FSC Customizing in SAP Treasury &. Risk Management. SAP ERP - Financials. Course Outline. Course Version: 98 Revision A. Course Duration: 5 Day(s). Documents Similar To Fsc en Col97 Fv Co a4. Skip carousel SAP Money Market manual. uploaded by uploaded by. This course provides the foundational knowledge required in order to understand the system configuration of the SAP Treasury and SAP Risk Management.

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Essential: Fundamental knowledge of SAP Treasury and Risk Management ( application and customizing) e.g. through. FSC and FSC Recommended: . SAP FI stands for Financial Accounting and it is one of important modules of SAP . This is an introductory tutorial that covers the basics of SAP FICO and how to. FSC11 0 Cust om izing in SAP T re a sury und Risk M a nagem ent . ©SAP AG FSC Ove rvie w of T ra nsa c t ion M a na ge r: Ove rvie w of Func t ions.

Cash Position Cash position supplies information on the current financial situation in your bank and bank clearing accounts.

Integration with payment advices means that cash position can give you an Overview over Short-term liquidity movements. IntegrationThe cash position reproduces the activity in your bank accounts. Data is supplied from three sources. The graphic below illustrate of the cash position in the Sap system Cash Budget Management Is to identify control payment flows in light of liquidity considerations While cash management takes a short term view, Cash budget management deals with medium-term and long — term liquidity developments Before you can use cash budget management you must also having the financial accounting.

Fsc110 en Col97 Fv Co a4

The cash balances come from cash and bank accounts in financial accounting. Every posting made CBM includes the following function Displaying business transactions having an affect on liquidity. By revenue and expenditure item Planning and displaying the payment flows and funds balances for any period you choose How to use cash budget management The SAP system distinguishes between different forms of organization, which have specific meanings within their respective applications.

In funds management the business is divided into areas of responsibility, which are then monitored centrally. Budget funds are assigned to the individual areas of responsibility. Division of revenue and expenditure Cash management divides revenues and expenditures by customer and vendor group. While, cash budget management, the division is by revenue and expenditure item.

Financial budgetPlanning is not possible in Financial Management Area The FM area is the commercial organizational unit, within which cash budget management and financial budgeting are conducted.

It structures the business as a viewed from cash budget management. Financial accounting: The company code Cash budget management :The financial management area.

Cash budget management you will be working with financial management areas Commitment Item The basis data object in cash budget management is the commitment item. With commitment items, you can divided business transactions affecting liquidity in your business into revenue, expenditure, and balance items. Commitment Hierarchy Commitment items are arranged in hierarchs.

A distinction is drawn between Account assignment itemsMake up the lowest level in the commitment item hierarchy. Summarization itemsYou define a hierarchy by Commitment Item Master Record You must define an item category and financial transaction in each commitment item master record. The item category controls whether the commitment is a revenue, expenditure, or balance item. The financial transaction is important When data is being recorded in cash budget management. To do this, return to the application and enter transaction TBB1.

Enter the following data to ensure that only your transactions are posted. Check the individual posting transactions.

To do this, enter transaction TPM Localize the transactions with the following entries: T ra nsa c t ion M a nage r — H e dge M a nagem ent Contents: T ra nsa c t ion M a nage r — H e dge M a nagem ent At the conclusion of this unit, you will be able to: Hedge Management Basics Topic 2: Basic Customizing Topic 3: Effectiveness Test Customizing Topic 4: Accounting Topic 5: Hedge Management in the Application Topic 6: Number ranges are always defined for each company code, whereby it makes sense to use a uniform number logic for all company codes.

N umbe r Range s for Ea ch Company Code H edge Pla n In the next step, you need to assign the number range interval you defined earlier to a company code. N umbe r Range s for Ea ch Company Code H edging Re la tionships In the next step, you need to assign the number range interval you defined earlier to a company code.

This makes sense because it is possible that several number ranges have been created for each company code for example, year-specific number range intervals.

N umbe r Range s for Ea ch Company Code H edge d I t em s In the next step, you need to assign the number range interval you defined earlier to a company code.

