5.3.1.6 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. For each combination of product and currency, you can choose one of the following discount methods:

• Spot Input
• Spot Interest Rate Code
• Forecast (Original Term)
• Forecast (Remaining Term)

The following table describes the methods and rate choices:

Table 5-30 List of Discount Methods

Method	Single Rate	Yield Curve
Spot Input	Discounts all cash flows by the Input Rate	Not applicable
Spot Interest Rate Code	Not applicable	Discounts each Cash Flow period by the equivalent term rate on the base Yield Curve chosen (the Yield Curve as of the start date). The term is defined by the remaining term of the cash flow. Refer Note
Forecast (Original Term)	Not applicable	Discounts each Cash Flow period by the Forecasted Value of the point on the yield curve corresponding to each transaction record's original term (fixed rate instrument) or repricing term (variable rate instrument). Refer Note
Forecast (Remaining Term)	Not applicable	Discounts each Cash Flow period by the Forecasted Value of the point on the Yield Curve corresponding to the remaining term until each cash flow. Refer Note
Effective Interest Rate	Effective Interest Rate (EIR) of account is used as discount rate.	Not applicable

Note:

In the case of Spot Interest Rate Code, if term point is not available, engine will use linear interpolation to determine the interest rate to discount cashflows.

When Discounting method of Forecast (Original Term) and Forecast (Remaining Term) is used, if term point is not available, engine will use Interpolation method defined for Interest rate code within Forecast Rate Rule. If Interpolation method defined in Forecast rate rule is Linear, engine will use Linear Interpolation. If Interpolation Method is cubic, engine will use Cubic Interpolation to determine interest rate to discount Cash Flows.

Discount Method Rule Summary

This page is the gateway to all Discount Method Rules and related functionality. You can navigate to other pages relating to Discount Method Rules from this point.

Figure 5-126 Discount Method Rule Summary

Search Discount Method Rule

Prerequisites: Predefined Discount Method Rule

To search for a Discount Method Rule:

Click Search after entering the search criteria. The search results are displayed in a table containing all the Discount Method Rules that meet the search criteria.

Or

An alternative method to search a Discount Method rule is through the Field Search option. This is an inline wildcard UI search that allows you to enter a search value (such as code, name, etc.) partially or fully. Rows that contain the string you are searching for are fetched and displayed in the Discount Method Summary. You can enter the Code, Name, Description, Dimension, Hierarchy, and Folder of the Discount Method Rule and click Search .

The Discount Method rule Summary displays the following information:

Add: Click the Add icon on the page header to build a new Discount Method rule.

• Code: The Code of Discount Method Rule.
• Name: The Discount Method Rule's short name.
• Dimension: The Dimension the Discount Method Rule belongs to.
• Hierarchy: Name of Hierarchy that is used to define Discount Method Rule.
• Folder: The Folder where the Discount Method Rule is saved.
• Last Modified By: The user who last modified the Discount Method Rule.
• Last Modified Date: The Date and Time when the Discount Method Rule was last modified.
• Access Type: The access type of the rule. It can be Read-Only or Read/Write.
• Action: Click this icon to view a list of actions that you can perform on the Discount Method rule.
  • Multiple Delete: Enables you to select and delete one or multiple rules in the table simultaneously.
  • View/Edit: Based on the user privilege assigned, you can either only view or edit existing Discount Method rules. To edit a rule, you must have Read/Write privilege.
  • Save As: You can reuse a Discount Method rule by saving it under a new name thus saving time and effort in entering data multiple times; it also leads to reduced data entry errors.
  • Delete: You can delete Discount Method rules that you no longer require. Note that only Discount Method rule owners and those with Read/Write privileges can delete Discount Method rules. A Discount Method rule that has a dependency cannot be deleted.
  • Dependency Check: You can perform a dependency check to know where a particular Discount Method rule has been used. Before deleting a rule, it is always a good practice to do a dependency check to ensure you are not deleting Discount Method rules that have dependencies. . A report of all rules that utilize the selected Discount Method rule is generated.

    Note:

    This is functionality will intended for a future release.

You can copy, in total or selectively, the product assumptions contained within the Discount Method Rules from one currency to another currency or a set of currencies or from one product to another product or a set of products.

Also See:

• Create Discount Method Rule