Two-Step Valuation

Use

The following steps are available for carrying out a two-step valuation which determines the write-up / write-down amounts separately for price/rate and exchange rate.

You define the sequence of the valuation steps in the position management procedure .

Example:

Valuation of a USD bond

This example shows how the sequence of valuation steps can affect the write-up / write-down amounts in the security and in the foreign currency.

The same bond is valuated first in the security and then in the foreign currency (position management procedure 1) and first in the foreign currency and then in the security (position management procedure 2).

Transaction basic data (= purchase of USD bond)	Position value date: 01/01
	Nominal amount: 1,000,000 USD
	Price: 110%
	Exchange rate: 2.00 EUR/USD
Prices/rates on key date of valuation (02/01)	Price: 100 %
Prices/rates on key date of valuation (02/01)	Exchange rate: 1.50 EUR/USD
Position management procedure 1	Security valuation Foreign currency valuation Strict lowest value principle
Position management procedure 2	Foreign currency valuation Security valuation Strict lowest value principle

This graphic is explained in the accompanying text.

Valuation results:
A) Position management procedure 1
Security write-down amount in USD	100,000 USD
Write-down amounts in EUR:
Security write-down	200,000 EUR
Foreign currency write-down	500,000 EUR
Total write-down amount in EUR:	700,000 EUR
B) Position management procedure 2
Security write-down amount in USD	100,000 USD
Write-down amounts in EUR:
Security write-down	150,000 EUR
Foreign currency write-down	550,000 EUR
Total write-down amount in EUR:	700,000 EUR