5.1.3.1 Creating an Interest Rate Curve

To create an Interest Rate Curve, perform the following steps:

1. Click Add from the Interest Rate Curve Summary page.
2. Enter the following information in the Interest Rate Curve Details window.
   • Interest Rate Code: When constructing a new Yield Curve, you must specify an Interest Rate Code between 1 and 9999999. Interest Rate Codes are used internally to uniquely identify Yield Curves. When working with Cloud service, you reference Yield Curves by Name, not by Interest Rate Codes. Interest Rate Codes are embedded within your instrument data (for example, the INTEREST_RATE_CD columns within the Instrument Data are populated with Interest Rate Codes). After you have saved a Yield Curve, you cannot modify its Interest Rate Code.
   • Name: Provide a unique Name for the Interest Rate Curve.
   • Description: You can enter a description for the Interest Rate Curve. You can modify this description at any time using the Edit action.
   • Display for All Currencies: This flag allows you to designate certain Interest Rate Curves to make them available for assumption mapping to any currency. Assumption Rules filter the list of Interest Rate Codes based on the currency when defining assumptions for a specific Product/Currency combination. When this option is enabled, the Interest Rate Curve appears in assumption rules for all currencies.
   • Reference Currency: Select a Reference Currency for your Interest Rate Curve. You can change the Reference Currency for previously saved Interest Rate Curves though such changes are unlikely. An Interest Rate Curve's Reference Currency is the currency for which your market rates are valid. For example, the Reference Currency for a Prime Rate Yield Curve would be US Dollars. The Reference Currencies drop-down list displays only Active currencies. For more information on Active and Inactive currencies, see the Currency Documentation.
   • Date Based Term Points: This toggle switch is applicable only for Standard Structure Type. If you select Structure Type as Hybrid, the toggle switch is disabled. When you select the Date Based Term Points, and add a Term Point, the Historical Rates Tab allows you to define a Custom Date and Rate for each Term Point. By default, the Date is inserted based on the Term that you define. You can change the Date to a custom Date and define the Rate.
   • Risk-Free: (Optional) This flag is for tagging the Interest Rate Curve as risk-free. That is Edit Table in new and Edit Modes. It is available for Non-Hybrid Curves and Hybrid Curves.
   • Structure Type: This attribute is required for each Yield Curve. Structure Type supports Standard, Hybrid Yield Curve, and Managed Rates Definitions. Hybrid Yield Curves are re-expressions of one or more pre-existing Standard Yield Curves. For more information, see Hybrid Term Structure. Managed Rates are free form, user-defined formula, that is, equation based objects. For more information, see Managed Rates. Standard Interest Rate Curves are used to define the Yield Curve and to add, edit, or delete Historical Interest Rate Data. After you have saved the Yield Curve, you cannot change the selected Structure Type.
   • The Interest Rate Curve Tabs are:
     • Terms & Attributes
     • Historical Rates
     • Parameters
     • Hybrid Term Structure
     • Managed Rates

     For new Yield Curves, you must begin with the Terms & Attributes tab. After you have selected the term structure and attributes for a Yield Curve, you cannot edit them. After assigning the attributes, navigate to the Terms tab to define a term structure for your Yield Curve, for example, an overnight rate, a one-month rate, a three-month rate, and so on. Click Apply after defining the term structure and attributes to the Interest Rate Curve.

     Note:

     You must specify an Interest Rate Code and Name in the Interest Rate Curve Details Window before navigating to the Terms & Attributes Tab.

     The first time you navigate to the Terms & Attributes Tab, an initial 1-month term point is provided, but even if this is the only term point you want for the curve, you must click Apply to finish term structure specification. In future revisions to the Curve's Definition, navigate directly to the Historical Rates Tab, but if you modify the term structure, you must always click Apply on the Terms & Attributes Tab before navigating to the Historical Rates Tab.

     The Historical Rates Tab is used to input historical interest rate data. This Tab is used for maintaining the Interest Rates Database. To navigate to the Historical Rates Tab, either click Apply on the Terms & Attributes Tab or select the Historical Rates Tab if you have already defined your term structure.

     Note:

     You must specify the following before navigating to the Historical Rates Tab:

     • An Interest Rate Code, Name, and Reference Currency in the Interest Rate Code Details Window.
     • A term structure in the Terms & Attributes Tab.