC associated with each of the currencies.
· No Arbitrage *: Forecast the Exchange Rate required to maintain a no-arbitrage condition between two currencies.
* The above methods are available when the selected currency has an associated reference IRC as defined in Rate Management.
You can map your forecast scenario with Behavior Pattern Rule. For more information, see Behavior Pattern Rule Mapping.
Examples of Currency Forecasting
The examples below use the following data to demonstrate currency forecast methods:
· Reporting currency = U. S. Dollars (USD is shown in the title bar)
· Local currency = Australian Dollars – (converting from Australian dollars (AUD) to USD)
· Exchange rate loaded from Rate Manager = 1.108 AUD to 1 USD (rate in effect on the as-of date, 06/30/09)
· Modeling period = 07/01/2009 to 06/30/2010
To Begin: For all examples, begin by doing the following:
1. Create a new Forecast Rates Assumption Rule with USD as the Reporting Currency.
2. In the Forecast Rates Window, add (or rename) a scenario:
§ Click Add (or Rename).
§ Type a name for the scenario.
§ Click Apply.
Flat Method: Calculate the Exchange Rate of Australian Dollars to $1 U. S., modeling no change in the Exchange Rate during the Modeling Period.
In the Forecast Rates window, do the following:
1. From Currency Codes, select AUD: Australian Dollar.
2. From Currency Forecast Method, click Flat.
3. Click View.
Under Rate Value, you will see the exchange rate: AUD 1.108 s equals USD 1. This rate is applied uniformly to all date buckets, based on the rate in effect at the As-of Date in your Application Preferences.
4. Click OK.
5. At the bottom of the page, click Save.
Structured Change: Model a change in the exchange rate so that the rate increases by a total of 0.5% over four months, levels off for four months, and then drops a total of 0.25% over three months.
In the Forecast Rates Window, do the following:
1. From Currency Codes, select AUD: Australian Dollar.
2. From Currency Forecast Method, select Structured Change.
3. Click Define.
4. Add rows and type bucket numbers and rate changes as follows:
5. You can also use the Excel Import/Export feature to add the rate changes.
6. Click Apply.
7. Click View.
8. Click OK.
9. At the bottom of the page, click Save.
Direct Input: Model a change in the exchange rate so that rates reflect a stronger U. S. Dollar during the spring of 2010.
In the Forecast Rates window, do the following:
1. From Currency Codes, select AUD: Australian Dollar.
2. From Currency Forecast Method, select Direct Input.
3. Click Define.
4. Click Apply.
5. Click View to see the Output Table.
6. You can also use the Excel Import/Export feature to add the rate values.
7. Click OK.
8. At the bottom of the page, click Save.
Parity: Model a period of rising interest rates for the U. S. and Australian Dollars. Use the parity method to forecast the exchange rate of Australian Dollars to $1 U. S. Parity is calculated based on the Forecast Interest Rates of the reference IRCs of the Australian dollar and the U. S. Dollar.
1. In the Forecast Rates window, forecast changes in the U. S. Dollar Interest Rate:
2. From Currency Codes, select USD: US Dollar.
3. From Interest Rate Codes, select Treasury Index.
4. From Rate Forecast Method, click Direct Input.
5. Click Define.
6. Type interest rate changes for 02/01/2010 through 04/30/2010.
7. Click Apply.
In the Forecast Rates window, forecast changes in the Australian Dollar reference Interest Rate:
1. From Currency Codes, select AUD: Australian Dollar.
2. From Interest Rate Codes, select IRC AUD.
3. From Rate Forecast Method, click Direct Input.
4. Click Define.
5. Type interest rate changes for 02/01/2010 through 04/30/2010.
6. Click Apply.
7. At the bottom of the page, click Save.
NOTE:
The View Button is not available for the parity feature. If you want to view results, enable the “forecast rate” option in the BSP process – Audit Block, for the relevant Interest Rate Codes. Audit results will be written to the FSI_INTEREST_RATES_AUDIT table.
