28.3 Creating a Forecast Balance Rule

To create a new Forecast Balance rule, complete the following steps:

1. Click the Add on the Forecast Balances summary page to add a new rule.
2. Enter a descriptive name for the rule.
3. Enter a description (optional).
4. Select a folder.
5. Select Product Hierarchy folder.
6. Select Product Hierarchy
7. Select Currency
8. Drill down to desired leaf level node(s) in the Assumption Browser
9. Click Save

When saved, go back to edit the Forecast Balance rule just created. Check the box next to the descrip­tion and click the Edit icon.

The Forecast Balance rule dialog opens on the Method tab. The other tabs (Rate Tiers, New Volume detail, Roll-over Set up and Detail) are dependent upon method chosen and the rate volume relation­ship. You must begin the assumption setup on the Method Tab and work your way through the remain­ing tabs, as needed. To input new assumptions for a particular product leaf and currency, follow the steps detailed under each Tab heading, described next:

Method Tab

The Method Page is used to define the Forecast Balance method per product leaf and currency. On this page you define the New Business method, the timing option, and the type of rate-volume relation­ship.

Follow the steps listed below to complete this information.

1. Select a product leaf from the drop-down list under the Product and Currency Details (in this case, Commercial Loans fixed).
2. Select preferred New Business Method. If you select Target End, Target Growth, New Add, or any combined rollover option, note that the Timing selection is enabled.
3. Select preferred Timing option (with Target End, Target Growth, New Add, Rollover with Growth % and Rollover with New Add only).
4. Select the type of Rate-Volume Relationship you want to model. If the relationship is Rate Spread, Rate Level, or Economic Indicator, the Rate Tiers tab is enabled.

Rate Tiers Tab

On the Rate Tiers tab the Rate Dependency Pattern drop-down list appears. Select the desired name you defined in the Rate Dependency Patterns user interface. If you have selected No Relationship on the Method Page, this page is not accessible.

You can see the defaulted values for the Base Rate and the Rate Tier Bars appear as input in, when the pattern was defined.

New Volume Detail Tab

The New Volume Detail Page is used to input new volume assumptions for the methods:

• New Add
• Target End
• Target Average
• Target Growth
• New Add component of the Rollover with New Add method
• Growth % component of the Rollover with Growth % method

On this page, you select the range of modeling buckets and input balance or percentage assumptions for each modeling bucket within this bucket range. An example of the New Volume Detail page appears as shown in the following figure:

1. Select the New Volume Detail tab.
2. Select the modeling bucket start and end range. The default Bucket Range includes all modeling buckets. To forecast new business in a subset of the modeling horizon, reduce the bucket range by increasing the bucket start date or decreasing the bucket end date. As you change the bucket start and/or the bucket end, the view adjusts accordingly to display only buckets within the selected range.
3. Select corresponding row to the first modeling bucket. If rate-volume relationships are used, this cell also corresponds to the first rate tier. Input the targeted value. For New Add, Target End, and Target average, input an amount. For Target Growth, input a percent. The percent should represent the percentage growth within the modeling bucket. It should not represent an annual­ized amount.
4. You can also use the Excel import/export feature to add the New Volume Detail information.

Rollover Setup and Details Tab

In the Rollover Setup and Details tab, first input the setup details necessary for definition of rollover percentages (source product leaves and bucket ranges), second, input rollover percentages. The roll­over percentages represent the percent of the runoff amount from the source (leaf and runoff type for the selected currency) which generates new business into the target leaf for the selected currency.

1. Click the Rollover Setup and Details tab to display the page.
2. Click the Add icon to select the Product Runoff Type Selection.
3. The Hierarchy page will appear. Select the product leaf members for the rollover and click Ok.
4. The selected products will appear below the Product Runoff Type selection bar.
5. Choose the desired runoff type (Total, Prepay, Maturity, Payment, Core, Volatile, Devolvement, Recovery, or NPA).
6. Define the input bucket ranges. You only need to define multiple bucket ranges if you want to vary rollover assumptions by modeling buckets. The bucket ranges defined here only apply to rollover occurring from the source leaf to the target leaf. You must have at least one bucket range defined. Typically, you define a bucket range from the first modeling bucket to the last modeling bucket, covering the entire modeling horizon. To define a bucket range, complete the following steps:
   1. Select a start bucket date for the first date range.
   2. Select an end bucket date for the first date range.
   3. Select Add to add a bucket range which begins on the first date of the start bucket and ends on the last date of the end bucket.
   4. Select a new start date for the next date range. You can select from any buckets that are not encompassed by a defined bucket range. Modeling buckets which are a part of an existing bucket range do not appear in this list.
   5. Select an end date for the next date range. You cannot create overlapping mod­eling buckets. To prevent this, the list of available bucket end dates only includes modeling buckets which follow consecutively from the selected start bucket.
   6. Continue adding bucket ranges until all desired ranges have been defined.
   7. Once all desired products and bucket ranges are selected and defined, click Apply.
7. The Rollover Bucket Range Details form will appear at the bottom.

   To define the details for the above prescribed bucket ranges, do the following:

   1. Select a bucket from the drop-down list of defined bucket ranges.

      Note:

      The defaulted values for runoff type are populated.

   2. Enter the percentage rollover for the given products.
   3. You can also use the Excel Import/Export feature to add the Rollover Bucket Range Detail information.
   4. Click Apply.