Answers for "SAP Treasury - TPM60 functionality"
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The latest answers for the question "SAP Treasury - TPM60 functionality"Re: SAP Treasury - TPM60 functionality
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<body><p>The positive and negative cash flows are discounted using their respective currencies yield curve i.e. those amounts are multiplied by the calculated discount rate. The discounting is from maturity date to the valuation date. Formula for discount rate (ZBDF) is 1/[1+interest rate*number of days between valuation date and maturity date/number of days in year (e.g. 360 if using Act/360)].</p><p><br/>So, if in the Forward Contract, we are buying 1M EUR and selling 1.2M USD then 1M EUR is discounted using EUR yield curve resulting in say, amount A and 1.2M USD is discounted using USD yield curve resulting in say, amount B. Then the discounted EUR amount A is converted to USD using the EUR/USD spot rate on the valuation date; resulting in say, amount C. C-B is your NPV. The forward points are not used in NPV calculation.</p><p></p><p>Interest rate (in the discount rate formula in 1st para) is calculated based on yield curve settings and reference interest rate settings and values. There may be some interpolation involved to calculate the missing grid points using existing reference interest rates.</p><p></p><p>There may be some other ways to calculate a different NPV as per business requirement; if hedge management is used, then that can be controlled by "Calculation Category" setting.</p><p></p><p>--</p><p>Mani</p></body>Mon, 30 Apr 2012 20:03:29 GMTManish Jauhari