No Arbitrage: Forecast the Exchange Rates required to maintain equilibrium between the U. S. and Australian Dollars. The forecast is based on the historical interest rates from the reference IRC of each currency. This example assumes that the following reference IRCs have been assigned in Rate Management:
· U. S. Dollar: Treasury Index
· Australian Dollar: IRC AUD
In the Forecast Rates ID Window, do the following:
1. From Currency Codes, select AUD: Australian Dollar.
2. From Currency Forecast Method, click No Arbitrage.
3. At the bottom of the page, click Save.
NOTE:
The View button is not available for the No Arbitrage feature. If you want to view results, enable the “forecast rate” option in the BSP process – Audit Block, for the relevant interest rate codes. Audit results will be written to the FSI_INTEREST_RATES_AUDIT table.
The following Economic Indicator methods are available:
· Flat: Forecast no change in the economic index for all dates beginning with the As-of Date.
· Structured Change: Forecast the economic index as an incremental change from the Previous Period.
· Direct Input: Type-specific economic index rates to use in forecasting.
Examples of Economic Index Forecasting
As you follow the steps in the examples, substitute similar data at your site if this particular data is not available.
Flat: View an economic index forecasted for New Residential Sales.
1. From Currency Codes, select USD: US Dollar.
2. From Economic Indicators, select New Residential Sales.
3. From the Economic Indicator Forecast Method, click Flat.
4. Click View.
The Economic Indicator View Window displays the rates forecasted for the New Residential Sales.
Here, the "Total Rate Change" field will be consistent with the Value Field of the Economic Indicator Screen.
Structured Change: Model a gradual increase for six months in New Residential Sales.
5. From Currency Codes, select USD: US Dollar.
6. From Economic Indicators, select New Residential Sales.
7. From Rate Forecast Method, click Structured Change.
8. Click Define.
9. Type the following Interest Rate Change:
10. Click Apply.
11. Click View.
12. You can see the incremental increase over the six months (150 = 25 per mo * 6 months)
Direct Input: To use the Direct Input Method, see Structured Change: with the following modifications:
· In step 3, click Direct Input
· In step 5, type in New Residential Sales Data (forecasted values for each bucket rather than forecasted values changes over a period of one or more buckets).
After you have defined the forecast method for an Economic Indicator, you can undo the definition by selecting the relevant Economic Indicator (green color check-box) and clicking the “Un-Define” button. This will bring the Economic Indicator to its original un-defined state indicated by the red color check box. This step is necessary if you want to delete an Economic Indicator from the “Common Object Maintenance > Rate Management > Economic Indicators” user interface after defining the forecast method for it.
The following Interest Rate Forecast Methods are available:
· Flat: Forecast no change in the interest rate for all dates beginning with the As-of Date.
· Structured Change: Forecast Rate changes in terms of absolute or percent change, for any Modeling Period or Interest Rate term, such as:
§ +100 basis points on Day 1
§ 200 basis points over the first 6 months
§ Yield curve rotation (short point decreasing, long point increasing)
· Direct Input: Type Interest Rates directly, for any Modeling Period or Interest Rate Term.
· Implied Forward: Forecast Interest Rates based on the Yield-Curve Interest Rates in effect at the As-of Date and consistent with the modeling bucket definitions.
· Change from Base: Make incremental changes to an existing Forecast Scenario.
· Yield Curve Twist: Flatten or steepen the Yield Curve around a specific point on the curve.
· Standardized Approach Shocks: Forecast an Interest Rate shock according to one of the BSCB Standardized Approach shock specifications (Scenario-level specification).
· Enhanced Approach Shocks: Forecast an Interest Rate shock according to user specifications that will flow into IRRBB Table B reporting.
The following Interpolation Methods are available:
· Linear Interpolation: Linear Interpolation uses linear yield curve smoothing. Linear Yield Curves are continuous but not smooth; at each knot point, there is a kink in the Yield Curve. You may not want to use a Linear Yield Curve with a model that assumes the existence of a continuous Forward Rate Curve, due to the nonlinear and discontinuous knot points of a Linear Yield Curve.
