Function documentationEdit Net Present Values

 

You use this function to store NPVs (time values) manually for a financial transaction in the NPV table VTVBAR or to display NPVs already stored in the system.

Integration

See also: Overview: Calculating NPVs in TRM

Features

The NPV table contains the following columns:

  • Contract Type

  • Company Code

  • Transaction (= Financial Transaction Number)

  • Contract Number (= Loan Contract Number)

  • Price Type/NPV Type

    You define the price type/NPV type in Customizing for Treasury and Risk Management under Start of the navigation path Basic Functions Next navigation step Market Data Management Next navigation step Master Data Next navigation step Statistical Data Next navigation step Define Price/NPV Type End of the navigation path. By defining different price types and NPV types, you can store calculated NPVs or fair values in different ways for a transaction and a point in time.

  • Valid-From Date

  • Net Present Value

  • Currency

  • Clean Price

  • Intrinsic Value (for options)

  • Time Value (for options)

  • Risk-Free NPV

  • CVA (= Credit Value Adjustment)

  • DVA (= Debit Value Adjustment)

  • NPV for Incoming Side (in the case of two-sided transactions, such as swaps)

  • NPV for Outgoing Side (in the case of two-sided transactions, such as swaps)

If you enter values in the table manually, the following equations must be satisfied:

  • NPV = risk-free NPV – CVA – DVA

  • Two-Sided Financial Transactions

    • Risk-free NPV = risk-free NPV incoming side + risk-free NPV outgoing side

    • NPV incoming side = risk-free NPV incoming side - CVA

    • NPV outgoing side = risk-free NPV outgoing side - DVA

  • Options

    NPV = intrinsic value + time value

  • NPV = risk-free clean price - CVA - DVA + accrued interest

Activities

  1. In the application menu for Treasury and Risk Management, call the function by choosing Start of the navigation path Basic Functions Next navigation step Market Data Management Next navigation step Manual Market Data Entry Next navigation step Enter Net Present Values End of the navigation path (transaction JBNPV).

    Note Note

    You can also call the function in Customizing for Treasury and Risk Management under Start of the navigation path Basic Functions Next navigation step Market Data Management Next navigation step Manual Market Data Entry Next navigation step Enter Net Present Values End of the navigation path.

    Further, the function can be called in Hedge Accounting for Exposures and in Hedge Accounting for Positions.

    End of the note.

  2. In the Field Selection screen, select the columns of the NPV table. You can select individual fields or select all columns by choosing Select All (Select All). Choose Copy (Copy).

  3. In the next screen, you can use the following fields to restrict which data is displayed:

    • Contract Type

    • Company Code

    • Transaction

    • Contract Number

    • Price Type/NPV Type

    Make the settings according to your needs. By choosing Further Selection Conditions, you can also use additional fields. Choose Copy (Copy).

  4. The NPVs of OTC Transactions: Overview screen appears.

    The columns and data displayed correspond to the selections that you have made.

  5. With the Detailed Log (Detailed Log) pushbutton, you can diplay the detailed log of the calculation for an NPV calculated by the system.

  6. You can choose the Display -> Change (Display -> Change) pushbutton to switch between the display mode to the change mode.

  7. If you have calculated the NPVs using the function Determine NPVs Including CVA and DVA (transaction TPM60CVA), you can display the calculation details for CVA/DVA as well as the risk-free key figures. To do this, select an entry and choose the CVA/DVA Calculation pushbutton. The List of CVAs/DVAs and Risk-Free Key Figures screen appears.

    • When the calculation was made for the single transaction, the CVA/DVA and the risk-free key figures are displayed in one line.

    • If the financial transaction is part of a netting group, the CVA/DVA of the netting group is displayed in the first line and, in the subsequent lines, the risk-free key figures for the transactions of the netting group.

    From here, you can select a line and then do the following:

    • Navigate to the relevant financial transaction

    • Call the calculation log for the risk-free key figures.

    When the CVA/DVA calculation has been performed using the method Based on Expected Exposures, you can also do the following:

    • Call the Expected Exposures of the netting group or of the single transaction.

      If you select a line and choose the Display Calculation Log pushbutton, you can display the calculation log for an expected exposure on that expected exposure date.

    • Display the CVA/DVA Calculation Log.

  8. In the change mode, you can make manual changes to existing entries. Further, you can use the New Entries and Copy as... (Copy as...) pushbuttons to store new entries in the NPV table.

  9. If errors occur during entry, you can choose the Undo Change (Undo Change) pushbutton to undo your changes.

  10. Once you have made all new entries, save your entries.

The NPVs can now be used, for example, for key date valuation.