11.13.1 Interest Rate Codes and Rate Lookups
A rate lookup is performed to derive a transfer rate for the appropriate date/term combination.
- Date Used: Oracle Funds Transfer Pricing accesses the yield curve based on the appropriate lookup date. If no match is found, it uses the first date before the date of your lookup.
- Term Used: Oracle Funds Transfer Pricing selects the term on the yield curve on an exact number of days basis, calculated by subtracting the cash flow date from the Transfer Pricing Date, which may be the As-of-Date, the Last Reprice Date, the Origination Date or the TP Effective Date, depending on the method and the instrument characteristics.
If the yield curve term is expressed in months or years, the term will be converted internally during rate lookups to a days basis, as follows:
- If Multiplier = M (month), Term in Days = Term in Months * 30.42
- If Multiplier = Y (year), Term in Days = Term in Years * 365
The rate is then derived from the yield curve by performing linear, cubic spline, or quartic spline Interpolation to the two points between which the lookup term falls.
Rate Lookup at Endpoints
- If the term < shortest point on the yield curve, then the rate = the shortest point.
- If the term > longest point on the yield curve, then the rate = the longest point.
- If the date for the lookup > dates available then the lookup is on the last date for the yield curve.
- If the date for the lookup < dates available then the lookup is on the first date for the yield curve.
Rate Lookup: An Example
The following table displays Transfer Rates for different date and term combinations:
Table 11-25 Transfer Rates for Different Date and Term Combinations
| Date | 1 Day | 1 Month | 3 Months | 1 Year |
|---|---|---|---|---|
| 01/01/2010 | 2.00 | 3.00 | 4.00 | 5.00 |
| 01/15/2010 | 2.10 | 3.10 | 4.10 | 5.10 |
| 01/31/2010 | 2.20 | 3.20 | 4.20 | 5.20 |
| 02/15/2010 | 2.30 | 3.30 | 4.30 | 5.30 |
The following table displays Date and Term Combinations for Lookup:
Table 11-26 Date and Term Combinations for Lookup
| Date | Lookup Term | Yield Curve Date Used | Term Before | Term After | Rate | Comments |
|---|---|---|---|---|---|---|
| 01/07/2010 | 60 days | 01/01/2010 | 1 Month | 3 Months | 3.50 | Rate is approximately halfway between 3 Months (91.26 Days) and 1 Month (30.42 Days). |
| 11/30/2009 | 182 days | 01/01/2010 | 3 Month | 1 Year | 4.33 | 3 Months Rate + (182 Days - 91.26 Days) * (1 Year Rate - 3 Months Rate) / (365 Days - 91.26 Days) (such as 1/3 of the Way between 3 Months and 1 Year). |
| 03/15/2010 | 2 Year | 02/15/2010 | 1 Year | None | 5.30 | Uses the last point on Yield Curve. |