· Cubic Spline of Yields: A cubic spline is a series of third-degree polynomials that have the form:
y = a + bx + cx2 + dx3
These polynomials are used to connect the dots formed by observable data. The polynomials are constrained so they fit together smoothly at each knot point (the observable data point.) This means that the slope and the rate of change in the slope with respect to time to maturity have to be equal for each polynomial at the knot point where they join. If this is not true, there is a kink in the yield curve and they are continuous but not differentiable.
Two more constraints make the Cubic Spline Curve unique. The first restricts the zero-maturity yield to equal the 1-day Interest Rate. The second restricts the yield curve at the longest maturity to be either straight (y"=0) or flat (y'=0).
· Quartic Spline: Quartic interpolation requires a minimum of 4-knot points. The Quartic Interpolation Equation can be represented as:
Y = a + b X1 + CX2 + d X3 + e X4
The end knot points satisfy equations for one curve and all intermediate points satisfy two curves. Therefore, in a scenario with a minimum number of knot points, there will be six equations. For n number of knot points, the number of equations is 2n-2. If n is the number of points to be interpolated, the order of the matrix to be formed is 5*(n-1) x 5*(n-1). The matrix is formed according to the following logic:
The second derivative at the endpoints and the first derivative of the last point is Zero. At the points other than the endpoints the value of the first derivatives, second derivatives, and the third derivatives of the function are equal.
NOTE:
In looking up Forecast Rates, the cash flow engine will (where necessary) perform an Interpolation between Yield Curve term points. For example, in determining a three-month rate from a Yield Curve that contains only a one-month rate and a six-month rate, the Cash Flow Engine will perform interpolation to determine the implied three-month rate. The Interpolation Method used is defined by the selected Interpolation Method for the Interest Rate Curve.
Examples of Interest Rate Forecasting
As you follow the steps in the examples, substitute similar data at your site if this particular data is not available.
NOTE:
You can generate the Forecast Rates for 360 calendar months, Moody's structured Cash Flow library's structured Cash Flow library integration is done with BSP. The first month corresponds to the first calendar month of As of Date. The subsequent months are full calendar months. For example, if As of Date is 30 APR 2013, then the first month is April 2013. The second month will be May 2013 and so on. ADCo model requires two IRCs for an ARM Instrument (The first is 2 Yr, 10 Yr IRC and the second is the Prepayment Index IRC). For a fixed-rate instrument, 2 Yr, 10 Yr IRC will only be passed.
You can forecast an IRC which has various term points including 2 Year and 10 Year term points. The term points 2 Year (or 24 Months) and 10 Year (or 120 Months) are available. The engine will identify 24 Months term point as 2 Years and 120 Months as 10 Years. If the term point(s) are not available, then the engine will not be able to send the forecast rates for the IRC
The engine will match the last day of the calendar month with the ISB (income simulation bucket) dates and fetch the rate corresponding to the term point to pass to the ADCo model while converting from ISB to 360 months. While converting from ISB to 360 months, if the total ISB size is less than 360 months, then the last available rate needs to be extended till the 360th month. For example, if the ISB covers only 240 months, then the 240th month rate will be applied from 241st to 360th months.
When the "Show 360 months Buckets" check box is enabled, 2 year (24 months) and 10 years (240 months) term points will be highlighted in red color.
The "Show 360 months Buckets" check box is displayed only if the Curve Identifier is defined for base IRC.
Flat: View U. S. dollar interest rates forecasted for the Treasury Index.
1. From Currency Codes, select USD: US Dollar.
2. From Interest Rate Codes, select US Treasury Curve.
3. From Rate Forecast Method, click Flat.
4. Select the Interpolation Method.
5. Click View.
After clicking View, the Interest Rate View Window displays the rates forecasted for the Treasury Index in the ISB view. Here, Show Rates for 360 Months Buckets check box is disabled by default. On checking this box, the results will be displayed for the 360 months view. You cannot enter the values against buckets for the Flat method in 360 months or ISB view. The Show 360 Months Buckets box is available by default if the ADCo LDM, or Moody's structured cashflow library, or both functions are mapped to the user.
Structured Change: Model a gradual increase for six months in U. S. Dollar Interest Rates.
