9.1 Introduction to Distributed Originations

New business instruments must be generated as part of an Oracle ALM Forecast, to replace balances that have run off for a particular product. New business impacts the total amount of income and market value in future periods. Without new business, both values will be understated in future periods because, over time, existing balances runoff. The income and market value associated with a new business is a function of the balance booked, the rate booked, and the timing of the booking. The balance and rate are determined by the assumptions input by the user. The timing of the bookings is a function of the modeling methodology.

The booking of a new business can be viewed as coming from three sources:

• Internal roll-over of existing accounts (hereafter referred to as roll-over)
• Rolling of existing accounts into other accounts (hereafter referred to as roll-into)
• New money unrelated to existing business (hereafter referred to as new originations)

In modeling the timing of new business, the modeling goal is to come as close as possible in reflecting reality while adding minimal processing time.

New bookings generated from run-off (roll-over and roll-into) would realistically occur on the date the run-off occurred. On the run-off date, the source of funds becomes available. For a practical example, consider the rollover of a Term Deposit. When a customer opts to rollover a Term Deposit, the funds are rolled into a new Term Deposit on the maturity date of the previous Term Deposit.