Va lua t ion Are a -De pende nt Se t t ings Evaluation types: Details for company code and valuation area Carry out reclassification in case effectiveness is not met? To do so, you assign the individual valuation areas to the company codes and specify the valuation type. The value stays in OCI until then. Se t t ings for t he Aut om a tic Cre a t ion of H e dge Da t a You can now specify for which products the Hedge Management tab is supposed to be displayed in the transaction.

In this step, you specify for which product and transaction types direct integration into the hedge plan is supposed to be possible. This tab enables the parallel entry of the hedge relationship directly in the transaction instead of the hedge monitor. Docum ent a t ion To meet the IFRS requirements with regard to documentation, appropriate forms must be defined. Assigning the pdf forms included in the standard Structure of the forms: These include the effectiveness calculation category, the offsetting calculation category for the differences, the evaluation type in the Market Risk Analyzer, and the NPV type.

Asse ssm ent T ype s You use assessment types to define in which interval the hedging relationship is considered effective. To implement IAS39 in the Hedge Management area there are detailed requirements as to where a hedging relationship is considered effective.

You define an upper and lower limit for the effectiveness ratio, which determines the range within which the hedging relationship is deemed effective. These assessment types are available as possible entries when you define the hedge strategy later on. H e dge St ra t e gy In SAP, you can map cash flow and fair value hedge relationships and define different hedge strategies for this purpose.

Overview of individual hedge strategies. The hedge strategy comprises several parameters that define how the effectiveness test is carried out. These include the assessment types, the calculation types for the effectiveness assessment, and the calculation types for the effectiveness measurement. Sum mary You are now able to: Only these update types can be used or posted from Hedge Management.

To do so, every update type is assigned to user U pda t e T ype s Re le va nt t o Posting Before you can post from Hedge Management to Accounting you must mark the corresponding update types as relevant to posting.

Additional option using valuation areas. Posit ion M a nage me nt Procedure To use valuation results as the basis for making a posting from Hedge Management, appropriate update types must be assigned to the position management procedure. This is important to make them easy to identify. If you want, you can use a separate document type for hedge accounting.

H e dge Pla n You use the hedge plan to link underlying transaction and hedge transaction. Double-click to select a hedge plan. H e dge Pla n Def. H e dging Re la t ionships For each hedge plan, you can now decide which market risks interest, currency risks, commodity price risks you want to hedge and assign the corresponding underlying transactions.

Details on the selected hedge plan or risk object Overview of the corresponding exposures that have already been created. You can define as many exposures as you require. H e dge d I tem s Choose the hedged items to be hedged. Select the second tab page Display of corresponding hedged items with value and runtime Specification of hedge type: This differentiation is made according to the type of hedged underlying transaction exposure.

The system supports the categories cash flow hedge, fair value hedge and net investment in foreign subsidiary. Cash flow hedge and fair value hedge differ with regard to the hedged risk. Whilst cash flow hedges aim to fix future cash flows, fair value hedges are used to hedge changes in market value for the underlying transaction. The net investment in foreign subsidiary is a special case of the cash flow hedge. The actual hedging rate provides information about the actual hedging rate of the exposure to be hedged.

The system calculates the actual hedging rate as soon as you integrate a derivative financial instrument or a certain portion thereof into a hedging relationship. The actual hedging rate is defined the portion in percent of an exposure that is hedged at a certain time. H e dging Re la t ionship In the last step, you have to assign the hedging transactions FX, derivatives and the hedge rate.

The hedge rate is important for the subsequent effectiveness assessment. Display documentation and carry out the effectiveness test Select the tab page "Hedging Relationships" Overview of assigned hedge transactions. The valuation then takes place analogously. This must be within a certain range in order for the hedge relationship to be called "effective".

It is only then that Hedge Accounting is possible legal requirements. Ca lcula t ion M e t hods You can use various methods to calculate changes in market value.

The method depends on the derivative and the hedge category: For example, changes to the fair value for variable interest financial instruments are mostly insignificant and are based more on the time that has passed than changes to the situation on the market. The cumulative approach uses the change from the start of the hedge relationship, that is, the total change in market value, to calculate the effectiveness.

