11.13 Create Interest Rate Codes

Oracle Funds Transfer Pricing uses historical interest rate information to transfer price your balance sheet. The final transfer rate or add-on rate assigned to the records in your instrument tables is based on the historical rates information stored in the system. Consequently, you must decide on the type and amount of historical rate information you require to satisfy your Transfer Pricing requirements at the outset of an Oracle Funds Transfer Pricing implementation.

The quality and availability of interest rate information varies throughout the world. In many markets, gathering comprehensive rate information is a challenge because of insufficient security types, inconsistent quoting conventions, and lack of liquidity. This necessitates careful management of the interest rate data. In Oracle Funds Transfer pricing, this is done using reference interest rates, called Interest Rate Codes.

Creating Interest Rate Codes is a mandatory step in the Oracle Funds Transfer Pricing process. Interest Rate Codes (IRC) are defined and managed within the Rate Management area of the application.

Oracle Funds Transfer Pricing facilitates the process of inputting and viewing interest rates by giving you data storage capabilities appropriate to your market. This is possible as the application supports multiple rate formats and allows you to store the following rate attributes:

• Rate Format (zero-coupon or yield-to-maturity)
• Accrual Basis
• Compound Basis

In addition to historical interest rate information, OFSAA Rate Management allows you to manage the term structure modeling parameters, such as volatility and mean reversion speed, as well as currency rates and economic indicators.

For more information, see OFSAA Rate Management.