19 Forecast Rates

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, repricing existing business, calculating prepayments, and determining discount methods. Use Economic Indicator forecasts to include in behavioral modeling and scenario or 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. For information on how to define Interest Rates, Economic Indicators, and Currency Exchange Rates, see the OFSAA Rate Management section.

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.

Topics:

• Creating a Forecast Rates Assumption Rule
• Currency Forecast Methods
• Economic Indicator Forecast Methods
• Interest Rate Forecast Methods
• ALM Volatility Codes
• Behavior Pattern Rule Mapping
• Data Loader Procedure