However, in general, we distinguish between a retrospective and a prospective effectiveness test. The only differences are in the data basis of the changes in market value. Specification for valuation date on which the effectiveness of the hedging relationship is to be checked Selection of whether a prospective or retrospective effectiveness test is to be performed FSCM — Treasury and Risk Management — TM — Hedge Management — Information System — Effectiveness Test Transaction: The evaluation of the effectiveness, which is the result of the created hedging relationships and the current market values, is specified by entering an evaluation date and the company code.

Effectiveness value Overview of assigned transactions. Double-click to access the detail screen. The transaction has very good effectiveness, which is illustrated by the effectiveness ratio in the second last column. Hedge Management Lesson: Structure of Hedging Relationships After completing this exercise, you will be able to: Assign this transaction to the exposure. This triggers a posting into OCI. The items in OCI are now cleared. Structure of Hedging Relationships You want to create a hedge plan for your company code FS and your group.

You see an overview of all hedge plans that have been created already. In the bottom section of the screen, make the following entries. Your hedge plan is added to the list. Now add an exposure in USD to this hedge plan. Cash flow Save your entries again. Make the following entries: Use the button to select the transaction you created earlier. Enter transaction TPM60 and specify the following restrictions. NPV at start: Restrict your entry by making the following entries: Double-clicking an entry enables you to take a closer look at the transaction.

Proceed as described in unit 5.

Pa ym e nt Progra m Contents: Pa ym e nt Progra m After completing this unit, you will be able to: Customizing F Topic 3: Customizing F Topic 4: Payment Forms Topic 5: Executing the Treasury Payment Run Topic 6: Pa ym e nt Progra m Ove rvie w There are two payment programs: Payment programs z F for the payment program in Accounting, which is based on vendor payments for example, liabilities from delivery and services.

After you enter the transaction, an interim menu appears. From there, you can navigate to the individual area T ra nsa c t ion: Pa ying Com pa ny Code s In the first step, define from which company codes payments are to be generated. Definition of minimum payment amounts. If a value falls below this threshold, no payment is executed. Choose a company code where you want to take a closer look at the payment control.

Company code FS00 can be used as the paying and sending company code. Company Code s In the second step, define from which company codes payments are to be generated. In this Customizing activity, you assign the possible or allowed payment methods depending on the country. Choose a payment method by double-clicking it to look at the details. You have to assign the permissible payment methods depending on the country. First of all, you need to specify for which country and payment method the new entry is supposed to be valid.

Definition of the direction of the cash flow a separate cash flow has to be created for each direction Definition of the payment method classification. This is important for output control. Payment methods can be controlled depending on the currency. Only allowed currencies can then be paid. Assignment of payment notes: In order to limit the number of currencies per payment method in advance, you can enter the values here. In the application, you can only use payment methods for which there is an entry in this table.

You will see that only the assigned payment methods are displayed when the business partner master data is adjusted. Double-click to view the payment method in the country Setting for the highest amount that may be paid with one payment run Specifies whether payment is also possible in a foreign currency Specification of issuer information. This data can be output in the payment file! Settings for payment advise generation! If the open item does not meet these conditions, no payment takes place.

Controlled for each company code Ranking: If several house banks have been created in the master data, you specify the order in which they are used here. Assignment of bank subaccounts to payment method Specify planned amounts: The advantage of this is that they can then be controlled individually.

Depending on the house bank and payment method, you can thus define preferences that can be very important especially for foreign currency payments. Here, you must make sure that the foreign currency amount is actually available at the time of payment.

If that is not the case, not all items are paid. Since the value date does not have to match the payment run date, you can define a time setting here Assigning expenses and fees: The limit is assigned for each house bank and currency. Configuring t he Pa yme nt Progra m for Pa ym e nt Re que st s In this Customizing activity, you have to set up the bank determination in the same way as for F because inconsistencies can occur otherwise The consistency check is started using transaction F8BH.

N um be r Ra nge Int e rva l for Pa ym ent Re que st You must define a number range interval for the generation of the payment request. Cle a ring Acc ounts If the Payment Request checkmark is set in the business partner, the posting is not made directly to the clearing account but to a payment request account, which is defined here.

