1. Cash Flow Engine Reference Guide
  2. Cash Flow Dictionary
  3. Cash Flow Columns
  4. Payment Frequency (PMT_FREQ)
  5. Module Usage

8.2.112.2 Module Usage

Oracle ALM and Funds Transfer Pricing Cash Flow Methodologies reference PMT_FREQ for calculating and processing payments, prepayments, and market valuation. The cash flow engine forecasts future next payment dates by incrementing NEXT_PAYMENT_DATE forward by PMT_FREQ.

Oracle ALM

PMT_FREQ is used in the Market Value calculation. The calculation is as follows:

MV = Cash Flow/(1 +r)t

PMT_FREQ is used to derive the r and t value for records when PMT_FREQ_MULT = M.

Following is an explanation of how the calculations that use the PMT_FREQ.

For records with PMT_FREQ MULT = M, r is defined as the discount rate divided by the number of payments per period. The number of payments per period is calculated as (12/PMT_FREQ).

r = Discount Rate/12/PMT_FREQ

The t value is defined as the number of days in the payment period from the AS_ OF_DATE divided by 30.41667. This amount is then rounded to a whole integer and then divided by the PMT_FREQ. The equation is as follows:

t = (Round((Current Payment Date - AS_OF_DATE) / 30.41667))/PMT_FREQ.

For user-defined Payment Schedules and Patterns, the Market Value formula is the same as used for PMT_FREQ = D records. That formula is:

t = (Current Payment Date - AS_OF_DATE/PMT_FREQ).

Funds Transfer Pricing

PMT_FREQ is referenced by the cash flow transfer pricing methodologies when deriving Discounted Cash Flows.

Oracle ALM and Funds Transfer Pricing

Both Oracle ALM and Funds Transfer Pricing use PMT_FREQ in defining payment dates.

Oracle ALM defines the date of payment using PMT_FREQ in the following manner:

  • During Cash Flow Generation, from the NEXT_PAYMENT_DATE, cash flow engine increments forward by the PMT_FREQ until the MATURITY_DATE. Oracle ALM does not use NEXT_PAYMENT_DATE for payment schedule records.
  • Oracle Funds Transfer Pricing defines the date of payment using PMT_FREQ in the following ways:

    Adjustable-rate Cash Flow Transfer-priced Records: In defining the transfer rate for an adjustable-rate record, the Cash Flow Engine uses the PMT_FREQ to define the payment dates from the LAST_REPRICE_DATE to the NEXT_REPRICE_DATE. To define all the payment events within this period, FTP rolls back from the NEXT_PAYMENT_DATE by the PMT_FREQ until just before the LAST_REPRICE_DATE. From this calculated payment date, the Cash Flow Engine again rolls forward by the PMT_FREQ, but this time cash flows are produced. The Cash Flows produced are used by one of the four cash flow transfer pricing methodologies to derive the Transfer Rate.

    Fixed-Rate Cash Flow Transfer-priced Records: In defining the payment dates for Cash Flow Transfer-Priced Fixed-Rate Records, the Cash Flow Engine starts from the record's ORIGINATION_DATE and rolls forward by the PMT_FREQ until the MATURITY_DATE.

  • Oracle ALM and Funds Transfer Pricing both use the PMT_FREQ in the following, similar manner:
    1. On the date of payment, the cash flow engine calculates the interest payments, principal payments, current deferred payments, prepayments, unscheduled prepayments, and negative amortization, if applicable. For an adjustable-type record where REPRICE_FREQ < PMT_FREQ, Oracle ALM applies only the last repriced rate for payment calculation.
    2. During the payment calculation processing, PMT_FREQ is used for interest income calculations (financial element 430) for records with ACCRUAL_ BASIS_CDs of 30/360, 30/365, 30/ACTUAL.
    3. PMT_FREQ is used in the Remaining Number of Payment calculation when calculating the payment amounts for balloon records and specific user-defined payment pattern instances.
    4. As each payment is made on the PMT_FREQ, the cash flow engine reduces the REMAIN_ NO_PMTS_C by 1. If the newly calculated REMAIN_NO_PMTS_C = 1, the next payment date is set to MATURITY_DATE.

    Note:

    PMT_FREQ <= ORG_TERM

    MATURITY_DATE <= NEXT_PAYMENT_DATE + (REMAIN_NO_PMTS_C *

    PMT_FREQ).

    PMT_FREQ = 1 and PMT_FREQ MULT = D require the Cash Flow Engine to perform Cash Flow Calculations for every day of the modeling horizon. This slows processing significantly.

    PMT_FREQ > 0 in all cases. PMT_FREQ = 0 can cause incorrect calculations to occur.

    Payment Frequency Multiplier (PMT_FREQ_MULT)