7.1.7.6 New Business Assumption

This method involves leveraging the existing business assumption, new business, to generate cash flows due to business growth over and above the baseline forward cash flows computed by the application. For instance, the cash flow computation method may be selected as Contractual Run-off for a given product. This method considers only the current contractual cash flows occurring beyond the forward date. In this case, users can specify new business over and above the current business using the New Business assumption. The initial cash flows due to new business and subsequent off-set cash flows signifying repayment of assets or liabilities are specified through the business assumption definition window by selecting the assumption category as ‘Incremental cash flow’ and sub category as ‘New Business’.

You can select one or multiple new business assumptions as part of the forward date contractual Run definition UI. For the purpose of forward cash flow calculations, the only allowed ‘Based On’ measure is EOP balance i.e. only those assumptions which are based on EOP balance are displayed for selection as part of the contractual Run in the Run Management window. This restriction does not apply to business-as-usual or stress Runs. The application applies the user-specified growth and off-set rates to each forward balance to compute additional cash flows as of each forward date. See section New Business in the OFS Liquidity Risk Measurement and Management User Guide on OHC Documentation Library, for details on defining the new business assumption.