CRA based on remaining maturity

[philippe_dubuisson2]

Dear experts,

My client would like to implement new rules for its credit risk analyser:

Different limit types (< 1 week, < 1 year, < 5 years, < 10 years) will be maintained per business partner ratings in money market (Limit product group MM)and per issuer rating for securities (Limit product group SEC)

Example:

     Issuer                    < 1 week                    < 1 year                    < 5 years                    < 10 years

S&P     Moody's         

AAA     Aaa               600,000,000.00          400,000,000.00          300,000,000.00          200,000,000.00

AA+     Aa1               600,000,000.00          400,000,000.00          300,000,000.00          200,000,000.00

AA       Aa2                500,000,000.00          250,000,000.00          150,000,000.00          75,000,000.00

.... etc

BBB+   Baa3               0.00                         0.00                            0.00                         0.00

No rating                    100,000,000.00          75,000,000.00            50,000,000.00            25,000,000.00

Do you have an idea on how we can implement that easily ?

Many thanks for your precious advices.

Best regards,

Philippe.

[Former Member]

Hi Phillipe,

Yes you can achieve this. In CRA, You can create limit type based on Business Partner and Ratings.

Make sure your analysis Structure has the characteristics, Partner and Ratings.

Then in CRA>Limit Management, you can define a limit type with Characteristics Partner and Rating.

After defining limit type, in TBL1 you can define the validity dates and the amounts.

Regards,

nikhil

[philippe_dubuisson2]

Hi Nikhil,

Thanks for your prompt answer. I agree for rating derivation but for the dates, they want to differentiate limit amounts based on remaining maturity. Means that we have to take end of term or bond maturity into account.

I don't think we can use validity dates in TBL1 because these fields are not dynamically determined.

Regards,

Philippe.

[Former Member]

Hi Philippe,

In That case, probably you can restrict the Validity 'TO' date , in TBL1, as the end of term of the specific bond, and have derivation based on  ID number. However a future date in Validity will contain your bond maturity date as well right ?

Regards,

Nikhil

[philippe_dubuisson2]

yes, but limit amounts are depending on remaining maturity gaps < 7d < 1y < 5y < 10y

Somehow, we have to calculate these gaps every day based on end of term in MM and bond maturity date.

Is anyone aware of this specific rule ?

rgds.

Philippe.

[Former Member]

There is a possiblity to solve your problem by using new analysis characteristic.

1. Definition of new analysis characteristic - Maturity Gap (spro: Treasury and Risk Management -> Basic Analyzer Settngs -> Reporting Characteristics - > Define Analysis Characteristics) with values: 7d, 1y, 5y, 10y

2. Assing the new characteristic to active Analysis Structure

3. Add new derivation rule to derivation strategy for MM and bonds (spro: Treasury and Risk Management -> Credit Risk Analyzer -> Basic Settings -> Automatic Integration of Financial Objects in TM Data -> Money Market/Securities -> Derive Default Risk Control Parameters). We solved similar issue through step type = Enhancement. There you can define how to derive one of possible values (7d, 1y, 5y, 10y) based on end of term/maturity date.

4. Define new limit types with Maturity Gap as limit characteristic

5. If you need to have actual data every day, you have to execute transaction AFO_AP_POS1_MUPD for Class Positions in Securities Accounts and AFO_AP_LOAN_MUPD for MM transaction on a daily basis before you execute KLNACHT to update limit utilizations.

Regards,

Maria

[Former Member]

Correction of the last step - mentioned transactions are: LMFO_TRTM_MUPD for MM and LMFO_POS_MUPD for Class positions in Securities Account.

Maria