24.3 Defining Maturity Mix Rules

The definition of a Maturity Mix rule is part of the Create or Edit Maturity Mix rule process. When you click Save in the Create Maturity Mix rule process, the rule is saved and the Maturity Mix rule summary page is displayed. However, Maturity Mix assumptions have not yet been defined for any of your products at this point. Typically, you would start defining your Maturity Mix assumptions for product-currency combinations before clicking Save.

Defining Maturity Mix Using Node Level Assumptions

Node Level Assumptions allow you to define assumptions at any level of the Product dimension Hierarchy. The Product dimension supports a hierarchical representation of your chart of accounts, so you can take advantage of the parent-child relationships defined for the various nodes of your product hierarchies while defining rules. Children of parent nodes on a hierarchy automatically inherit the assumptions defined for the parent nodes. However, assumptions directly defined for a child take precedence over those at the parent level.

Prerequisites

Performing basic steps for creating or editing a Maturity Mix rule.

Procedure

Defining Maturity Mix assumptions involves three primary steps:

  1. Choosing your rate dependency option.
  2. Defining Maturity Mix assumption bucket ranges.
  3. Inputting Maturity Mix assumption details.

Note:

Using the default currency to set up assumptions can save data input time. At run time, the calculation engine uses assumptions explicitly defined for a product currency combination. If assumptions are not defined for a currency, the engine uses the assumptions defined for the product and the default currency. If the assumptions are the same across some or all currencies for a specific product, you can input assumptions for the default currency. Be careful using this option on screens where an Interest Rate Code is a required input.

Rate Dependency Relationships

There are four rate dependency options to choose from:

  • No Relationship
  • Rate Level Dependent
  • Rate Spread Dependent
  • Economic Indicator Dependent

Rate Dependency Patterns

If any one of the Rate Dependency options, other than No Relationship, is selected, the Rate Dependency Pattern drop list becomes active. The list of available patterns is limited to those which apply to the selected Rate Dependency Relationship type.

Note:

Rate Dependency Patterns are not supported in BSP. For BSP, you must select No Relationship.

Maturity Mix Date Bucket Selection Screen

Click the Add Row button to select the number of maturity mix date ranges that are required during the forecast period. The Bucket Number column is used to calculate the start and end dates. The Bucket Number column determines which income simulation bucket is used to calculate these dates.

The Maturity Mix rule uses the modeling period defined in the “active” Time Bucket rule. You should always verify that your modeling horizon and related assumptions are consistent with the As of Date and active Time Bucket rule before processing.

Rate Tiers: Rate Tiers reflect the Rate Dependency Pattern details from the selected Rate Dependency Pattern. You define Maturity Mix assumptions for each rate tier. The application will automatically determine which set of assumptions to apply for a given scenario based on the relationship between the Rate Tier and the related Forecast Rate assumption value.

Bucket Number: The bucket number input allows you to select a range of buckets over which the maturity mix assumptions will apply. Start Date and End Date values are updated automatically based on the Bucket Number input for each row.

Start Date and End Date: When the Maturity Mix detail page opens, the Start Date (min value) and End Date (max value) columns are automatically populated and are read-only values. The date ranges represent the Income Simulation Date buckets as defined in the “active” Time Bucket rule. See Time Buckets for more information. Any new business that originated within these dates is modeled using the Maturity Term(s) defined in the Maturity Mix rule.

Note:

The Start Date value in the first row is always set equal to the first modeling date, that is the as of date plus 1 day, and the End Date value in the last row always equals the last day of the modeling horizon as defined in the “active” Time Bucket rule.

Apply Defined Buckets to all Rate Tiers

This option allows you to copy the bucket setup from one page to all other Rate Tiers when using Rate Dependent assumptions.

Maturity Mix Details Screen

The Maturity Mix details screen allows you to define the maturity mix details. You can assign one or more maturity terms within the details page, but the sum of the percentage weights must equal 100%.

Figure 24-2 Maturity Mix Details Screen


This screen displays the Maturity Mix Details.

  • Maturity: Maturity (= term)
  • Multiplier: Maturity multiplier (= days, months, years)
  • Amortization: The amortization term will default to the maturity term. The amortization term should always be greater than or equal to the maturity term.
  • Multiplier: Amortization multiplier (= days, months, years)
  • Percent: The percentage of new business at the specified term and maturity for the associated date bucket.

For each Date Bucket defined, the maturity terms must be specified.