7.5.3.6.1 Selected Time Bucket

This method assigns the cash flows only to the time buckets against which the assumption value is specified. If the assumption is not specified on Level 0 buckets, then the assignment to the more granular buckets is done proportionately to the bucket size.

The formula is as follows:

Figure 7-47 Selected Time Bucket


Selected Time Bucket

The time buckets used for computation are as follows:

Table 7-70 Time Buckets Used For Computation

N_BUCKET_NO V_BUCKET_NAME V_BUCKET_NAME_CATEGORY
1 Overnight Overnight
2 1-10Days 1-15Days
3 11-15Days 1-15Days
4 16-20Days 16-30Days
5 21-25Days 16-30Days
6 26-30Days 16-30Days
The following example shows the allocation of cash flows when the assumption value is specified for a Level 0 bucket.

Table 7-71 Assignment Method Leg 1 - Selected Time Bucket Example 1

Assumption Category Assumption Unit Applied to Assignment Method Based On
Cash Flow Movement: Run- off Percentage Original Balance Selected Cash Flow

Table 7-72 Assignment Method Leg 1 - Selected Time Bucket Example 2

Business Assumption Computation
Product Customer From Bucket To Bucket Run-off% Contractual Cash Flow (From Bucket) Contractual Cash Flow (To Bucket) Run- off Revised Cash flow- From Bucket Revised Cash flow-To Bucket
Time Deposits Customer 1 10-10Days 5-5Days 10% 30000 23000 3000 33000 20000
(30000* (30000+ 3000) (23000--3000)
10%)    
However, this allocation differs for Levels other than Level 0 buckets as Illustrated in the following example. The following example shows the selected Cash Flow assignment method on Level 1 buckets.

Table 7-73 Assignment Method Leg 1 - Selected Time Bucket Example 2

Business Assumption Computation
Customer From Bucket To Bucket Run-off% Contractual Cash Flow (From Bucket) To Bucket Contractua l Cash Flow (To Bucket) Run-off Revised Cash flow- From Bucket Revised Cash flow-To Bucket
Customer 1 16-30Days 1-15Days 10% 50000 1-10Days 21000 5000 45000 24333.33
(50000* (50000-5000) {21000+(5000*10/
10%)   15)}
          11-15Days 15000     16666.67 {15000+(5000*5/15)}
  1. Increasing assignment:

    The cash flows are assigned to each bucket up to the selected bucket in increasing order based on ranks assigned to cash flows. Assignments are made in increasing order to the selected level and further assignment is done until the most granular level.

    The formulae under different conditions are as follows:

    1. When, Cash Flow Based Assumptions, Assumption Unit = Percentage

      Figure 7-48 Cash flow based authentication


      Cash flow based authentication

    2. When Assumption Unit = Value

      Figure 7-49 Cash flow increasing assumption


      Cash flow increasing assumption

      The following example shows Increasing Cash Flow assignment method based on Cash Flow.

      Table 7-74 Increasing Cash Flow assignment method based on Cash Flow

      Assumption Category Assumption Unit Applied to Assignment Method Based On
      Cash Flow Movement: Run-off Percentage Original Balance Increasing Cash Flow

      Table 7-75 Assignment Method Leg 1 - Increasing assignment Example 1

      Business Assumption Computation
      Product Customer From Bucket To Bucket Run- off % To Bucket Bucket Rank Contract ual Cash Flow (From Bucket) Contractual Cash Flow (To Bucket) Run-off (Value) Revised Cash flow- From Bucket Revised Cash flow-To Bucket
      Assets Customer 1

      10-

      10Days

      3-

      3Days

      		 10% Overnight 1 30000 20000

      300

      =(30000*10

      %)*1/10

      27000

      =(30000-

      3000)

      20300

      = (20000+300)
                1-1Days 2   21000 600 =(30000*10%)*2/10   21600 = (21000+600)
                2-2Days 3   19000 900 =(30000*10%)*3/10   19900 = (19000+900)
                3-3Days 4   27000 1200 =(30000*10%)*4/10   28200 = (27000+1200)
    3. When, EOP Balance Based Assumptions, Assumption Unit = Percentage

      Figure 7-50 Cash flow increasing balance


      Cash flow increasing balance

      The following example shows Increasing Cash Flow assignment method based on EOP Balance. Here, EOP Balance (Time Deposits) is assumed as 300000.

