8.18 Transfer Pricing Methodologies and Rules

The transfer pricing methodologies supported by Oracle Asset Liability Management can be grouped into the following two categories:

• Cash Flow Transfer Pricing Methods: Cash flow transfer pricing methods are used totransfer price instruments that amortize over time. They generate transfer rates based on the cash flow characteristics of the instruments.

  To generate cash flows, the system requires a detailed set of transaction-level data attributes, such as, origination date, outstanding balance, contracted rate, and maturity date, which resides only in the Instrument tables. Consequently, cash flow methods apply only if the data source is Account tables. Data stored in the Management Ledger Table reflects only accounting entry positions at a point in time and does not have the required financial details to generate cash flows, thus preventing you from applying cash flow methodologies to this data.

  The cash flow methods are also unique where Prepayment rules are used only with these methods. You can select the required Prepayment rule when defining an ALM Process.

  Oracle Asset Liability Management supports the following cash flow Transfer Pricing methods:

  • Cash Flow: AverageLife
  • Cash Flow:Duration
  • Cash Flow: Weighted Term
  • Cash Flow: Zero DiscountFactors
• Non cash Flow Transfer Pricing Methods: These methods do not require the calculation of cash flows. Oracle Asset Liability Management supports the following non-cash flowtransfer pricing methods:
  • MovingAverages
  • Straight Term
  • Spread from Interest RateCode
  • Spread from NoteRate
  • RedemptionCurve