11.2.1 Scenario-based Forecast Rates

Scenario-based forecast rates are the interest rates used for repricing events, rate setting of new business, and market-rate observations for prepayment assumptions and new business assumptions. The Forecast Rates assumption rule stores the definition of forecasted rate scenarios.

Within the Forecast Rates assumption rule, the user creates deterministic scenario(s) for each IRC, defining the forecasted rates in each modeling bucket (for an active time bucket rule) for each IRC and scenario. Most methods use the as-of-date rates, stored in history tables, as the basis for the rates forecast. The following methods are available:

• Flat
• Structured Change
• Direct Input
• Change from Base
• Implied Forward
• Yield Curve Twist