4.3 Application Specific Rules

This section covers the following topics:

1. Currency Gain/Loss: Currency Gain/Loss occurs when an entity buys/sells goods or services in a foreign currency, and that currency fluctuates relative to their Local currency, this can create differences in value of the monetary Assets and Liabilities.
2. Time Bucket: The Time Bucket module describes the procedure for working with and managing Time Bucket rules. The Time Bucket Rules allow users to create the time bucket definitions used for computing and out­putting aggregated cash flows across time. The Time Bucket Rules determine the granularity of cash flow output and can be set at any frequency through a combination of daily, monthly, and yearly buckets.
3. Prepayment Rules: A Prepayment Rule contains methodologies to model the prepayment behavior of various amortizing instruments and quantify the associated Prepayment Risk.
4. Prepayment Models: Prepayment Models can be referenced by a Prepayment Rule to Model Prepayment Behavior of instruments based on a range of instrument level attributes.
5. Behavior Pattern Rules: The Behavior Pattern Rule UI allows you to group Behavior Pattern codes (behavioral assumptions) together in a set at the Product/Currency level which then can be rotated to select a value on a combination.
6. Volatility Curve: The Volatility Curve UI allows you to select the curve. The curve selected will contain volatility rates. If you select this option, all other curve attributes become disabled and the curve is used exclusively for managing volatility details.
7. IRRBB Standardized Approach : The IRRBB Standardized Approach UI allows you to view, edit, and delete currencies, shocks, or other parameters currently stored in the IRRBB Standardized Approach shocks table FSI_IRC_STDAPRCH_SHOCKS as well as the Standardized Approach Prepayment/Early Redemption scalars table FSI_IRC_STDAPRCH_CPRER.
8. Forecast Rates: Forecast Rate scenario assumptions allow you to define future interest rates, future economic indicators, and future currency exchange rates. Use interest rate forecasts to project cash flows, including pricing new business, re-pricing existing business, calculating prepayments, and determining discount methods. Use Economic Indicator forecasts to include in behavioral modeling and scenario/stress analysis. Use currency exchange rate forecasts to account for the effects of currency fluctuations on income.
9. Discount Methods: This module describes the procedure for working with and managing Discount Method Rules. Discount Method Rules allow users to define the method for discounting projected Cash Flows for market value and duration calculation purposes.
10. Pricing Margin: The Pricing Margin Rules allow users to define pricing margins (or spreads) for your products. Pricing margins are defined period by period based on your active Time Bucket definition, for each product and, potentially, each currency. Pricing margins work together with an underlying base interest rate curve to determine note rate pricing for new business volumes defined through Forecast Balance Rules.
11. Forecast Balance rules: The Forecast Balance rules module discusses modeling of new business activity through the Forecast Balance rules. Included are assumption setup and processing. Within a Forecast Balance rule, you specify the amount of new activity generated per modeling bucket on each MDBSS node within each active currency. To create a new business assumption, you select from following available forecasting methods.
12. Static Deterministic Process: This module discusses the procedure for creating and executing a Static Deterministic Process (existing business only). When all the required assumptions are defined, The processing performs the Static Cashflow Calculations and generates an aggregated result set.
13. Dynamic Deterministic Process: Dynamic Deterministic processing generates output based on a set of user-defined forecast rate scenarios and includes new business assumption rules in the process flow.