Interest Result Evaluation
Use
The net interest income is the part of the total payments belonging to a transaction that results when interest is calculated on the nominal capital.
The interest result analysis displays the net interest income of a bank distributed over time. By comparing the net interest income based on current price parameters and various scenarios, you can see the impact of possible future developments on the net interest income of the bank.
Features
In the interest result evaluation, the system displays the following: balance sheet volume, product interest rate, opportunity interest rate, interest revenue (product interest), interest revenue (opportunity interest), net interest margin contribution, absolute and relative net interest income and the profit or loss from the mismatch spread.
Depiction of the net interest income before and after simulation.
Depiction of the net interest income when different scenarios/scenario progressions are applied.
Splitting of the net interest income into the profit or loss from the mismatch spread and the net interest margin contribution.
Depiction of the profit or loss from derivatives
The profit or loss from derivatives comprises the interest income and premium income from derivative transactions. Since derivatives are generally used to hedge interest rate risks from the balance sheet, an interest result evaluation needs to display the data including and excluding the profit or loss from derivatives in order to show the effect of the hedge.
In addition to the interest income of the transaction, the premium from an option transaction also represents revenue or expense. This premium is displayed at the due date.
You can display the profit or loss from derivatives by assigning the balance sheet indicator
off-balance sheet
to the derivative transactions in the analysis parameters of the financial object. Start the
ALM simulation
. Choose
Settings
Data Relevant for Display
and deselect the
balance sheet transaction
indicator. Choose
Continue
. You see the profit or loss from derivatives in the interest result evaluation.
Depiction of the exchange rate result.
In the interest result evaluation, you can have the system display how the net interest income has changed due to currency fluctuations. For more information about the depiction of exchange rate results choose profit or loss from currency translation .
In the interest result evaluation, transactions are always taken into account with their capital commitments. You can hide the results that were calculated using forward rates by deselecting the
forward liquidity
indicator in the data relevant for display. To access the
data relevant for display
, choose
Settings
Data Relevant for Display
.
Products requiring special treatment
Options with the exception of caps and floors
The setting you make for the
delta indicator
in the ALM valuation type determines how the net interest income of an option is taken into account in the interest result evaluation.
Whether or not an accrual is required for the net interest income of an option depends on the delivery type of the underlying:
An accrual is not required for the interest revenue or expense of options with cash settlement . The interest result is effective on the due date only, and is therefore accounted for completely in the period in which the due date falls. In this case, the net interest income corresponds to the intrinsic value of the option.
In the case of options with physical delivery , the underlying is realized after the option is exercised. An accrual may or may not be required, depending on the underlying. If an accrual is made for the net interest income of the underlying, the same applies to the option, and vice versa.