      Table 7-76 Assignment Method Leg 1 - Increasing assignment Example 2

      Assumption Category Assumption Unit Applied to Assignment Method Based On
      Incremental Cash Flow: Run-off Percentage Original Balance Increasing EOP Balance

      Table 7-77 Assignment Method Leg 1 - Increasing assignment Example 2

      Business Assumption Computation
      Product Customer From Bucket Run- off % Bucket Rank Primary Bucket Contractual Cash Outflow(Primary Bucket) Run-off Revised Cash Outflow (Primary Bucket)
      Time Deposits Customer 1 1-1 Days 10 1 Overnigh t 20000 10000 (300000*10%)*1/3 10000
              2 1-1 Days 30000 20000 (300000*10%)*2/3 20000
  2. Decreasing Assignment

    The Cash flows are assigned to each bucket up to the selected bucket in decreasing order based on ranks assigned to cash flows. Assignments are made in decreasing order to the selected level and further assignment is done until the most granular level.

    The formulae under different conditions are as follows:

    1. When, Cash Flow Based Assumptions, Assumption Unit = Percentage

      Figure 7-51 Formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

    2. When Assumption Unit = Value

      Figure 7-52 Formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

      The following example shows Decreasing Cash Flow assignment method based on Cash Flow.

      Table 7-78 Decreasing Cash Flow assignment method based on Cash Flow

      Assumption Category Assumption Unit Applied to Assignment Method Based On
      Cash Flow Movement: Run-off Percentage Original Balance Decreasing Cash Flow

      Table 7-79 Assignment Method Leg 1 - Decreasing Assignment Example 1

      Business Assumption Computation
      Product Customer From Bucket To Bucket Run- off % To Bucket Bucket Rank Contract ual Cash Flow (From Bucket) Contractual Cash Flow (To Bucket) Run-off (Value) Revised Cash flow- From Bucket Revised Cash flow-To Bucket
      Assets Customer 1

      10-10Days

      3-3Days

      		 10% Overnight 4 30000 20000 1200 (30000*10%)*4/10 27000 (30000- 3000) 21200 (20000+1200)
                1-1Days 3   21000 900 (30000*10%)*3/10   21900 (21000+900)
                2-2Days 2   19000 600 (30000*10%)*2/10   19600 (19000+600)
                3-3Days 1   27000 300 (30000*10%)*1/10   30000 (27000+300)
    3. When, EOP Balance Based Assumptions, Assumption Unit = Percentage

      Figure 7-53 Formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

      Table 7-80 EOP Balance Based Assumptions

      Assumption Category Assumption Unit Applied to Assignment Method Based On
      Incremental Cash Flow: Run-off Percentage Original Balance Decreasing EOP Balance

      The following example shows Decreasing Cash Flow assignment method based on EOP Balance. Here, EOP Balance (Time Deposits) is assumed as 300000.

      Table 7-81 Decreasing Assignment Example 2

      Business Assumption Computation
      Product Customer From Bucket Run-off % Bucket Rank Primary Bucket Contractual Cash Outflow(Primary Bucket) Run-off Revised Cash Outflow (Primary Bucket)
      Time Deposits Customer 1 1-1 Days 10 2   Overnight   20000
              1   1-1 Days   30000
  3. Equal Assignment

    The Cash flows are to be assigned equally up to the selected bucket. Assignments are made equally to the selected level and further assignment is done until the most granular level.

    The formulae under different conditions are as follows:

    1. When, Cash Flow Based Assumptions, Assumption Unit = Percentage

      Figure 7-54 Formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

    2. When Assumption Unit = Value

      Figure 7-55 Formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

      The following example shows Equal Cash Flow assignment method based on Cash Flow. Here, Level X buckets are assumed as a higher granular bucket.

      Table 7-82 Equal Cash Flow assignment method

      Cash Flow Movement- Run-off Percentage Original Balance Equal Cash Flow
      Cash Flow Movement: Run-off Percentage Original Balance Equal Cash Flow