6. From Currency Codes, select USD: US Dollar.
7. From Interest Rate Codes, select US Treasury Curve.
8. From Rate Forecast Method, click Structured Change.
9. Select the Interpolation Method.
10. Click Define and enter a shock amount to apply to the IRC in absolute or percentage change. You can designate either absolute rate change or percent rate change and click apply.
11. Type the following interest rate changes:
You can also use the Excel Import/Export feature to add the Interest Rate changes.
12. Click Apply.
13. Click View.
After clicking View, the Interest Rate View Window displays the results in the ISB View. Here, Show Rates for 360 Months Buckets check box is disabled by default. On checking this box, the results will be displayed for the 360 months view. You cannot enter the values against buckets for this method in 360 months or ISB View. The Show 360 Months Buckets box is available by default if the ADCo LDM, or Moody's structured Cash Flow Library, or both functions are mapped to the user.
14. The rate increases you typed in step 5 are apportioned equally over six months in this case August to January. Therefore, in monthly buckets 2-7, you will expect to see the following increments added to the Treasury Index Interest Rates:
3 month |
6 month |
1 year |
2 year |
1/6 of 1.00 = 0.1667 |
1/6 of 1.25 = 0.2083 |
1/6 of 1.50 = 0.25 |
1/6 of 1.75 = 0.2917 |
15. The interest rates in buckets 2-7 reflect the increases.
Direct Input: To use the Direct Input method, see Structured Change: With the following modifications:
16. In step 5, type interest rates (Forecasted Rates for each bucket rather than Forecasted Rate Changes over a period of one or more buckets).
17. In step 3, click Direct Input
18. During defining the Direct Input, the “Show 360 Months Buckets” box is checked by default if the ADCo LDM, or Moody's structured Cash Flow Library, or both functions are mapped to the user. If you enter the forecast rates against 360 months, the UI converts the same to across Income Simulation Buckets.
19. Similarly, users can enter the data for income simulation buckets after unchecking the “Show 360 Months Buckets”. Now, UI will convert the rates from ISB to 360 months view.
When you switch from ISB to 360 months view or vice versa, you will get a message “Switching the view will erase the existing definition. Do you want to continue?” If you select YES, then the definition is erased. Otherwise, it is retained. In effect, you will be restricted to do the following:
§ Enter the data across ISB, check the “Show 360 Months Buckets” box, and override that data for a few of the 360 months buckets.
§ Enter the data across 360 months buckets, uncheck the “Show 360 Months Buckets” box and override that data for a few of the ISB.
After defining the rates in 360 Months buckets and clicking View, the Interest Rate View window displays the result in the "360 Months" view. Here, the "Show Rates for 360 Months Buckets" check box is enabled by default.
If you have defined the rates in ISB and click View, the Interest Rate View window displays the result in ISB view. Here, the "Show Rates for 360 Months Buckets" check box is disabled by default. On checking this box, the results will be displayed for the 360 months view. You cannot enter the values against buckets for this method in 360 months or ISB view.
You can also use the Excel import/export feature to add the Interest Rates. For more details, see Excel Import/Export.
Implied Forward: View U. S. Dollar Interest Rates forecasted from the Treasury Index Rates and terms in effect at the as-of date and consistent with the Modeling Buckets.
1. From Currency Codes, select USD: US Dollar.
2. From Interest Rate Codes, select US Treasury Curve.
3. From Rate Forecast Method, click Implied Forward.
4. Click Define and enter a shock amount to apply to the IRC in absolute or percentage change. You can designate either absolute rate change or percent rate change. If no changes are desired to the base curve, leave at 0.0 and click apply.
5. You can also use the Excel import/export feature to add the absolute or percent rate changes.
6. Click view to view the implied forward rates.
After clicking View, the Interest Rate View window displays the results in the ISB view. Here, Show Rates for 360 Months Buckets check box is disabled by default. On checking this box, the results will be displayed for the 360 months view. You cannot enter the values against buckets for this method in 360 months view. The Show 360 Months Buckets box is available by default if the ADCo LDM, or Moody's structured Cash Flow Library, or both functions are mapped to the user.
Change from Base: Select a Forecast Rates Scenario that you have already defined and saved and change it by typing incremental changes to rates. For example, you might want to forecast for scenario 1 based on incremental changes to the rates in Scenario 2.