Ac companying She e t SAPscript is used to define the structure of the form. Only active forms can be output! You can copy them and adjust them according to your requirements. This form is used to output the payment log and can therefore be controlled individually.

Ac companying She e t St ruc t ure A payment form usually consists of one page. Ac companying She e t Va lue s of t he Form Form setup: Busine ss Pa rtne r Pa ym ent De t a ils In order to be able to execute a payment run, you must specify the bank details of the recipient Bank details T ra nsa c t ion: Busine ss Pa rt ner Pa ym e nt De t ails Count e rparty Specification of the house bank and payment details in the "Counterparty" role Assignment of the defined payment method.

Definition of recipient data Here, you specify whether a payment request is to be generated, which serves as the basis for F We now look at the EURO payment details for all outbound transactions To look at the details, we double-click the entry Definition of the house bank from the BP master data used to fetch the We use the Payment Request entry to specify whether all account data EUR outflows are supposed to be paid using payment run F Post ing Posting the asset cash flow that is to be paid using the payment run.

The posting generates a payment request. In this area, you can specify the transaction and the company code in order to limit the output. Pa ym ent Run F11 1 Pa ra m e te rs Based on the payment request and the business partner information, a payment run can be executed. Parameter entry Additional log control see screen below T ra nsa c t ion: Pa ym ent Run F11 1 Proposa l You can generate a payment proposal based on the stored parameters.

Pa ym ent Run F11 1 Pa yment Run All included payment entries are now posted and a payment file is generated. Posting document from payment run. In the payment proposal, you can check the selected payments and exclude individual payments, if necessary.

Pa ym ent Run F11 1 Pa yment File After the successful execution of the payment run, a payment file is generated, which can be sent to the bank using Bank Communication Management, for example. Example of a DME file: ERP 6. You do not need to enter any parameters manually. However, you can still start a manual payment run. The implementation is shipped as inactive.

If you want to process payments using In-House Cash, all you have to do is activate this implementation. Payments that are only made using open items on a customer cannot be replaced. Therefore, when you create transactions in Treasury, make sure that the flag for payment requests is set. Decides whether the payment is processed using the methods of the BAdI or, by default, using the payment requests of Accounting. Displays a payment. Returns the status of a payment. Releases a payment.

Blocks a payment. Pa ym e nt Progra m — Sum ma ry You are now able to: Payment Program Lesson: Performing a Payment Run After completing this exercise, you will be able to: You now want to create a fixed term deposit in Transaction Manager, post it, and pay it using payment run F Usually, these settings are retrieved automatically from the business partner or in case of securities also from the securities account. During the posting, a payment request is created. Check the posting transactions and make a note of the payment request number.

Write down the document numbers: Transaction Alternatively, you can also use the SAP standard report transaction: Choose the selection parameters so that only the transaction you created in step is selected. Check whether your transaction has been selected. Generate a payment and a payment medium. The posting is now generated. Document number: Performing a Payment Run In your company code FS , create a fixed term deposit with product type 5 and transaction type The payment details were fetched correctly from the business partner and a payment request is generated for outbound cash flows.

In the structure, choose the inbound workflow items. On the right side, you see a list with all transactions that can be released. You see the transaction details. Check these, paying special attention to the payment request for the outbound transaction. Then use the green arrow in the toolbar to go back. You see a menu where you can release or reject the transaction. Release the transaction, if all information is correct.

In order to post your transaction, set a restriction to company code FS and enter your transaction number. Start the test run first. Check the posting log. If no errors have occurred, start the posting run. Make a note of the document number as well as the number of the payment request. Confirm your entry. To restrict the display to a few transactions, set a restriction for the company code FS and the due date. You will see a list of all transactions that meet your selection criteria.

The number of entries must match the number of outbound flows in the transaction. Enter the execution data as well as a payment run ID, and confirm the entry by choosing "Enter". To restrict the items to be paid, choose the button. Check the flows direction and amount in the payment proposal. To do so, press the button. Following that, start the payment run by pressing the button. In addition, there is also the information how many flows have been paid.

