Overview

Front Office – Portfolio Management (PM) is a comprehensive asset management package for UNIX‑Windows NT networks. The package implements the latest client or server technology in conjunction with the Sybase database. The Front Office – PM server side software uses advanced analytical and flow control functionality, which includes  a financial server, a report generator, and a database server to structure, access, and administer the database.

On the client side, Front Office – PM runs on Windows NT workstations. A variety of screens allows you to interact with the Sybase database. The data in the fields presented on the various screens are recorded directly in the appropriate database tables only when you validate. (Usually by clicking OK in a data entry screen).

Front Office – PM uses lists to display table data. For many operations, a selection screen first displays a list and you can select an existing entry to view or modify. If the object is not in the list or the list is empty, a Create button allows you to create a new object of the list type. When you create and validate a new object, you are entering a new record in the database. When you view or modify a list item, you are reading records from the database and returning modified records to the database, if you validate your changes. A host of hidden features helps you manage this data and perform a wide range of financial calculations on it.

Front Office – PM also includes extensive, advanced script and interface languages that allow you to run the program in batch mode and to customise it to meet your requirements. This way, Front Office – PM can manipulate large volumes of data.

Front Office – PM implements all financial functions used in today's markets and allows you to record all major financial operations currently practised. Advanced analysis and risk features help you make the right decisions on time.

The financial instruments handled by Front Office – PM are:

Definining Instruments

The concept of financial instruments encompasses all the assets (stocks, bonds and cash accounts) and contracts (options, futures) that can be held in a portfolio as well as any underlying instruments (indexes, rates) that support their pricing mechanisms.

The three major concepts that apply to instrument creation are:

  • All instruments are stored in the same table. Real or possible cash flows are defined in associated events sub-tables.
  • Composite instruments are complex instruments that you build from basic component instruments.
  • Generic instruments let you define pertinent data at the transaction level for simple OTC instruments (time deposits, foreign exchange forwards and plain Vanilla swaps). You do not have to create as many instruments as there are contracts.

Instruments and events

The following sections provide additional information about instruments and events:

ClosedNatures and Sub-natures

All instruments are kept in the same table but hard-coded Nature and Sub-nature fields to process specific kinds of instruments appropriately.

The list of instrument natures are as follows: Stock, Fixed Income, Option, Cash Account, Money Market, Future, Forward, Index, Rate, Swap, Discount Instrument, Commodity, Fund Share, Yield Curve, Deliverable, Debt, Other, Option Bond, Convertible Bond, Forward Rate Agreement, Forex Swap, Exotic Option, Swaption, Mortgage-Backed Security, Flow Instrument and Notional Instrument.

Examples of sub-natures are:

Nature Sub-natures
Fixed Income US Treasury bond, BTP, OAT, FRN and so on.
Rates Money market rate, discount rate and so on.
Swaps Fixed or float, fixed or fixed, float or float and so on.
Exotic Options Chooser, lookback, Asian, Barrier, Spread and so on.
ClosedCommon Data

The following attributes are applicable to most instruments:

Attribute Description
Identification Data
Code Most common identification code for instruments. This is the default code for all instruments (for example, CH00xxxx for Nestle).
Name Name of the instrument. It is used in screen displays.
Denomination Long name of the instrument in the default language of the system.
Multi-Lingual Denomination Denomination sub-table permits multilingual denominations to be attributed.
Codification Synonym sub-table associates other instrument codes with the instrument (Reuters code, Telekurs, CEDEL and so  on).
User-defined classification
Type Subtype You can associate the instrument with a user-defined hierarchy of types and subtypes.
Issue data
Reference Currency Indicates the currency of the principal or capital. For contracts, this is the main quotation currency.
Parent Instrument The original stock of which the current instrument is a foreign certificate (for example, an ADR). For cash accounts, it is used to define a ‘parent’ cash account that contains all the information relating to interest rates. With interest changes, you only enter data at the parent cash account level.
Vote Quantity Used for stocks to indicate how many voting rights are associated with one share. You can use the quantity for constraints (for example, a fund is not allowed to hold more than 5% of voting rights).
Face Value Nominal value of a stock or bond quoted in units. (for example, 1 unit of OAT bond represents 2000 FRF).
Issuer The third party that issued the instrument. For example, Belgian Government.
Issue Quantity Number of instruments issued in the market. You can use the quantity for constraints (for example, not more than 7% of the same non-sovereign issuer).
Issue Quote Indicates the price at which the instrument is issued.
Contract Size Used to define the quantity implied by one contract, for example, 100 for US stock options.
Notepad Used to store any comments (textual) on the instrument. These comments are shared with any users who have access to the instrument.
Wrap Eligible Indicates if the instrument is eligible for wrap services. Instrument natures such as Stock, Fixed Income, Fund share, Convertible Bond and Mortgage-Backed Security are eligible for wrap services. An instrument being eligible for a wrap service means that the various fees (administrative expenses, management expenses, commissions for trading, investment advice and so on) on that instrument can be wrapped into a single fee for all the services provided.
Risk Data
Risk Country Geographic area to which the instrument is most exposed.
Risk Currency Currency to which the instrument is exposed.
Risk Nature Risk factor to which the instrument is exposed, for example, equity for stocks, commodity for gold mining stocks, interest rate for Fixed Income, and so on. The risk nature is used in the risk engine (see below).
Rating Attribution A sub-table where the rating (creditworthiness) is stored. Various ratings of different agencies can be held (S&P, Moody’s, and so on). You can also define this at the issuer level.
Sector Attribution A sub-table storing the economic sectors linked to the issuers of the instruments. Various sector sources can be held (NACE, BNS, and so on).
Market Data
Index Representative index of the market to which the instrument belongs.
Last Trade Date Indicative date on which the instrument can be traded (especially in derivative contracts).
Negotiable Flag Indicates if the instrument is traded.
Active You can use this in user-defined selection lists.
Quotation Data
Market The main market on which the instrument price is quoted (for example, NYSE and LIFFE).
Provider Default quotation source (for example, Telekurs and Reuters).
Valuation Rule Method used to price the instrument. Permitted values are:
  • Quoted – The price is found in the instrument price table
  • Quote = 0 – Used for positions with no values
  • Quote = 1 – Used for cash accounts, for example
  • Composite – The price is computed as the sum of its components (for example, option bonds)
  • Theoretical – The price is computed from a model, a yield curve (for example, options, swaps)
  • Reference Instrument – The price is computed as a margin to be added to the price of the reference instrument
  • Script – Price computed using a user-defined script (for debts only)
  • Parent Price – Adopts the price of the parent instrument (used mainly in fund splitting)
  • Simple Script – Evaluates the script as it stands without performing fund valuations. Reference Instrument: used to support the "reference" quotation rule.
Odd Lot Quantity Trading round lot.
Tick Size Minimum price increment.
Settlement Cycle Days Number of days to settlement. You can use this in calendar functions.
Price Calculation Rule Indicates how the unitary amount (price) is computed from the market quote. The unitary amount is the value of one unit of instrument (for example, a discount instrument is quoted at 3.725% and the unitary amount is 0.9866; for stocks, the quote and the price are the same; for bonds, the quote is 102 and the price is 1.02).
The Script Valuation rule initiates a complete fund valuation process to calculate its value. This means that a complete fund valuation is also performed in the Journal and Event Generation functions for this purpose (if there are debts in the portfolio). The simple Script Valuation rule does not start a fund valuation but simply evaluates the script as it stands. This makes the Journal and Event Generation functions more efficient.
Tax Data – The taxation of instruments is handled by script language key words that normally use the fees and tax convention tables. However, the following attributes can also be referenced if instrument specific issues have to be processed.
Tax Country The fiscal residence of the instrument.
Withholding Tax Rate The rate withheld on income payment.
Short Term Capital Gains Tax Rate The tax rate applied on short-term capital gains.
Long Term Capital Gains Tax Rate The tax rate applied on long-term capital gains.
Long Term Period UnitUnit Frequency The period after which the long-term capital tax is applied.
Euro conversion data – You can use these attributes for automatic conversion into Euro.
New Euro Instrument The new ‘Euro’ instrument into which the instrument is converted.
Euro Conversion Date The date at which conversion occurs.
Euro Conversion Rule The method used to convert into the new ‘Euro’ instrument. (for example, bottom up one cent and top down minimum lot).
MiFID data
Complexity Used to specify the complexity of an instrument. This field could be initialised by a default value based on other attributes of the instruments such as nature, risk-nature, currency, market and so on
Risk Level Used to specify the risk level of an instrument. This field is used in conjunction with the investment profile risk level in order to check if the instrument does not excess the risk level tolerated by the investment profile.
Market Directive Category Used to define the market directive category to which the instrument belongs (similar to the Markets in Financial Instruments Directive (MiFID) in Europe). This field is used to define various investment restrictions, which will prevent investment proposals that are not suitable or appropriate for clients depending of their knowledge and experience of such instrument category.
User-defined fields – You can always create user-defined fields in the instrument table. Read the Overview for more information.
Default values and input control – You can define default values that set the attribute values for all the fields. Additionally, the input data is validated by parameterised input controls.
ClosedAccrual Rules

