19.1 Creating Forecast Rate Rule

1. From the Forecast Rates Summary page, click Add.
2. Enter a name for the rule.
3. Enter a description for the rule. This is an optional field.
4. Select the Reporting Currency.
5. Select a Folder.
6. Select the Access Type option.
7. Click Save.

The Apply defined method to all IRCs check box is only supported for flat rates method. Other IRC methods do not support Apply to all.

Features of Forecast Rates

The selected reporting currency that you created appears in the Forecast Rates assumption rule window. Each Forecast Rate 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 less than 2%, then set the minimum rate to the floor at 0%, although negative rates are allowed if required.

The following options are available for defining Forecast Rate Scenario:

· Standardized Approach

· Enhanced Approach

IRRBB Standardized Approach Shocks allows you to select one of the six Standardized Approach Shocks (SAS) in a forecast rate scenario for certain currency IRCs. The following are the 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 are available for supported currencies. If an IRC is for a non-supported currency, then these options will not display.

For more information, see the Cash Flow Engine ReferenceGuide.

The Active currencies defined under the Currencies section of the Rate Management are listed under the Currency Codes pane. 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 pane is dependent on the selected currency. The IRCs, including a reference IRC for each currency, are loaded from the Rate Management. When you select a currency other than the reporting currency, the options under Currency Forecast Method pane provide several ways to model relationships between the 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 the economic conditions that will affect the forecast outcome of another variable. For example, if you forecast a higher GDP, then use 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 the Rate Management.

The IRCs for all active currencies (and reporting currencies, a subset of the active currencies) are listed under the Interest Rate Codes. The options under the Interest Rate Code Forecast method pane provide several ways to model the effects on portfolio cash flows due to interest rate changes.

You can map your forecast scenario with the Behavior Pattern Rule. For more information, see the Behavior Pattern Rule Mapping section.