Select the product group OTC transactions and confirm your entry by pressing the Execute button. You see a list with all values; select your document number. M a rk e t Da t a M a nage m ent After completing this unit, you will be able to: Introduction Topic 2: Exchange Rates Topic 4: Securities Prices Topic 5: Commodity Prices Topic 6: In this context it is important to use up- to-date data for the purpose of evaluation.

However, in the standard, we recommend using a market data file interface. All values of a yield curve differ only in the term and time unit. In SAP, a user exit in the market data upload is also available for this purpose. The stored curve type is used for interpolation between the grid points if the reference interest rate has been assigned to a variable interest transaction.

For each yield curve, you then have a structure containing markers, from which the yield curve is constructed. This contains the following values: When the concrete interest rates are saved in the extended yield table, the system converts them into the interest calculation methods for the yield curves. Yield curve details: Defining the quotation type: Here it is important to have a strict separation by currency and quotation type.

The master data contains information about the interpolation procedure for grid points for which daily rates are not available. Double-click an entry. EUR and the interest calculation method: Definition of the interest calculation method and the calendar defines the number of days per month and year as well as number of public holidays for possible postponements Overview of assigned grid points depending on the currency Interest calculation method describes the number of days per year: In the time units area, day, month, and year are distinguished.

These are calculated using the interpolation procedure linear interpolation and cubic spline interpolation or different read procedures. These missing grid points can then be calculated using the different interpolation procedures. Maintenance of yield curves: Yield curves must be entered anew every day.

Hence, you must set a time control before the entry. Here, you can maintain interest rates directly via the yield curve or via the individual reference interest rates.

This field shows the number of maintained reference interest rates that did not have to be interpolated! Double-click to display the details. In our example, no current interest rates are maintained; they are all prescribed by the read procedure.

Overview of the individual interest rates under consideration of the term Graphical display of the yield curve: After maintaining the grid point values, you can use the graphic icon to generate a yield curve.

This helps you make statements on the current interest history for example, inverse yield curve, normal yield curve and use it for making investment decisions. Last found reference interest rate that has been entered! Che ck Exc ha nge Ra t e T ype s Specifies whether the rates are fixed or not. Important for conversion and use!

This allows the conversion using the reference currency triangulation. For missing courses, it allows the use of inverse rates. This allows you to enter various rates for the same date.

You also specify that you want to use a different rate type for special currency pairs. Rounding Rule s Specification of rounding rules: Definition of the unit to which rounding is to be performed.

Rounding rules can be defined as company code specific. For example, the company code currency plays a central role here. Ex cha nge Ra t e Ma int enance in t he Applic a t ion If the rate types, translation ratios, and currency codes have been maintained, exchange rates can be entered. De fining t he Exc ha nge Before you can enter security prices, you must specify the exchanges: This is important because the quotation can vary significantly between the individual exchanges, and this can affect price determination.

De fining t he Sec urit y Pric e T ype For different reporting and evaluation purposes, you want to use different price types to take into account individual requirements. For example, you can define and use individual quotation forms for the year-end valuation. Se c urit y Pric e s in t he Applica t ion Once you have completed the Customizing for the exchanges and security price types, you can maintain the various security prices in the application.

Security prices are maintained depending on the exchange.

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The rates are maintained for each rate type. De fining t he Sourc e of t he Quot a tion In this IMG activity, you define the source of quotations for traded goods. This information is used in combination with the quotation type and name in the key that the system requires for accessing quotations.

De fining t he Quota t ion T ype The quotation type is used in connection with the source and the name of the quotation in the key that the system needs to access quotations.

De fining t he Quota t ion Name The notation name is used to record information such as currency e. EUR , price unit e. Unit of measure Specifies the commodity product in question. De fining t he Quota t ion Group Quotation groups are used to determine a security price using several initial prices, for example, notification or selection of the highest or lowest quotation. De fining Quot a t ion T ype s a nd Assigning Logist ic a l Quot a t ion T ypes Define the quotation types and assign them the corresponding logical quotation types.

Quotation Types and Ass. Quotation Types. De fining Quot a tion Source s a nd Assigning Logistic a l Quota t ion Source s The quotation source represents the respective data supplier, for example, Reuters. Quotation Source and Ass. Quotation Source. Com m odit y Pric e s in t he Applica t ion Once all Customizing settings have been made, the corresponding market data can be entered manually or fetched using a data supplier. One rate can be used for each exchange, quotation type and name Selection of the quotation name that has been defined in Customizing.

