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Former Member

SAP Treasury - TPM60 functionality

Dear All,

I have a quick question around the functionality of TPM60 - Save NPV values. I am trying to do the set up for a FX forward (60A - 102)

Based on my understanding, the data thats required for NPV calculation in TPM60 is

Exchange rates - Market data - I am using M rate

Interest rates - Market data - I maintained LIBOR interest rates

Yield curves - Market data - I am using standard yield curve 0133

FOREX SWAP rates in table AT15 - market data

Market risk analyzer settings to create evaluation type and so on - customizing - I am trying to use evaluation type - standard FAS133 with the above mentioned yield curve and M rates. I am using all "Middle par rates"

I have done all the set up and when i run TPM60, i see that SAP is trying to create a NPV. When i go to the detail log, it seems to be using the exchange rates, interest rates and yield curves to come up with the discounting factor to compute the NPV.

However, i am not sure where the FOREX forward points stored in AT15 are used

Can some one please explain me how the NPV is computed and whats the contribution of the FOREX SWAP points (table AT15) in this calculation?

Any hep will be much appreciated and rewarded.

Thanks

Shilpa

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1 Answer

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    Former Member
    Apr 30, 2012 at 08:03 PM

    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)].


    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.

    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.

    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.

    --

    Mani

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    • Wouldn't be easier for the system to pick up the forward rate of the transaction instead?

      It seems you need enhancements to do that...

      The swap points in AT15 applies to all transactions using the same Exchange rate type, right? So it's a rate used across all transactions valued in a given date, or is it not?