8.18.3 Spread from Note Rate

To generate transfer prices using this method, you must provide just one parameter: a rate spread. This spread is added or subtracted from the coupon rate of the underlying transaction to generate the final Transfer Rate for that record.

While entering the rate spread, make sure to input it with the appropriately positive or negative sign, as illustrated in the following table. The first row describes a situation where you are transfer pricing an asset and want to have a positive matched spread for it (the difference between the contractual rate of the transaction and the transfer rate is positive). Here, you must enter a negative rate spread.

Table 8-6 Example of Rate Spread

Account Type	Matched Spread	Sign of Rate Spread
Asset	Positive (Profitable)	Negative
Asset	Negative (Unprofitable)	Positive
Liability or Equity	Positive (Profitable)	Positive
Liability or Equity	Negative (Unprofitable)	Negative