In an economic environment, where Fed Funds and other indicator rates are moving up or down, it is important to review and adjust your index rate assumptions in IRR-Solutions® II .
Important Items to Review
Manual Rate - Many clients have manual indices set up in IRR-Solutions® II. Effective rates as well as adjustments should be reviewed and updated. In the example below, Fed Funds is a manual rate (designated by the M in the icon, rather than H for host rate). The Eff. Rate field requires adjustment to the current Fed Funds rate.
Resulting Rates of Zero or Negative - These results are highlighted in bold/red and should be adjusted. In the example below, adjustment amounts (whether spread, percentage, or value) may need modification in the declining rate scenarios to produce positive results.
In the example below, a modification to the Fed Funds Eff Rate (reduced to 3.0 from 5.00), resulted in a rate of zero in the -300 shock scenario. In this case the adjustment was based on a spread and the spread needs to be tightened to adjust to the low effective rate now in effect.
