Under Risk Management in the Risk Simulation, you can set up a risk simulation report to analyse how, e.g., the outstanding loan and interest expenses will be affected by adding different rollover, decrease, and increase scenarios of your loan portfolio.
You set it up the same way as a report in the system, but there is a new tab, "Risk Simulation," where you can add different risk scenarios to the report. The different scenarios you set up will automatically create new transactions to increase/decrease the outstanding loan and change the interest expenses. This will reduce or remove the need to add new simulated deals in a separate portfolio.
Description of the Risk Simulation tab
This section will automatically rollover the chosen percentage of the maturing loans during the measuring period of the report.
Mandatory fields: Deal type and Roll percentage. All other fields are optional.
- Deal Type-Available deal types are Bond, Commercial paper, Interest Rate Swap, Leasing Loan and Loan
- The amount that will be rolled over is the repayment at the end, except for the Leasing loan, where the Residual amount will be used.
- Interest Type to Roll - If IRS is chosen as the Deal type, you can create different scenarios per leg.
- Chose currency if it is only a particular currency you would like to rollover
- To create the simulated deal, we look at the original deal and make a simulated deal with the same conditions if nothing else is specified. The simulated deal will be a loan.
All simulated deals will have an "R" in the Global ID. If the deal rolled over multiple times the first will have R1 the second R" and so on.
The simulated deals
If not filled in, the Treasury System will use the settings and conditions set on the original deals on the simulated deals.
- End Date- If not set, the simulated deal will be rolled over until the Measuring Period ends. If a date is set, no rollovers will be made after the set date. If its a short term instrument like commercial paper it can be rolled over multiple times until end date.
- Maturity Period - If you would like to roll over all your loans with a specific period, e.g. 1-year loan, regardless of how long the original maturity period is.
- Limit amount Percentage Amortisation- if there is an amortisation plan connected to the original loan, the last amortisation will be rolled over to the new loan if the amount is x% ( default 10%) or more of the original amount. If it is below X, no simulation will be created. To avoid rollover of small amounts on loan with scheduled amortisation.
- Limit amount Amortisation -Same as Limit amount Percentage but a fixed amount instead
- Roll Percentage- Set up in % how much of the maturing loans you want to roll over. ( default 100%)
- Payment Period -Enter a payment period if all the simulated deals should have a specific payment period that is different from the original deal.
- Interest- Enter an Interest percentage if the simulated deals should get a specific interest rate that is different from the original deal.
- Spread- enter a percentage if the simulated deals should have a specific spread that is different from the original deal.
- Interest type- if the simulated deals should have a specific interest type (fixed or floating) that is different from the original deal.
- Fixing index - if the simulated deals should have a specific fixing index, different from the original deal.
- Fixing period- if the simulated deals should have a specific fixing period different from the original deal.
In the second section, it is possible to pinpoint a specific deal and create a particular scenario. Note that the deal specified in this section will then be excluded from the general conditions above in the Rolling Behaviour section. In other words, the deal will not be simulated twice.
- Deal ID- Pick a specific deal that should be simulated in a different way than set in the Rolling behaviour section
- Exclude deal- Check the checkbox if a specific deal should not be simulated at all, then only the original deal will be in the report.
- Deal Type- Not necessary to fill in but useful if you have added different deal types to one deal
- Interest Type to roll- Only to be used for Interest rate swaps
- End date- If not set, the simulated deal will be rolled over until the Measuring Period ends. If a date is set, no rollovers will be made after the set date.
- Scheduled amortisation- if the selected deal has an amortisation plan you can choose to Keep the scheduled amortisation or to simulate the deal without a scheduled amortisation.
In the third section, a Capital increase or decrease can be entered. This will create new transactions in the simulation report to decrease/increase the loan amount and other affected columns. Add from and to dates for the start and maturity of the new loan/deposit transactions; this will create the simulated transaction.
Mandatory fields are
- From date
- To date
- Payment period
- Spread (if applicable)
- Interest type: If floating interest, a base interest that we should start from needs to be entered. The expected interest is still calculated.
The simulated deal will have an "N" In the Global ID.
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