Option for archiving data. Le a rning Objec tive s After completing this topic, you will be able to: De fining t he St at ist ic s T ype The statistics type defines the sample size and specifies the basis for calculating correlation and volatility Parameters of the respective estimation function are encrypted using the statistics type.

In addition, rate types for the underlying instruments can be encrypted here. A standard distribution is assumed as the basis. De fining t he Vola t ilit y T ype Classification of volatility types. You can store volatilities for any underlying transactions such as foreign exchange rates, reference interest rates, securities classes or stock indexes in the system.

Assignment of volatility types: In order to be able to calculate it in SAP, the previously defined statistics type must be assigned. De fining t he Corre la t ion T ype In "Customizing", a correlation type is assigned a statistics type. This describes the statistical calculation type and defines the parameters of the underlying estimation function sample size etc. This ensures that the market data that was used for calculating the net present values is also used for calculating volatilities, the calculation should use the statistics calculator.

It is also possible to enter these values manually or import them into the system using a data interface. Corre la t ions in t he Applica t ion The correlation specifies how two currencies, reference interest rates correlate. Alternatively, you can also import this information. You can also choose to calculate just volatilities or just correlations. If par coupon rates are used as the calculation base, the rates are transformed to the corresponding zero coupon rates via the assigned yield curve.

The volatilities are then determined for the zero coupon rates and stored in the table "Interest rate volatilities curve". The historical volatilities calculated in this way should not be confused with the par rate volatilities usually implied volatilities stored in the "Interest rate volatilities" table.

Interest rate volatilities from par rates are needed to calculate interest rate options; here there is no transformation to zero coupon volatilities. You can store the calculated values directly in the interest rate volatilities table since allocation to a yield curve from which the corresponding zero rates are calculated in the case of par rates is not necessary here. Applic a t ion!

This structure specifies which risks are to be analyzed and thus affects the output structure. You can then select a currency from the previously defined list and assign it by pressing the "Enter" key. St a t ist ic s Ca lc ula t or in t he Applic a t ion Based on the defined risk hierarchy, the market data in the market data table and the Customizing settings, you can use the statistics calculator to calculate volatilities and correlations. The advantage of this method is that there is a dependency of all market data and possible errors can thus be avoided.

Based on these settings, you can include the desired error tolerance and sample size. This is the maximum number of missing values. That means you can, amongst other things, define yield curves, security price types, and statistical data. Market Data Management Lesson: Assign the yield curve a Euro currency.

In SAP Customizing, choose: In the SAP Customizing, choose: Also assign the reference interest rate you have created to the yield curve. Save your yield curve.

Double-click EUR to view the yield curve structure. Rate Type M Price Type: Volatility description individual Stat. M a rk e t Risk Ana lyze r Contents: M a rk e t Risk Ana lyze r After completing this unit, you will be able to: Basic Analyzer Settings Topic 3: General Settings Topic 4: Value at Risk Topic 5: Simulations Topic 6: Results Database Topic 7: Risk Cont rolling Proc e ss I.

Identifying risks z Risk factors IV. Controlling in the narrow sense as management check Risk Controlling II. Quantifying risks Risk key figures III. In risk identification, it can be helpful to be aware that risks have a cause and an effect for example, changes in value and revenue on a certain object. Risk H ie ra rc hy The risk hierarchy is used to define the risks to be analyzed and display them in structured form. In these risk hierarchies, you can include any market price parameters risk factors that are consolidated to the overall risk using consolidation levels.

In general, default aggregation categories are specified for the aggregation of risks using the hierarchy, these can be changed for individual nodes. For example, you can summarize the interest volatility risks per curve to an overall interest volatility risk or the volatility risk of different exchange rates, security prices, stocks or stock indexes.

These volatility figures are then consolidated to the overall market risk. Le a rning Object ive s After completing this topic, you will be able to: Additional structures are possible but cannot be used actively at the same time! User Characteristics Rating Define Ana lysis Cha ra c t e rist ic s In this section, you edit the characteristics according to which you want to perform the evaluation. The definition of characteristics takes place irrespective of an analysis structure and applies to all clients.

