32.5 Transfer Pricing Future Dated Instruments (Loan Commitments)

The base FTP rate quoted on the Commitment Start date is calculated using the current Forward Rates corresponding to the tenor of the Rate Lock period requested and the loan period/payment frequency based on the TP method selected. If an instrument record has a commit_start_date <= as_of_date and origination_date > as_of_date, then FTP will generate implied forward rates based on the commit_start_date spot IRC curve.

Table 32-1 Implied Forward Rate

Effective Date	Lookup Tenor
COMMIT_END_DATE (for example, 30, 60, 90 days forward)	Term of the loan (or) Related cash flow terms, depending on the TP method

After the record is identified as a Rate lock record, the Forward Curve is generated for the same term points as the Spot curve (selected in the Transfer Price Rule UI). After this is done, the TP method that is selected follows its usual flow, except for using the Forward TP IRC instead of the Spot TP IRC. If required tenors are not found, Interpolation is used.

Within the Loan Commitment table, prior day results can be propagated forward, so post-processing, all open commitments will have a Transfer Rate and Rate Lock Option Cost assigned through either propagation or new calculation.

Note:

The FTP engine uses only the Standard Term for Forward Rate based TP calculation and not the Remaining Term. Commitment Term and Commitment Term Mult are mandatory attributes for forward starting instruments as it will help to calculate the Implied Forward Rates which will be used for the Rate Lock Option Cost calculations on Committed Instruments.