A number of instruments that bear interest require an Accrual Rule to be defined in their definition (for example, Fixed Income instruments, Options, Rates and so on). For example, yields on some instruments are quoted on the basis of a 360-day year, others on a 365-day basis. Front Office – PM includes the following Accrual Rules*:

Accrual Rules Function DATE_DayBetween() # of days in year
30E/360 Each month has 30 days, the 31st is treated as the 30th 360
30/360 (Feb) Each month has 30 days, the 31st is treated as the 30th (28.2, 29.2, 30, 31 can be the last day of the month) 360
30/360 (Def) Each month has 30 days. The 31st is assumed to be the 1st of the following month. 360
30US/360 Each month has 30 days. If the period starts on the 31st change to 30th. If the period ends on the 31st and starts on 30th or 31st, change end to 30th, otherwise leave at 31st. 360
Actual/365 Exact number of days in year (leap year control) 365
365/365 February has always 28 days, other months are treated normally 365
Actual/Actual Exact number of days in a year (leap year control). Actual/Actual uses the same implementation as the accrual rule ACTACT (see ACTACT in the next table below).
For Actual Interests computation of several periods (when the first period was a leap year followed by a longer accrued interest period (on a non-leap year)), Front Office – PM formerly used an equivalent method to the SimCorp ACTLEAP method. Now, ACTACT is systematically used when Actual/Actual is chosen.
Actual
Actual/360 Exact number of days in year (leap year control) 360
Actual+1/365 Exact number of days in year (leap year control) + 1 365
Actual/Actual (US) Exact number of days in year (leap year control, difference between 2 days for the same month and year) Annual Period
30E/365 Each month has 30 days, the 31st is treated as the 30th 365
30/360 Each month has 30 days, the 31st is treated as the 30th 360
30E/Actual Each month has 30 days, the 31st is treated as the 30th Actual
30US/365 Each month has 30 days. If the period starts on the 31st change to 30th. If the period ends on the 31st and starts on 30th or 31st, change end to 30th, otherwise leave at 31st. 365
30US/Actual Each month has 30 days. If the period starts on the 31st change to 30th. If the period ends on the 31st and starts on the 30th or 31st, change the end to 30th, otherwise leave at 31st Actual
Actual+1/Actual Exact number of days in year (leap year control) + 1 Actual
Actual+1/360 Exact number of days in year (leap year control) + 1 360
30/360+1 (Italian BTP) Each month has 30 days, the 31st is treated as the 30th+1 360
BUS/252 Number of business days between two dates. 252

To calculate the number of days in leap years (where the rule is xxx/Actual):

Days in 4 years = 4 * 365 + 1
Days in 100 years = 100*365 + 25 -1
Days in 400 years = 400*365 + 100 -4 + 1

Additional accrual rules are available that more closely match market requirements, particularly with regard to ISDA conventions.

