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AM Back Value Management-3

This document describes a back-value management system that allows users to retroactively change portfolio information such as prices, exchange rates, cash, securities, and corporate actions. It outlines the types of information that can be back-valued, how portfolio valuations, fees, performance, and composites will be recalculated as a result. The document also discusses the back-value period, recalculation process, treatment of existing transactions, and reference dates used for back-value recalculations.

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Gnana Sambandam
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148 views5 pages

AM Back Value Management-3

This document describes a back-value management system that allows users to retroactively change portfolio information such as prices, exchange rates, cash, securities, and corporate actions. It outlines the types of information that can be back-valued, how portfolio valuations, fees, performance, and composites will be recalculated as a result. The document also discusses the back-value period, recalculation process, treatment of existing transactions, and reference dates used for back-value recalculations.

Uploaded by

Gnana Sambandam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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AM BACK VALUE MANAGEMENT

Application Design

Back-value on portfolio information - definition

Back-value on portfolio information principally consists of inputting back-value dated information


that will launch the recalculation of a historic portfolio valuation, recalculation of performance and
fees.

The scope of the back-value system developed includes the following:

Information can be back-value dated on the following information:

1. Registering back-value on price


2. Registering back-value on exchange rate
3. Registering back-value on cash
4. Registering back-value on security
5. Registering back-value on corporate action

Recalculation will then be applied to the entities mentioned below:

Portfolio valuation: Portfolio valuation can be generated with a back-value


price, exchange rate, cash entry, security, corporate action
entitlement or recalculation of account interests.
Fees: Calculated fees can be generated based on the recalculation
of portfolio valuation.
Portfolio performance. Portfolio performance is generated based on the
recalculation of portfolio valuation and changes in
performance inflows or outflows.
Composite Composite performance is generated based on the
performance. recalculation of portfolios performance (see also Composite
user guide).

This document presents the principle back-value functionalities and orientations and then describes
the back-value operations mentioned above, followed by the recalculation process that is triggered
by those operations. Finally the last chapter describes the back-value system parameterisation.

Main functionalities

Below are the main rules that have been followed when designing and developing this system.

Back-value period

The back-value parameterisation system requires to define a first date which limits the back-value
recalculation process and a second date which, determines the date from which the recalculation
updating should start. Moreover, using the On-Line recalculation process (see in section below)
provides the user with the ability to apply the Back-Value recalculation for a selected date only.

Recalculation process

Back-Value portfolio recalculation process is split into five different sub-processes: price, exchange
rate, cash, security and corporate action. Each of these sub-processes can be launched either On-
Line, though a specific application, or at End Of Day. Note that Back-Value operations are
available for On-line process the day next to the day they have been recorded. Composite back-
value recalculation is an online process.

Respect of existing transactional structure

Back-value transactions are available within the existing transactional structure: only back valued
transactions, based on the value date of a transaction being less than the current working date, are
treated, no chained or combined transactions which may be indirectly linked to the back value
transaction are modified by this development.

Example: Assume we are on the 19th July

The user records a back-value transaction on a security: share purchase for example on the 1st
February for a particular portfolio. If a corporate action has been recorded on this same share on the
15th March: the system will not automatically modify the original corporate action on this portfolio.
The user will have to record a new corporate action for the updated position.

Current Treatment

A back-value transaction is applied using the current parameters applied to the portfolio: historical
data such as parameters or links are not stored. Commission and tax calculation rates used for back-
value are the current ones. A back-value transaction will not be possible if the impacted entity has
changed status or link, e.g., it is not possible to create a back-value transaction on closed portfolios.

Exceptions to this rule:

Security file: Historical data on the security file (SECURITY.MASTER) is managed. It is


used for bonds information: accruals and interest rate.

Accounts: Account has been removed from its portfolio since the back-value date.

As soon as this account is linked to a portfolio at the current date of back-


value input, the updating will be applied for all the sub-periods within the
back-value period when the account was linked to a portfolio. In fact
portfolio number is a mandatory key for back-value updating process at the
current date of the back-value input: if an account is currently linked to a
portfolio: all the portfolios to which this account was linked within the
back-value period will be updated.
Portfolio valuation recalculation results

Portfolio valuation recalculation results are maintained using a monthly file system.
Each file of this set of files is named SC.VEH.YYYYMM where YYYY MM represents
respectively the year and month of the portfolio valuation data available in the file.

The structure of this file is described in last chapter: ‘SC.VEH.YYYYMM file structure’.

This structure is unique for securities information and cash information: field definitions depend on
the type of position.

A model enquiry is provided, including a routine that addresses the SC.VEH.YYYYMM file
matching the date selected in the enquiry selection window.
This enquiry is: SC.VAL.HIST.YYYYMM

Re-printing

No re-printing functionality has been developed for this back-value system: the bank will use, adapt
or develop the tools necessary to re-print after back-value operations.

Reference date for back-value recalculation

General principle

In the majority of operations included in this back-value system we can find three kinds of dates:

WORKING.DATE TRADE.DATE VALUE.DATE

TRADE.DATE and VALUE.DATE are input by the user. T24 WORKING.DATE is generated by the
system.

For a standard operation we have generally the following relations between these dates:

WORKING.DATE >= TRADE.DATE


VALUE.DATE >= TRADE.DATE

In T24 portfolio historical valuation is maintained in TRADE.DATE

Important:
The back-value system will consider an operation to be back-valued only if its TRADE.DATE is less
than T24 WORKING.DATE.

For the transactions without TRADE.DATE, the VALUE.DATE information is used instead. Details are
listed in chapter below.
Principle declination

The preceding generic principle declines itself according to existing application specific transaction
labels and structure. The table below lists the correspondences between TRADE.DATE references
mentioned above and the field used in each transaction for back-value identification.

Example: for FUNDS.TRANSFER as there is no concept of trade date for that transaction, the
VALUE.DATE information is used instead to determine a back-value operation.

Domain Application Working.date Trade.date Value.date


Price SC.PRICE.CHANGE T24 system The reference date in this
date – no application is part of the
specific label record ID, and so has no
specific label – the field
TIME.CHANGE is used to
identify latest change.
Exchange Rate AM.CCY.RATE BANK.DATE The reference date in this
application is part of the
record ID, and is displayed
also as no input field
labelled ‘Date’ – the field
BANK.DATE is used also
to identify the history of
successive changes.
Cash FUNDS.TRANSFER T24 system CREDIT.VALUE.DATE
date – no and
specific label DEBIT.VALUE.DATE
DATA.CAPTURE Same as above VALUE.DATE
Security SEC.TRADE Same as above TRADE.DATE VALUE.DATE
SECURITY.TRANSFER Same as above TRADE.DATE VALUE.DATE
POSITION.TRANSFER Same as above TRADE.DATE VALUE.DATE
SC.BOOK.COST Same as above TRADE.DATE VALUE.DATE
Corporate action DIARY Same as above VALUE.DATE
ENTITLEMENT Same as above VALUE.DATE

Back-value system general overview

The following activity diagram synthesises a dynamic view of the back-value system
Bv Corporate
Bv Security Bv Cash Bv Price Bv Forex Rate
Action

EOD Process

Collect BV
operations

Triggered either
Storage of Composite portfolios Portfolio Valuation
automatically for BV
impacted by BV operations Recalculation
EOD parameterisation,
or on user demand for
BV OnLine
parameterisation

Portfolio Performance Fee Posting based on user


Recalculation Recalculation validation

On user demand
and on selected Composite Exclusion
Preparation
composite/period

Composite Performance
Recalculation

Figure 1 - Back-Value system overview

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