26.2.1 Discount Method

Select a method from the Discount Method list:

• Spot Input
• Spot Interest Rate Code
• Forecast (Original Term)
• Forecast (Remaining Term)
• Effective Interest Rate

The following table describes the methods and rate choices:

Table 26-1 List of Discount Methods

Method	Single Rate	Yield Curve
Spot Input	Discounts all cash flows by the Input Rate	Not applicable
Spot Interest Rate Code	Not applicable	Discounts each cash flow period by the equivalent term rate on the base yield curve chosen (the yield curve as of the start date selected in your ALM Application Preferences). The term is defined by the remaining term of the cash flow. Refer Note
Forecast (Original Term)	Not applicable	Discounts each cash flow period by the forecasted value of the point on the yield curve corresponding to each transaction record's original term. Refer Note
Forecast (Remaining Term)	Not applicable	Discounts each cash flow period by the forecasted value of the point on the yield curve corresponding to the remaining term until each cash flow. Refer Note
Effective Interest Rate	Discounts all cash flows by Effective Interest Rate from instrument column “EFF_INTEREST_RATE_C”	Not applicable

Note:

In the case of Spot Interest Rate Code, if term point is not available, engine will use linear interpolation to determine the interest rate to discount cashflows.

When Discounting method of Forecast (Original Term) and Forecast (Remaining Term) is used, if term point is not available, engine will use Interpolation method defined for Interest rate code within Forecast rate rule. If Interpolation method defined in Forecast rate rule is Linear, engine will use linear interpolation. If Interpolation method is cubic, engine will use Cubic interpolation to determine interest rate to discount cashflows.