After clicking View, the Interest Rate View window displays the results in the ISB View. Here, Show Rates for 360 Months Buckets check box is disabled by default. On checking this box, the results will be displayed for the 360 months view. You cannot enter the values against buckets for this method in 360 months view. The Show 360 Months Buckets box is available by default if the ADCo LDM, or Moody's structured Cash Flow Library, or both functions are mapped to the user.
Yield Curve Twist: Set up a scenario to steepen or flatten a given Yield Curve.
1. From Currency Codes, select USD: US Dollar.
2. From Interest Rate Codes, select US Treasury Curve.
3. From Rate Forecast Method, click Yield Curve Twist.
4. Click Define.
5. Type the following interest rate changes (flattening the curve around the 3-month term point):
6. Click Apply.
After clicking View, the Interest Rate View window displays the results in the ISB view. Here, Show Rates for 360 Months Buckets check box is disabled by default. On checking this box, the results will be displayed for the 360 months view. You cannot enter the values against buckets for this method in 360 months view. The Show 360 Months Buckets box is available by default if the ADCo LDM, or Moody's structured Cash Flow library, or both functions are mapped to the user.
After you have defined the forecast method for an Interest Rate Code, you can undo the definition by selecting the relevant Interest Rate Code (green color check-box) and clicking the “Un-Define” button. This will bring the Interest Rate Code to its original un-defined state indicated by the red color check box. This step is necessary if you want to delete an Interest Rate Code from the “Common Object Maintenance > Rate Management > Interest Rates” user interface after defining the forecast method for it.
Standardized Approach Shocks
NOTE:
Standardized Approach Shocks are unlike other interest rate rules as they are applied at the scenario level instead of at the IRC Level. When a user creates a new Forecast Rates rule, by default, Scenario 1 is always the base scenario for Standardized Approach purposes and cannot have a Standardized Approach shock definition.
7. On the main page of a Forecast Rates rule, select the “IRRBB Shocks”. This will allow users to define either Standardized or Enhanced Approach Scenarios, or both for a single Forecast Rates Rule. After a forecast rates rule has been designated as IRRBB Shocks, this check box cannot be unselected unless there are no defined scenarios as either Standardized or Enhanced Approach Scenario type.
8. To apply a Standardized Approach Scenario, click the “Add Scenario” button.
9. In the Add Forecast Rates Scenario popup box, select the Scenario Type which you want to apply to this scenario.
NOTE:
Only one Standardized Approach Shock may be applied to a Single Scenario, and no two SA Shocks of the same type may be applied to the same Forecast Rates Rule. All qualifying IRCs will inherit this SA Shock and may not be changed except for their Interpolation Method and Minimum Rate.
10. Click Apply. The scenario is now a Standardized Approach Shock.
Enhanced Approach Shocks
Like Standardized Approach shocks, Enhanced Approach Shocks are scenario-level rules, and Scenario 1 is always referred to as the Base scenario for reporting purposes. However, unlike Standardized Approach Shocks, the Forecast Method for each IRC is not pre-established. This means that users must define the Forecast Method, Interpolation Method, and minimum rate for all Interest Rates in each scenario. After defined and processed, the results will flow through into the Table B Reporting.
11. On the main page of a Forecast Rates Rule, select the “IRRBB Shocks”. This will allow users to define either Standardized or Enhanced Approach Scenarios, or both for a single Forecast Rates Rule. After a Forecast Rates Rule has been designated as IRRBB Shocks, this check box cannot be unselected, unless there are no defined scenarios as either Standardized or Enhanced Approach Scenario Type.
12. To apply an Enhanced Approach Scenario, click the “Add Scenario” Button.
NOTE:
Only one Enhanced Approach Shock may be applied to a single scenario, and no two EA Shocks of the same type may be applied to the same Forecast Rates Rule. All IRCs in this scenario remain fully editable for Forecast Method, Interpolation Method, and Minimum Rate.
13. Click Apply. The scenario is now an Enhanced Approach Shock.
This feature allows users to set a Static Shock Percentage (positive or negative) to be applied to BSP Volatilities in a Forecast Rates Screen.