Accrual Rule Numerator Computation Denominator Computation Related Old Method**
ACTACT The number of days between the two dates is computed as the actual number of calendar days in the period, including 29th February if it occurs in the period. The number of days per year is the actual numbers of days from the period start date to one year ahead.  
ACTLEAP The number of days between the two dates is computed as the actual number of calendar days in the period, including 29th February if it occurs in the period. The time period in question is defined to go from, and including, the period start date to, but excluding, the period end date. The period is split into the periods that are in leap years and those that fall in non-leap years. In the former periods, the number of days per year is 366 while in the latter periods the number of days is 365. The day count fraction is the sum of the day count fractions of the sub-periods. More precisely, this means the denominator is 366 when the period covers the leap year’s extra day (29th February), otherwise the denominator is 365.  
ACTAFB*** Same as ACTACT. If the period is shorter than one year then the number of days is 366 if 29 February occurs in the period. Otherwise, it is 365. If the period is longer than one year then the period is split into yearly sub-periods - counting backwards from the period end date - plus the remaining initial stub period of length shorter than one year. The day count fraction is the sum of the day count fractions of the sub-periods. The stub period is treated in accordance with the first rule and the remaining year-long periods have a day count fraction of 1.  
ACTEUROBOND Same as ACTACT. If the period equals a whole year then the number of days per year equals the actual number of days in the period. If the period is not a whole year the number of days per year equals the number of days in the calendar year of the end period date.  
ACTFRF Same as ACTACT. The number of days per year is the actual number of days from the end period date to one year before.  
EU30360 360 * (y2 - y1) + 30 * (m2 - m1) + (d2 - d1). If d1 = 31 then d1 is set to 30. If d2 = 31 and modified d1 = 30 then d2 is set to 30. 360 30/360 (Def)
EU30E360 360 * (y2 - y1) + 30 * (m2 - m1) + (d2 - d1). If d1 = 31 then d1 is set to 30. If d2 = 31 then d2 is set to 30. 360 30E/360
EU30E365 360 * (y2 - y1) + 30 * (m2 - m1) + (d2 - d1). If d1 = 31 then d1 is set to 30. If d2 = 31 then d2 is set to 30. 365 30E/365
US30360 360 * (y2 - y1) + 30 * (m2 - m1) + (d2 - d1). If d1 = 31 then d1 is set to 30. If d2 = 31 and modified d1 = 30 then d2 is set to 30. 360 30US/360
US30E360 360 * (y2 - y1) + 30 * (m2 - m1) + (d2 - d1). If d1 = 31 then d1 is set to 30. If d2 = 31 then d2 is set to 30. 360  
ACT365 Same as ACTACT. 365 Actual/365
ACTNL365 The number of days between the two dates is computed as the actual number of calendar days in the period, excluding 29th February. 365  
ACT360 Same as ACTACT. 360 Actual/360
EU30EP360 360 * (y2 - y1) + 30 * (m2 - m1) + (d2 - d1). If d1 = 31 then d1 is set to 30. If d2 = 31 then d2 is set to 1, m2 (and possibly y2) is updated to next month. 360  
BUS252 The number of days between two dates is computed as the number of business days in the period. 252  
  • The difference between two libraries of accrual rules is that the first one assumes a generation of income period forward (Anchor) – as in with a first coupon regular - whereas the second assumes a generation of income backward from the end date (Anchor Back) – as in with a last coupon date regular. This implies that if there is an irregular coupon period due to the coupon frequency and to the dates set, then it is assumed at end with the first library and at beginning with the second. Consequently, it has an impact on other coupon periods as well as on accrual calculated. Of course, it also depends on the other instrument parameters impacting the accrued and coupon calculations.
  • The mapping provided in this case cannot be totally ascertained. Computation differences may arise if you use an end-of-month convention.
  • The ACTAFB method is the one recommended by the ISDA for bond markets and floating swap legs.
ClosedEvent Tables

All flows associated with the instrument are described in related event tables. These are:

Event Table Description
Issue or Redemption Event Defines the flows that ’create‘ or ’repay‘ the principal of an instrument. For example, definition of issue or redemption schedules of fixed income instruments (final redemption, early redemption, nd sinking funds), the amount of outstanding principal for a debt instrument, or mortgage-backed securities redemption plans.
Income Payment Event Defines when income is paid. This covers the definition of odd periods, ex-dates, dual currency payments, and, for stocks, the paid dividend.
Interest Rate Condition Defines the rate of interest or how it is computed (benchmark, multiplicative factor, spread, capped and/or floored rates). Allows you to specify cash account interest rates (you can specify a different interest rate for negative balances).
Exchange Event Defines events where a new instrument is obtained or is received as part of an exchange. Typically, it is used to define corporate actions (stock dividends, splits, reverse splits, capital increase, merger, spin off, and so on) as well as Convertible Bond conversions and cum option bond stripping.
Term Contract Event Defines the conditions in which a derivative contract can be exercised and therefore includes not only the exercise of options and Futures settlements (including cheapest-to-deliver handling) but also swaptions and the exercise of Exotic options.

The attributes listed in these tables are described in the following sections (as descriptions of each ‘nature’). However, the following remarks apply to all events:

Attributes Description
Code Business identifier of the event. The code can be used to give a coupon or dividend number to the event. In the Journal and Event Generation functions (read the Overview for more information), the code and a hard-coded sequence are used to check that a position does not already exist with the same characteristics. If any are found, no flow is generated. Otherwise, the event code and number are copied respectively into the event code and event number fields of the position.
Validity Date Date when the event is known. You can therefore view past data ‘as it was known’. The system ignores all events that have not passed their validity date. You can also use the Validity Date when the conditions of a Convertible Bond change due to a split in the target stock.
Begin Date Opposite to the Validity Date. It defines the first possible date on which the event can occur.

For the Event Generation function:

  • There is no redemption operation generated for the term events with the following conditions:
    • The instrument of the term event has one of the following sub-natures: Accumulator, Decumulator, Mini Futures - Turbo, Basket Option, Structured Option, Double Knock-in, Knock-in Knock-out Barriers, Pivot Option, Digital Pay Out, Participating Forward, Target Knock-out Forward, and Pivot TARKO
    • The term event has one of the following pay-off natures: Accumulator, Decumulator, Digital, Short, and Long.
  • There is no income operation generated from the interest rate condition record that has the interest rate rule set to Digital or Range Accrual.
ClosedSimple Instruments

You can use events to define flows at any time. For some straightforward, simple instruments, however, you should enter data directly at the instrument level. These are described in detail in each section.

  • The fixed interest rate can be stored in the instrument table but stepped coupons are stored in the interest rate condition sub-table.
  • First generation options can be stored in the instrument table but not exotic options.
  • Final redemption of Fixed Income instruments can be stored in the instrument table but not early redemption possibilities.
ClosedEnd of Business Day Convention

There are cases where the system needs to address which day should be considered when the last coupon payment falls on a holiday. The cash flows begin, end and payment dates must be considered for the business day's convention and apply it to the appropriate calendar.

The cash flows can be moved to before or after the coupon date based on the Holiday calendar by configuring the Business Day convention in the Instrument entity.

If the choice is the Next in Month in the business day convention, then cash flow dates are moved on a following business day basis. It is moved to the previous business day if the next business day falls on the next month. Cash flow amounts are adjusted accordingly.

Composite Instruments

You can define instruments as composite instruments, that is, an instrument that depends either on its pricing or risk measure on the value or risk characteristics of other ‘component’ instruments. For example, a cum-warrant bond that is viewed as the sum of an ‘ex-warrant’ bond and a number of warrants. In this case, the cum-warrant bond is quoted but in a Risk View the composite instruments are shown.

The composite instrument process is used frequently to define indexes, multi-legged swaps, underlying of basket options, exchange options, or spread options.

From a financial engineering point of view, this process can also be used for structured products where the instrument is composed of an option on an index and a zero-coupon bond.

Defining the composition of an instrument is done by creating occurrences in the instrument composition table. In particular:

  • Instrument is the component instrument.
  • Quantity is the quantity for one unit of composite instrument.
  • Rank is important in Risk Views where the sum of the values of the component instruments is equal to the value of the composite instrument. The value of the component with the highest rank is computed by difference.