      Table 88 Assignment Method Leg 1 - Equal Assignment Example 1

      Table 7-83 Assignment Method Leg 1 - Equal Assignment Example 1

      Business Assumption   Computation
      Product Customer From Bucket To Bucket Run- off % To Bucket Bucket Rank Contractual Cash Flow (From Bucket) Contractual Cash Flow (To Bucket) Run-off (Value) Revised Cash Flow- From Bucket Revised Cash Flow-To Bucket
      Assets Customer 1 10-10Days 5-5 Days 10% Overnight 30000 20000 500 (30000*10%)/6 27000 =(30000- 3000) 20500 (20000+500)  
                1-1Days   21000 500 (30000*10%)/6   21500 (21000+500)  
                2-2Days   19000 500 (30000*10%)/6   19500 (19000+500)  
                3-3Days   27000 500 (30000*10%)/6   27500 (27000+500)  
                4-4Days   13000 500 (30000*10%)/6   13500 (13000+500)  
                5-5Days   11000 500 (30000*10%)/6   11500 (11000+500)  
    3. When, EOP Balance Based Assumptions, Assumption Unit = Percentage

      Figure 7-56 This illustration shows the formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

      The following example shows Equal Cash Flow assignment method based on EOP Balance. Here, EOP Balance (Time Deposits) is assumed as 500000.

      Table 7-84 Equal Cash Flow assignment method

      Assumption Category Assumption Unit Applied to Assignment Method Based On
      Incremental Cash Flow: Run-off Percentage Original Balance Equal EOP Balance

      Table 7-85 Assignment Method Leg 1 - Equal Assignment Example 2

      Business Assumption Computation
      Product Customer From Bucket Run-off % Primary Bucket Contractual Cash Outflow (Primary Bucket) Run-off Revised Cash Outflow (Primary Bucket)
        Customer 1         50000 (500000*10%) 45000
      Time Deposits   1-1 Days 10 Overnight 20000  

      Business Assumptions

      20000+(50000/2)
              1-1 Days 30000  

      55000

      30000 + (50000/2)
  4. Proportionate Assignment

    The Cash flows are assigned to each bucket up to the selected bucket in proportion to the bucket size. Assignments are made proportionately to the selected level and further assignment is done until the most granular level.

    The formulae under different conditions are as follows.

    1. When, Cash Flow Based Assumptions, Assumption Unit = Percentage

      Figure 7-57 Formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

    2. When Assumption Unit = Value

      Figure 7-58 Formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

      The following example shows Proportionate Cash Flow assignment method based on Cash Flow. Here, t = Number of days in the given Level x bucket

      T= Total number of days up to the selected bucket

      Table 7-86 Proportionate Cash Flow assignment method

      Assumption Category Assumption Unit Applied to Assignment Method Based On
      Cash Flow Movement: Run-off Percentage Original Balance Proportionate Cash Flow

      The following time buckets are considered for the computation:

      Table 7-87 Time buckets for computation

      N_BUCKET_NO V_BUCKET_NAME
      1 Overnight
      2 1-10Days
      3 11-15Days
      4 16-20Days
      5 21-25Days

      Table 7-88 Assignment Method Leg 1 - Proportionate Assignment Example 1

      Business Assumption Computation
      Product Customer From Bucket To Bucket Run- off % To Bucket Contractua l Cash Flow (From Bucket) Contractual Cash Flow (To Bucket) Run-off (Value) Revised Cash Flow- From Bucket Revised Cash Flow-To Bucket
      Assets Customer 1

      26-

      30Days

      		 11-15Days 10% Overnigh t 30000 20000

      0 (30000*10%)*0

      /15

      27000

      =(30000

      - 3000)

      		 20000
                1-10Days   21000 2000 (30000*10%)*10  

      23000

      (21000+2000
      /15 )
                11-15Days   19000 1000   20000
      (30000*10%)*5 (19000+1000
      /15 )
    3. When, EOP Balance Based Assumptions, Assumption Unit = Percentage

      Figure 7-59 Formula for calculation of cash flows.


      This illustration shows the formula for calculation of cash flows.

      The following example shows Proportionate Cash Flow assignment method based on EOP Balance. Here, EOP Balance (Time Deposits) is assumed as 300000.

      Table 7-89 Proportionate Cash Flow assignment method

      Assumption Category Assumption Unit Applied to Assignment Method Based On
      Incremental Cash Flow: Run-off Percentage Original Balance Proportionate EOP Balance

      Table 7-90 Assignment Method Leg 1 - Proportionate Assignment Example 2

      Business Assumption Computation
      Product Customer Primary Bucket Run-off (%) Bucket Rank Primary Bucket Contractual CashOutflow (Primary Bucket) Run-off Revised Cash Outflow (Primary Bucket)
      Customer 1 1-10Days 10 1   Overnight 20000 0(300000*10%)*0/10 20000
            2   1-10Days 30000   60000
      30000 (30000 +
      (300000*10%)*10/10 30000)