About yield curves
Yield curves are required for both the FTP base rate and cash flow, as well as term-based FTP calculations, so you must set up yield curves before entering key rates and adding rate rules. Yield curve settings are referenced by rate rules and during the loading and interpolation of yield curve rates.
Consider the following when creating yield base rate and adjustment curves.
A common practice is for Base Rate curves to include rate records beginning with the earliest origination date of the records in the InstModelStg table through the end of the current processing period. This is not a requirement.
If a financial instrument has an origination date that precedes the first yield curve record, the first yield curve record will be used. When checking origination dates, be aware that only the origination dates from fixed rate records using the cash flow or term to maturity methods are impacted. And weigh the significance of these older records on results and your decisions.
To generate meaningful results, 10 years of history may be adequate when the number and balances of records originated more than 10 years earlier are small. The fewer the records, the better the performance.
Base curves should be populated through the last business day of the current month to support a match rate FTP methodology.
A curve used to support liquidity premiums, for example, must have records that fall on or before the earliest origination date of the records to which you will be applying a premium. Unlike the base rate, the engines do not apply the earliest rate record to instruments with records that are older than that rate record. This limitation can be addressed, if it is an issue, by anchoring the curve with a record that is older than the origination date of any of your instruments. Copy the earliest curve rates you have into it.
NOTE: The limitation on adjustments is intentional. Every record must have a base rate, so the engines are designed to ensure that every record has a base rate. Adjustments are optional, and whether an adjustment is applied to a record is driven by mapping and the available rates. If a rate record is not available on or before the date the instrument was originated, and records are assigned by origination date, then the instrument will not have an adjustment rate.
Use adjustment curves only as needed. For example, you may want to change the liquidity premium only quarterly, or annually, or when a significant change in rates occurs.
Manage Yield Curve utility
The Manage Yield Curve utility has a 10,000-record limit to the number of records that can be loaded at one time. You can either manually enter data or paste data into the spreadsheet for loading.
When loading rate data, you can copy yield curve data from an external source and use Paste Special > Values to paste the data into available entry rows, or simply paste if the data is correctly formatted, into the ReviewEnterRates sheet.
While the sheet initially displays days, you can and probably should copy over them with your own data. Rows with no interest data are ignored even if there is a date. However, for rows with data, all columns must contain data. Zero (0) is a valid rate and is used if you do not enter a rate for a column.