Generic Instruments

Instruments issued ‘on demand’, differ only by a few characteristics (issue date, interest rate, and so on) and are not quoted directly on the market. You can define a ‘generic’ instrument and enter the relevant data at the operation level.

Typically, this applies to term deposits where the rate and expiration date are specified at operation level but it also applies to foreign exchange contracts, Forex swaps, forward rate agreements, and plain Vanilla swaps.

Note: If you want to disable the merger of positions in the same instrument because of these different characteristics, it is necessary to enter generic instruments using an Open Reference nature (read the Overview for more information).

ClosedDefining Generic Instruments

To define a generic instrument, check the Generic Flag box in the Instrument Definition screen.

Instrument Templates

Instrument templates contain predefined attributes that are designed to make creation of Over The Counter (OTC) Orders, OTC Contracts and Deposit Orders through Channels easier and faster.

Templates are created as instrument entities always in MASTER business entity, with the Negotiable flag set to No and Underlying category set to None.

The following instrument template types are available:

ClosedStructured Notes Templates

Structured Notes templates should be created using the GUI for both standalone and integrated releases.

In addition, with related instrument nature's default values, the following attributes should be defined for templates:

Denomination Usage-nature Nature Sub-nature
Capital Protected Notes 2 - Structured Notes Template 2 - Fixed Income 75 - Capital Protection Notes
Capital Protected Notes with Coupon 2 - Structured Notes Template 2 - Fixed Income 76 - Capital Protections Notes with Coupon
Reverse Convertible Note 2 - Structured Notes Template 19 - Convertible Bond 77 - Reverse Convertible Notes - Equity Linked Notes, 78 - Reverse Convertible Notes - Bonds Linked Notes,
79 - Reverse Convertible Notes - Credit Linked Notes 
Discount Certificate 2 - Structured Notes Template 2 - Fixed Income 80 - Discount Certificates
TwinWin Certificate 2 - Structured Notes Template 2 - Fixed Income 81 - Twin Win Certificates
Bonus Notes 2 - Structured Notes Template 2 - Fixed Income 82 - Bonus Notes
Memory Coupon Notes 2 - Structured Notes Template 2 - Fixed Income 83 - Memory Coupon Notes
Airbag Certificate 2 - Structured Notes Template 2 - Fixed Income 84 - Airbag Certificates
MiniFutureTurb 2 - Structured Notes Template 22- Exotic Option 74 - Mini Futures Turbo

The expected attributes for the main instrument templates are:

  • Sub-nature
  • Currency
  • Risk level
  • Market

For all other instrument attributes, read the Structured products section for more information.

ClosedOTC Derivatives (Non-FX) Templates

Non-FX OTC Derivatives templates should be created using Temenos Transact for integrated releases and through the GUI for standalone releases.

The following attributes should be defined in TAP for these templates:

Denomination Usage-nature Nature Sub-nature
Options 3 - OTC Derivatives Template 3 - Option None
Exotic Options 3 - OTC Derivatives Template 22 - Exotic Option None
Future 3 - OTC Derivatives Template 6 - Future None

The expected attributes for the main instrument template are (common for all natures except when specified):

Attributes Specific values
  • Code
  • Name
  • Denom
  • Reference Currency
  • Market
  • Tick Size
  • Contract Size
  • Delivery Method
  • Risk Level
  • Underlying instrument
  • Option Style (Options and Exotic Options only)

 

Read the Exotic_Options.htm and Future_Contracts.htm sections for all other instrument attributes.

ClosedOTC Derivatives (FX) Templates

FX Derivatives templates should be created using Temenos Transact for integrated releases and through the GUI for standalone releases.

The following attributes should be defined for these templates:

Denomination Usage-nature Nature Sub-nature
Options 5 - OTC Currency Derivatives Template 3 - Option None
Exotic Options 5 - OTC Currency Derivatives Template 22 - Exotic Option None
Future 5 - OTC Currency Derivatives Template 6 - Future None

The expected attributes for the main instrument template are (common for all natures except when specified):

Attributes Specific values
  • Code
  • Name
  • Denom
  • Reference Currency
  • Market
  • Tick Size
  • Contract Size
  • Delivery Method
  • Risk Level
  • Option Style (Options and Exotic Options only)

 

Read the Exotic_Options.htm and Future_Contracts.htm sections for all other instrument attributes.