For more information, see the Cash Flow Reference Guide on OHC.
This section will display the list of Interest Rate Codes that are defined as BSP Volatility Surface. For a BSP Volatility to be viewable and editable on this screen, you should have the following prerequisites:
· Be defined in Rate Management: Interest Rate as a BSP Volatility Surface
· Have a matching currency to the Forecast Rates Reporting Currency
For more information, see Interest Rates Detail Screen
Below is an example to define the Shock Percentage for BSP Volatility Surface: These steps can be repeated for each new scenario.
1. From Currency Codes, select a currency, for example, USD: US Dollar. Only BSP Volatility Surfaces of the same currency will be available.
2. In the BSP Volatility Block, select a Vol Surface.
3. Enter Shock Percentage for respective BSP Volatility. You can enter positive or negative values here (between -99.9999 and 1,000).
4. Click Apply.
A confirmation box is displayed.
5. To view the results of the Shock, select a BSP Volatility then click View.
6. To remove the Shock Percentage, click Un-Define.
To edit a Forecast Rate, follow the steps given below:
1. From Currency Codes, select the Currency Code (for example IND: INDS).
2. Here, initially, the IRC is in Red and after selection (that is, Editing of Currency Code) and clicking on Apply button, it turns to Green.
NOTE:
Selecting a different IRC means the addition of an IRC and not the deletion/Unselection of the rest of the IRCs. When you reopen the Forecast Rate, the lowest IRC code will be checked by default.
If the scenario has been defined as a Standardized Approach Scenario, this definition may be changed or removed.
3. Select the Edit button for a Standardized Approach Scenario
4. To change the scenario from one SA Shock to another SA Shock, select the new definition. Doing this will change all qualifying SA IRCs to the new definition.
5. To remove a SA definition to the current scenario, select “NONE” as the Scenario Type.
Note: This will remove all Forecast Method definitions for all qualified SA IRCs.
6. To change the SA definition to an Enhanced Approach definition, select an available Enhanced Approach Scenario Type.
Note: This will remove all Forecast Method definitions for all qualified SA IRCs.
7. Click Apply to accept the change.
If the scenario has been defined as an Enhanced Approach Scenario, this definition may be changed or removed.
8. Select the Edit button for an Enhanced Approach Scenario.
9. To change the scenario from one EA shock to another EA Shock, select the new definition. Note: Changing from one EA Scenario to another EA Scenario will not change the IRC Forecast Methods already defined.
10. To remove an EA definition to the current scenario, click to uncheck the selection box “IRRBB Standardized Rate Shocks”. Note: Changing from an EA Scenario type to NONE will not change the currently defined IRC Forecast Methods.
11. To change an existing EA Definition to a Standardized Approach Scenario, select a currently available Standardized Approach type in the Scenario Type dropdown menu.
Note: This will change all relevant IRC Forecast Methods Definitions.
12. Click Apply to accept the change.
The Behavior Pattern Rule Mapping drop-down shows the list of existing Behavior Pattern Rule. you can select any Behavior Pattern to map with the Current Forecast Scenario. If you want to map a behavior pattern to all the Forecast Scenarios, the use "Apply to all Scenarios" check-box. For more information on Behavior Pattern Rule, see the chapter Behavior Pattern Rule.
Stage Forecast Rate Loader Procedure loads forecast rates definitions into OFSAA BSP Forecast Rates Tables from Staging Tables. Forecast Rate Parameters for Direct Input and Structured Change Methods within a scenario for Exchange Rates, Interest Rates, and Economic Indicators are loaded from staging to the Financial Services Data Model. After loading the Forecast Rates, the user can view the information in Forecast Rate Assumptions UI.
For information on how to set up the procedure, see Oracle Financial Services Analytical Applications Data Model Utilities User Guide, Stage Forecast Rates Loader.
Executing the Data Loader
To execute the Data Loader Procedure:
13. Navigate to the Forecast Rates Main Page.
14. Click the Data Loader Execution button on the action bar – This will execute all the available Forecast Rates set up in the Data Loader for Direct Input and Structured Change Methods.
A warning message will appear: “Update all available Forecast Rates?”
15. Click “Yes”
