SAP Treasury - TPM60 functionality

[Former Member]

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

[Former Member · Accepted solution]

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

[Former Member · Accepted solution]

Thanks a lot Manish. I am seeing exactly what you explained in the above post in the system.

Going by that logic, there is no need to maintain the FOREX SWAP points (table AT15) in SAP.

However, my client has given me a list of forward points that he gets from the bank using which he is computing the Mark to Market at this point (without SAP)

Do you know where we would use the Forex SWAP points (values in table AT15) in SAP?

Once again, thanks a lot for helping out.

Shilpa

[Former Member · Accepted solution]

Hi Shilpa

For the evaluation TPM60 you have created an evaluation type in customizing (basic analyzer settings > devine and set up evaluation type. To calculate your fx positions with the forward points and not with the yield curve you have to add a valuation rule to your existing valuation type. When you have created the rule you can see a tab called "evaluation control". Opent this tab and then on the right you see a field called "valuation control". In this field you have to set the flag for "calculate theorethical price". When this setting is done TPM60 generates the values for the NPV calculation with the swap points instead of the yield curve.

Regards

Juerg

[Former Member · Accepted solution]

Hello Juerg,

Please correct me if I'm wrong. But I thought you have to implement BADI JBA_SFGDT as per note 950562 to be able to achieve that behavior.

Thanks

Mani

[Former Member · Accepted solution]

Hi Mani

The implementation of the note 940562 is necessary.

Regards

Juerg Heiz

juerg.heiz@treascon.com

[Former Member · Accepted solution]

Thank you so much Juerg and Mani. I will try implementing the Note and do the customizing as suggested.

[Former Member · Accepted solution]

Shilpa,
Just to clarify, once this BADI is implemented, SAP will calculate NPV in the following manner: For the example in my previous post, instead of discounting EUR amount using EUR yield curve, EUR amount (1m in our example) will first be converted to USD using forward rate (i.e. spot rate + swap points from AT15); then both the USD amounts will be discounted using USD yield curve. The difference of the resulting amounts would be your NPV then.

If your business requirement is such, you can go this route.

mani

[joao_ferreira10 · Accepted solution]

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?