8.2.74.2 Module Usage

Oracle ALM

1. MARGIN is used during Cash Flow Generation.
2. For adjustable-type records, MARGIN is the contractual spread above/below the index that is applied throughout the instrument's life. The financial institution's retention rate (CUR_NET_RATE) is equal to the index that the record is tied to plus a spread, which is defined by the MARGIN field.
3. The events of a repricing involving MARGIN are as follows:

   At a repricing event (or a TEASER_END_DATE) for an adjustable-rate record, the cash flow engine matches the INTEREST_RATE_CD, REPRICE_FREQ, and repricing date of the detail record to the Forecast Rates assumption. After matching the rate from the Forecast Rates assumption attached to the ALM Process.

   After matching the rate from the Forecast Rates assumption rule, if the IR Margin type cd = 1 (Percent) engine calculates Margin using forecast raw rates, and Margin percent provided in column MARGIN as MarginC = Margin % * Raw Rate C. Margin calculated is added back to Raw Rate.

   If IR Margin type cd =0 (Rate), provided MARGIN amount gets directly added to Raw Rate.

   Any teases, rate caps/floors, and rounding are applied thereafter to derive the rate that is applied to the record.

   Note:

   The Repriced Rate defined in Step 3 equals the coupon rate that is used for amortization, prepayment, and interest income (financial element 430) calculations.

Transfer Pricing

MARGIN is used only when mid-period repricing is selected for spread from Note Rate to compute the rate from a prior period.