The characteristics and their values depict the selection criteria according to which transactions are selected in report and that you can use for navigating the results display of the evaluations.

Assignment of analysis characteristics to structure TRM St e p 2: After the successful creation you must generate the structure St e p 3: Before the analysis structure is used for evaluation purposes, it must be activated! The same characteristics can be used in different analysis structures, whereby only one analysis structure can be activated per system at the same time. From which table is the characteristic read Status of the analysis structure that has been selected and is in process.

Shows whether this characteristic is assigned to a segment. Define Cha ra c te rist ic V a lue s In this step, you define the values of the characteristics that you have defined, which are assigned to an analysis structure. Defined for each application area. In this case, only for securities.

If you have selected the Component Active settings you use the radio buttons to control the response in case of errors: The transaction cannot be saved.

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The transaction can be saved the data of the component is not saved. A derivation strategy consists of several derivation steps that can be used to derive the characteristic values from other characteristics one after another.

Possible derivation strategies: Different field names are used in the analysis structure. Hence, you must establish a reference through assignments. Additional conditions Definition to which target field the for the selected characteristics: Assignment of check values.

De fine Port folio H ie ra rc hy You can use the portfolio hierarchy to specify a customer-specific display structure for the display of the individual evaluation results of the risk key figures. This is important, for example, to display individual totals using the position.

Assignment of characteristics to the previously created portfolio hierarchy. Filters are stored if specific criteria are used that are not valid for all. De fining Va lua t ion Rule s In this step, you define a valuation rule. The valuation rule receives its value only through the assignment to a valuation type. This makes it also possible to use different valuation rules for the different product types.

Creation of a valuation rule that is to be used for all product types or categories later. You can specify different valuation rules for different product types e. Assigning V a lua t ion Rule s U sing Produc t T ype s After having defined the valuation rules in the first step, you have to make an assignment to individual product types in the second step.

Assign the valuation rules to the product type. The transaction type is irrelevant at this point. Assignment which market data is to be used for the evaluation.

You should always use the middle rate for all foreign currency transactions here. You can use it to define from which source the data is to be retrieved. Here, you specify which basis is supposed to be used as the basis for analysis in Portfolio Analyzer. De fine M a t urit y Ba nd A maturity band defines the time sequence of periods in which data with different levels of detail is evaluated.

Confirm your entries with "Enter". De fining N um be r Range s for Ba ck T e st ing In this Customizing activity, you define the number range intervals for freezing data positions in the context of back testing. This way, you can exclude that, for example, a saved position of the last year-end closing can be modified again. If changes occur nonetheless, you can use the saved position to determine the difference. You must define a number range interval based as the bases for backing up the position.

To define the individual procedures, you have to specify the following entries: Furthermore, you can include additional information such as confidence interval or retention period for each procedure. The normal distribution is assumed as the basis for all procedures.

The advantage of this procedure is its high calculation accuracy. The disadvantage is the calculation intensity of the procedure. The advantage of this approximation is that the procedure is less calculation-intensive.

However, assuming a linear NPV function leads to imprecision, in particular in the area of option contracts. The calculation of the gamma add-on can take place product-specifically or single transaction-specifically. To ensure that these valuation rule-specific settings are not ignored, you must enter the combination procedure in the VaR type in Customizing.

Customizing in Treasury & Risk Management

The complete valuation is more precise but can result in long runtimes. For linear instruments, you can use an approximate procedure, thus achieving shorter runtimes without a loss of precision. If market data is missing, the sample scope is extended into the history. That is, if 10 days are allowed to be missing, a maximum of 10 additional market data records is read and used for volatility calculation. If, in the selection, more market data is missing than what you specified with the maximum allowed number, the system terminates the selection and therefore also the valuation.

If the value of a price parameter is missing for a business day, this is also interpreted as an error for the corresponding pair value and the history is extended by one day for both market prices. VaR determination using abs. The selected VaR determination method can also be disclosed in reporting.

