5.3.4.1.8 Spread from Note Rate
To generate transfer prices using this method, you need to provide just one parameter: a Rate Spread. This spread is added or subtracted from the Coupon Rate of the underlying transaction to generate the final transfer rate for that record.
Figure 5-50 Spread from Note Rate
While entering the Rate Spread, ensure to input it with the appropriately positive or negative sign, as illustrated in the following table. The first row describes a situation where you are transfer pricing an asset and want to have a positive matched spread for it (the difference between the contractual rate of the transaction and the transfer rate is positive). Here, you should enter a negative rate spread.
Table 5-18 Example of Rate Spread
Account Type | Matched Spread | Sign of Rate Spread |
---|---|---|
Asset | Negative | Positive (Profitable) |
Asset | Positive | Negative (Unprofitable) |
Liability or Equity | Positive | Positive (Profitable) |
Liability of Equity | Negative | Negative (Unprofitable) |
The following option becomes available in the application when you select this method:
- Mid-Period Repricing Option: Select the check-box beside this option to invoke the Mid-Period Repricing option.
Note:
The Spread From Note Rate Method applies only to accounts that use Account Tables as their data source.