1. Asset Liability Management User Guide
  2. Forecast Rates
  3. Economic Indicator Forecast Methods

19.3 Economic Indicator Forecast Methods

The following Economic Indicator methods are available.

Table 19-2 Economic Indicator Forecast Methods

Method Description
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

Flat: Viewing 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 Economic Indicator Forecast Method, select 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 window.

Structured Change: Model a gradual increase for six months in New Residential Sales.

  1. From Currency Codes, select USD: US Dollar.
  2. From Economic Indicators, select New Residential Sales.
  3. From Economic Indicator Forecast Method, select Structured Change.
  4. Click Define. Enter the interest rate change.
  5. Click Apply in theEconomic Indicator View Structured Changes window
  6. Click View in the Forecast Rates window
  7. You can see the incremental increase over the six months (150 = 25 per month * 6 months)

Direct Input: To use the Direct Input method, see the Structured Change section with the following steps:

  1. From Currency Codes, select USD: US Dollar.
  2. From Economic Indicators, select New Residential Sales
  3. From Economic Indicator Forecast Method, select Direct Input.
  4. Click Define. Enter the interest rate change. Enter New Residential Sales data (forecasted values for each bucket rather than forecasted values changes over a period of one or more buckets).

After defining the forecast method for an Economic Indicator, you can undo the definition by selecting the relevant Economic Indicator (green color check-box) and click Un-Define. This will bring the Economic Indicator to its original undefined state indicated by the Red Color check box. Use this if you want to delete an Economic Indicator from the Economic Indicator of the Rate Management after defining the forecast method for it.