Introduction to Real Time Valuation and Margin Lending

The ASSET.TYPE application defines the top-level division of the assets and liabilities of a portfolio. Temenos Transact modules linked to the portfolio management system (other than securities) must be defined as a record in the ASSET.TYPE application. This must be done before the module is included in the portfolio management system (as shown in the below screenshot).

If a module is not setup in the ASSET.TYPE application, assets or liabilities for that module is not recorded in the portfolio management related applications, even if the transaction is linked to a portfolio. Input the module in the Interface To field. Only those applications that appear in the drop-down in the Interface To field are linked to the Securities (SC) module.

The Report Sub Total field is linked to the SC.VAL.REP.SUB.TOTAL application and allows the user to group ASSET.TYPE records together for reporting purposes. If this field is blank for an ASSET.TYPE record that is used to define a group of accounts, then any account linked to this ASSET.TYPE is considered by the portfolio management system for information alone and has a zero value. The ASSET.TYPE records linked to assets and liabilities (which are not part of the SC module) use only the Margin Rate field.

The records ASSET.TYPE for the SC module defines a type of security such as shares or bonds as explained in the above example.

So, the ASSET.TYPE application is the top-level portfolio asset and liability file. For example, if the user wants to separate bonds, then the fixed and variable rate instruments belong to different ASSET.TYPE records.

However, to provide even greater descriptions of each ASSET.TYPE, Temenos Transact uses the SUB.ASSET.TYPE application. The Concentration Cap field captures the concentration cap details.

For modules other than SC, each module requires a default SUB.ASSET.TYPE record to be setup, which must be linked to the ASSET.TYPE record for that module (as shown above). If this default SUB.ASSET.TYPE record is not setup, then assets or liabilities for that module are not recorded in the portfolio management related applications, even if the transaction is linked to a portfolio. An example of such a record in SUB.ASSET.TYPE is shown in the below screenshot.

For these non-SC application, the SUB.ASSET.TYPE records, for each ASSET.TYPE is only permitted. Facility is not available to enable the splitting of loans, deposits, leases and so on. Therefore, if the Loans and Deposits (LD) module is linked to the SC module in this way, all LD transactions in respect to the portfolio are listed together.

Each SECURITY.MASTER record (which defines an individual security on Temenos Transact) has to be linked to a SUB.ASSET.TYPE record. As each SUB.ASSET.TYPE in turn has to be linked to an ASSET.TYPE record, this defines the breakdown of a portfolio’s securities assets and liabilities.

The SUB.ASSET.TYPE application provides the opportunity the user to separate the various security types into meaningful types of paper, thus enabling the structured revaluations, statements (both by enquiry and by report) and so on. The user can setup many SUB.ASSET.TYPE records and unlike the non-SC applications, any number of records may be linked to one record in ASSET.TYPE .

A record ID in SUB.ASSET.TYPE may be setup to comprise of up to five either/or/both alpha and numeric characters. Each SUB.ASSET.TYPE record must be linked to the SC module as shown in the below screenshot.

The SUB.ASSET.TYPE application contains the attributes that are common to the particular class or group of instruments. These values are defaulted to equivalent fields in the individual instrument master (SECURITY.MASTER or DX.CONTRACT.MASTER) records that belong to this SUB.ASSET.TYPE. However, they can be changed at the individual instrument master level.

In addition to the default ASSET.TYPE and SUB.ASSET.TYPE, the assets and liabilities of a particular category can be linked to a specific SUB.ASSET.TYPE (and hence to a corresponding ASSET.TYPE) by using the ASSET.BY.CATEG application.

In the below screenshot, the forward FOREX contracts (CATEGORY 20000) are linked to Sub Asset Type2 rather than using the default SUB.ASSET.TYPE for the FOREX module. Also, this application links different types of account (identified by having different category codes) to different SUB.ASSET.TYPE records, thereby allowing the system to report on them separately.

The Concentration Cap field (to be considered for the SUB.ASSET.TYPE) captures the concentration cap details.

The margin rate setup of the expiry and effective dates are explained below.

If a customer wants a short-term loan of 550k in a month’s time for a period of three months. The customer pledges a bond he holds as a collateral. The face value of the bond is 700k. The customer is highly regarded, considered a good credit risk by the bank and so enjoys preferential treatment.

• Current date is 01 APRIL 2017
• Effective date is 01 MAY 2017
• Expiry date is 31 JUL 2017
• Default margin rate for the corporate bond is 75%
• Customer specific margin rate is 80%

On the first revaluation on the Effective Date (01 MAY 2017), the bond is valued at 560 (80% of 700k). On the expiry date (31 JUL 2017), the system defaults to the default margin rate and is revalued to 525 (75% of 700k).