ClosedStructured Products Templates

Structured Products templates should be created using Temenos Transact for integrated releases and through the GUI for standalone releases.

In addition, with related instrument nature's default values, the following attributes should be defined for templates:

Denomination Usage-nature Nature Sub-nature
Dual Currency Investment / Triple Currency Investment 4 - Structured Product Template 5 - Money Market 85 - Dual Currency Investment / 86  - Triple Currency Investment
Accumulators / Decumulators 4 - Structured Product Template 22 - Exotic Option 72 - Accumulator / 73 - Decumulator
FX Participating Forward / TARKO 4 - Structured Product Template 22 - Exotic Option 94 - Participating Forward / 95 - Target Knock-Out Forward

The expected attributes for the main instrument template are:

Product Attributes Specific values
Dual Currency Investment/ Triple Currency Investment
  • Code
  • Denom
  • Type
  • Subtype
  • Reference Currency
  • Underlying instrument
  • Risk Level
Type/Sybtype as defined in type entity. Reference Currency is base currency, Underlying instrument stores Alternative Currency 1 in both cases. Alternative Currency 2 for TCI case is not expected in instrument template.  
Accumulators/ Decumulators
  • Code
  • Denom
  • Type
  • Subtype
  • Reference Currency
  • Underlying instrument
  • Risk Level
Type/Sybtype as defined in type entity.
FX Participating Forward/ TARKO
  • Code
  • Denom
  • Type
  • Subtype
  • Reference Currency
  • Underlying instrument
  • Risk Level
Type/Sybtype as defined in type entity. Reference Currency is Currency Sold. Underlying instrument stores Currency Bought.  

 

ClosedFiduciary Deposit Templates

Fiduciary Deposit templates should be created through the GUI for the Fixed type FD template and using Temenos Transact for the Notice type FD template.

In addition, with related instrument nature's default values, the following attributes should be defined for templates:

Sub-Nature Usage-nature Nature Sub-nature
Notice Fiduciary 6 - Fiduciary Deposit Template 5 - Money Market 116 - Notice Fiduciary
Fixed Fiduciary 6 - Fiduciary Deposit Template 5 - Money Market 117 - Fixed Fiduciary
ClosedTerm Deposit Templates

Term Deposit templates should be created through T24 for an integrated stack.

In addition to the related instrument nature's default values, the following attributes should be defined for templates:

Sub-Nature Usage-nature Nature Sub-nature
Notice Deposit 7- Term Deposit Template 5 - Money Market 118 - Notice Deposit
Fixed Deposit 7- Term Deposit Template 5 - Money Market 119 - Fixed Deposit

Instrument Prices

Market quotations are stored in the instrument price table. The following attributes define a price:

  • Currency
  • Type: for example, "ask", "bid", "close"
  • Provider: for example, Reuters, Telekurs
  • Term type: defines the price settlement; it is used in term markets
  • Market: for example, NYSE, BELFOX
  • Date

You can enter several prices per day and per instrument. The above criteria are used to select the price with which to value the instrument. (Read the WealthSuite Front Office - Portfolio Management - Business Functions User Guide for more information).

The remaining fields of this table are:

  • Quote
  • Price calculation rule

The distinction between price and quote are,

  • Quote – It is the figure provided by the market.
  • Price – It is the unitary value of the instrument.

The way of getting from the quote to the price is the price calculation rule.

  • The quote of a Swiss Government bond is 102.25, and the price is 1.0225.
  • The quote of a US Treasury Bill is 7, and the price is 0.956.
Typically, the price is the number by which you multiply the quantity to obtain the value of a position (excluding accrued interest). The quote is the market representation of this number and is what the user sees and enters
For a Signature Portfolio instrument with nature as fund share, sub-nature as an external product, and a Price Calculation rule as portfolio specific price, the system will not search for prices in instr_price but instead in entity portfolio_instr_price only.

