28.5.1 Rate Sensitive Rollover Example

This example shows how to input rollover behavior for a product where as the yield curve steepens, holders of shorter term products increasingly choose to roll into another longer term product (for example, CD investors).

1. Create a new Forecast Balance rule.
2. Select US dollars in the Currency selection.
3. Select the desired product leaf from the product list.
4. Click the Add icon to add new forecast balance rules.
5. Select the New Business method Rollover.
6. Define the Rate-Volume relationship as Rate-Spread Dependent.
7. Click the Rate Tiers Tab.
8. Select the desired rate dependency pattern.
9. Click the Rollover Setup and details tab.
10. Click the Add icon to add desired products in Product Runoff Type Selection.

    Choose Total, Prepay, Maturity, or Prepayment runoff.

11. Define the bucket range. (In this case the entire bucket range). Click “Add” to create the range.
12. Click Apply. The rollover Bucket Details Bar will appear at the bottom of the page.
13. Input the desired rollover for each rate spread scenario. In this case it is the steepening spread between 6 month and 5 yr Libor curve points.
14. Click Apply.