11.1 Define Transfer Pricing Rules

Defining Transfer Pricing rules is a mandatory step in the Oracle Funds Transfer Pricing process. You must define Transfer Pricing rules, to transfer price your products. A Transfer Pricing rule is used to manage the association of transfer pricing methodologies to various product-currency combinations. It can also be used to manage certain parameters used in option costing.

To reduce the amount of effort required to define the transfer pricing methodologies for various products and currencies, Oracle Funds Transfer Pricing allows you to define Transfer Pricing methodologies using node level and conditional assumptions.

• Node Level Assumptions: Oracle Funds Transfer Pricing uses the Product Dimension that has been selected within Application Preferences to represent a financial institution's product portfolio. Using this dimension, you can organize your product portfolio into a hierarchical structure and define parent-child relationships for different nodes of your product hierarchy. This significantly reduces the amount of work required to define transfer pricing, prepayment, and adjustment rule methodologies.

  You can define transfer pricing, prepayment, and adjustment rule methodologies at any level of your product hierarchy. Children of parent nodes on a hierarchy automatically inherit the methodologies defined for the parent nodes. However, methodologies directly defined for a child take precedence over those at the parent level. For more information, see Defining Transfer Pricing Methodologies Using Node Level Assumptions.

• Conditional Assumptions: The Conditional Assumption feature allows you to segregate your product portfolio based on common characteristics, such as term to maturity, origination date, and repricing frequency, and assign specific transfer pricing methodologies to each of the groupings.

  For example, you can slice a portfolio of commercial loans based on repricing characteristics and assign one global set of Transfer Pricing, Prepayment, or Adjustment rule methods to the fixed-rate loans and another to the floating-rate loans. For more information, see Associating Conditional Assumptions with Assumption Rules.