Theoretical Valuation

Front Office – PM allows for the calculation of theoretical prices (fair market prices) and analytic indicators (sensitivities) for interest rate instruments, options, and futures. These calculations are based on discounting the future flows of these instruments by using either a yield curve or analytic models such as the Black-Scholes model for options.

The following AA keywords are available for these calculations:

  • AA_DF_BOND()
  • AA_DF_FLOW()
  • AA_DF_FUT()
  • AA_CC_FUT()
  • AA_BS_OPT()
  • AA_CRR_OPT()
  • AA_CRR_CONVBOND()

You can work with these keywords in the following ways:

  1. Define a theoretical Valuation rule (read the WealthSuite Front Office - Portfolio Management - Business Functions User Guide for more information) and set it as the default theoretical Valuation rule by using the AA_DEF_VAL_RULE system parameter. In this case, all instruments with Valuation rule set to Theoretical in their master data are evaluated with their theoretical price in all business functions.
  2. Define format elements by using these script words, for example, in the valuation function. In this case, you can also retrieve the theoretical price (and other analytic indicators) for ‘quoted’ instruments.

Instrument Chronological Data

Any instrument-related numerical data (other than prices) that changes over time can be stored in the instrument chronological data table. Examples are the price-earnings ratio of a share, duration of a bond, and volatility of an index. In addition to these predefined items, you can create user-defined values.

Some chronological data is used in hard-coded processing (for example, the price calculation factor is used to adjust price time series for corporate actions). Other data is just for information purposes (for example, price-earnings ratio).

All chronological data can be displayed using the INSTR_CHRONO() keyword. In some cases, you can also indicate that if no data is found for this chronological data, it should be computed online. As this latter possibility can be time-consuming, it might be useful to compute chronological data in batch mode (this is recommended when the chronological data depends on time series, for example, Betas or Volatility).

For generic instruments (for example, Money Market), it does not make sense to define data such as DURATION or MODIFIED DURATION in the Chrono. The calculation of these figures requires data, which is defined at the operation level. Therefore, this data is not evaluated. 

Instrument chronological data is computed using the Compute Instr Chrono functionality. You specify the instrument(s), nature of the chronological data, date, and operation to perform if the data already exists (recompute or not). The instrument chronological value is calculated by the function Compute Instr Chrono according to the computation method called through the script defined as default value.

Several system parameters determine the period in which user chronological data is valid (instrument chronological data only). The following table shows the system parameters and the instrument chronos they affect:

System Parameter Instrument Chrono
STOCK_DATA_VAL_PERIOD
  • Alpha
  • Beta
  • Number of Shares
  • Earnings per Share
  • Net Asset Value per Share
  • Price Earning Ratio
  • Volatility
  • Volume
  • Correlation Coefficient
  • Determination Coefficient R2
  • Covariance
BOND_DATA_VAL_PERIOD
  • Average Life
  • Modified Duration
  • Discount Yield
  • Duration
  • Convexity
  • Current Yield
  • Yield-to-Maturity
  • Prepayment Rate
  • Scaling Factor
OPTION_DATA_VAL_PERIOD
  • Delta
  • Theoretical Price
  • Gamma
  • Probability
  • Rho
  • Omega
  • Vega-Lambda
  • Theta
  • Holding Cost Sensitivity
  • Strike Price Sensitivity
  • Lookback Current Extreme
  • Asian Current Average
ACCR_INTEREST_VAL_PERIOD
  • Accrued Interest
  • Accrued interest denominator
  • Accrued interest numenator
  • Determination Coefficient R2
USER_CHRONO_DATA_VAL_PERIOD
  • Unpaid %
  • Margin
  • Price conversion factor
  • Minimum Rating
  • Price calculation factor

The operations involving multiple positions that increase the number of positions for a given date (for example, portfolio transfer operation, adjustment operation, locking operation and so on) for an instrument connected to an instrument chrono are not supported. Some financial operation risks calculate X times the value of the timer (where X is the number of positions on the date given).

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Published on :
Tuesday, August 29, 2023 4:45:25 PM IST