11.6 Define and Execute a Transfer Pricing Process
Defining and executing a Transfer Pricing Process is one of the mandatory steps in Oracle Funds Transfer Pricing. The Transfer Pricing Process allows you to:
- Select Transfer Pricing, Prepayment, and Adjustment Assumptions, respectively, contained in the associated Transfer Pricing, Prepayment, and Adjustment rules, within the Transfer Pricing Process.
- Determine the data that you want to process in a particular Run.
- Define the calculation elements used in Transfer Rate, Option Cost, Economic Value, and Adjustment Calculations to migrate transfer pricing results to the Management Ledger table.
- Choose the calculation mode for generating transfer pricing results, such as the Remaining Term or Standard.
- Select which calculations, such as Transfer Rates, TP Rate Adjustments, or Option Costs to perform.
- Optionally select an Alternate Rate Output Mapping Rule. Alternate Rate Output Mapping rules can be used when you want to direct the FTP output to non-standard columns.
After a Transfer Pricing Process has been created, a user may select RUN from the summary page to execute it.
When a Transfer Pricing Process rule is executed, detailed records are processed and individual records are updated with the results of the transfer pricing process. These results are based on the calculation elements selected.
The following table displays the Instrument Table fields that may be updated as a result of transfer pricing processing when you select Account Tables as the data source.
Table 11-13 Instrument Table Fields Updated by Transfer Pricing Processing
| Calculation Type | Calculation Mode | Account Table Field |
|---|---|---|
| Transfer Rates | Standard | TRANSFER_RATE and MATCHED_SPREAD_C |
| CHARGE_CREDIT_TRATE | ||
| Transfer Rates | Remaining Term | TRAN_RATE_REM_TERM |
| CHARGE_CREDIT_TRATE_REM_TERM | Standard | HISTORIC_STATIC_SPREAD and HISTORIC_OAS |
| Option Costs | ||
| Option Costs | Remaining Term | CUR_STATIC_SPREAD and CUR_OAS |
| Adjustments - Liquidity Adjustment | Any | LIQUIDITY_PREMIUM_RATE |
| LIQUIDITY_PREMIUM_AMT | ||
| LIQUIDITY_PREM_CHARGE_CREDIT | ||
| Adjustments - Basis Risk Cost | Any | BASIS_RISK_COST_RATE |
| BASIS_RISK_COST_AMT | ||
| BASIS_RISK_CHARGE_CREDIT | ||
| Adjustments - Pricing Incentives | Any | PRICING_INCENTIVE_RATE |
| PRICING_INCENTIVE_AMT | ||
| PRICING_INC_CHARGE_CREDIT | ||
| Adjustments - Other Adjustments | Any | OTHER_ADJUSTMENTS_RAT |
| OTHER_ADJUSTMENTS_AMT | ||
| OTHER_ADJ_CHARGE_CREDIT | ||
| Adjustments - Breakage Charges | Remaining Term | BREAK_FUNDING_RATE |
| BREAK_FUNDING_AMT | ||
| BREAK_FUNDING_MV | ||
| Economic Value- All In TP Rate | Any | EV_ALLIN_TP_RATE |
| Economic Value - TP Rate | Any | EV_TP_RATE |
| Economic Value - Liquidity Premium Rate | Any | EV_LIQ_PREM_RATE |
| Economic Value - Pricing Incentive Rate | Any | EV_PRIC_INC_RATE |
| Economic Value - Basis Risk Rate | Any | EV_BASIS_RISK_RATE |
| Economic Value - Other Adjustment Rate | Any | EV_OTH_ADJ_RATE |
| Economic Value - Other Adjustment Rate | Alt | EV_OTH_ADJ_RATE_ALT |
Additionally, you may choose the Ledger table as the data source for the transfer pricing of certain products. If the Ledger table data source is selected, the following rows are created for each product:
- Financial Element 170, Average Transfer Rate
- Financial Element 450, Charge/Credit
- Financial Element 172, Average Remaining Term Transfer Rate
- Financial Element 452, Charge/Credit Remaining Term
Note:
For a given combination of Organizational Unit and Product dimensions, only one row should exist for transfer rate (170 or 172) and charge/credits (450 or 452).Tip:
Depending on the Charge Credit Balance type selected in your Application Preferences, Either Average Balance, Financial Element 140, or Ending Balance, Financial Element 100, must exist in the Ledger Table to successfully transfer price ledger balances.TP_EFFECTIVE_DATE and ADJUSTMENT_EFFECTIVE_DATE are used by the FTP Standard Process as an override date for determining the historical rate from the specified interest rate curve (IRC). TP_EFFECTIVE_DATE and ADJUSTMENT_EFFECTIVE_DATE are used in cases where the customer rate on the instrument record is set before the origination date and users wish to align the TP Rate lookup with the date that the customer rate was set.
The FTP process normally uses the ORIGINATION_DATE for fixed-rate instruments or LAST_REPRICE_DATE for adjustable-rate instruments to determine the historical rate effective date for the transfer rate or Adjustment Rate lookup. This input allows users to specify an alternate effective date.
- TP_EFFECTIVE_DATE should be NULL if not applicable. Do not default TP_EFFECTIVE_DATE (for example, 01-JAN-1900) to a valid date as the TP Engine will reference any valid date.
- TP_EFFECTIVE_DATE <> ORIGINATION_DATE
- TP_EFFECTIVE_DATE <> LAST_REPRICE_DATE