1. Asset Liability Management Cloud User Guide
  2. Business Rules Administration
  3. Application Specific Rules
  4. Discount Methods
  5. Discount Method Examples
  6. Forecast Remaining Term

4.3.9.7.4 Forecast Remaining Term

The Forecast Remaining Term Method uses forecasted Interest Rate Data to determine the discount fac­tor.

Interest Rate Code = Treasury Yield Curve

The formula for the market value of this account is:

Market Value = Cash Flow1/ (1+ 1Year Treasury Rate at the 1 year point in the forecast) + Cash Flow2/ ((1+ 2 Year Treasury Rate at the 2 year point in the forecast)^2)

Cash Flow1 is the Cash Flow at the end of year 1. Cash Flow2 is the cash flow at the end of year 2. The val­ues for 1 Year Treasury and 2 Year Treasury reflect the scenario specific values from the forecast rates - interest rate data. Cash Flow1 is discounted at the 1 year Treasury rate, from the 1 year point of the fore­cast and Cash Flow2 is discounted at the 2 year Treasury rate, from the 2 year point of the forecast.