Fsc110 en Col97 Fv Co a4

De fining Liquida t ion Sce na rios Liquidation scenarios are used to simulate additional liquidation revenue from the sales of securities or the sales of loans in the liquidity evaluation of ALM. Liquidation scenarios are used for simulating additional liquidation revenue from the sale of securities or the sale of loans in the liquidity evaluation of ALM.

In order to enable this simulation in the system, you have to define which potential sales revenue can be realized in which periods. The change refers exclusively to a reduction of the market value of the item. Assigning Liquida t ion Sc enarios t o t he V a lua t ion Rule Assignment of liquidity scenarios to a valuation rule. This is important because the liquidation and the corresponding risk strongly depend on each individual product type.

For a security without maturity for example, a share , the system sets the remaining term RT of the security to 0. The distinction is only made based on the different usages.

That is, interest calculated on last day of the month. Interest calculation method: The due date scenario describes the fictitious change of balances or positions for each time unit. Assigning Due Dat e Sc e narios and Sim ula t ed I nt erest t o V a luat ion Rule s In this step, the due date scenarios and simulated interest payments are linked to a valuation rule and an evaluation type. De fining Filt e rs To restrict output and calculations to certain criteria you can define filters. Filters can be defined for a portfolio hierarchy or for the calculation in the results database.

In our case, this means that 5 key figures have to be specified. Assignment of the previously defined key figures Assignment of possible portfolio hierarchies for subsequent output. Overview of the usage areas. The Definition of a new initial layout to ensure assignment is always made for each defined individual output in the results database.

Assignment of the previously defined key figures Display order in the Analyzer information system Line items: Maturity band: For the structured output of data, specifying a portfolio hierarchy is useful. Yield evaluation: The other levels of the initial access layout. You use the selected layout and the portfolio hierarchy to specify in which form the calculated key figures are displayed.

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That is, you can display all characteristics of the analysis structure and use them for further analysis. You can display the value at risk values on the nodes of the risk hierarchy.

Market Risk Analyzer Lesson: Use the same settings as for your standard report type RM Check the calculation in the detail log. Assign the structure characteristics company code, portfolio, and product type to it. Assign the previously defined key figures to the procedure for single records and the procedure for final results. Use filter Comp. Assign the key figures to the individual areas. Then assign the values from the following table.

First, start transaction JBRX. You then need to make the following entries: You see an overview list. To see more details, double-click an entry. You can create a portfolio hierarchy from the transaction and from Customizing. We are only looking at the Customizing area here.

Keep in mind that you must create the procedure for single records first! Cre dit Risk Ana lyze r Contents: Cre dit Risk Ana lyze r After completing this unit, you will be able to: Basic Settings Topic 3: Attributable Amount Determination Topic 4: Limit Management Topic 5: Wha t Are Credit Risk s? They can then view the current status of the limits, utilizations and collateral at any time, if necessary. They can also analyze the portfolio according to a diverse range of criteria.

The tightening of regulations regarding risk controlling underlines the increasing significance of analyzing and limiting the risk of insolvency. It also makes business sense to have system support for measuring, analyzing and managing credit risks. You can then let the system calculate the settlement and default risks arising from your activities on the financial and capital markets, as well as classical credit risks.

By defining differentiated upper risk limits, you can restrict potential losses on financial transactions as a result of business partner insolvency.

In the same way, you can use the limit system to maintain control over the activities of your traders. You can display all the existing utilizations in aggregated form for any given key date and, with the appropriated system settings, taking business partner relationships into account. This allows you to track the limit utilizations over time and see exactly which transactions are behind the exposure. This enables you to monitor all trading activities, thus offering you a high level of security.

In order to be able to use the Credit Risk Analyzer functions, you must have successfully completed the basic Analyzer settings. Globa l Se t t ings In order ensure that the limit check is active, you must activate it here. Identifies the market parameters and valuation parameters for risk management evaluations.

If that is the case, set the indicator Default Risk Limitation Active. The system then uses this evaluation type for the transactions to be attributed as NPV for all evaluation. You use the indicator Derivation Active to define whether the system is supposed to automatically derive the default risk rule for the transactions of Transaction Managers TR-TM.

These are company code specific settings. The default risk limit component is required for CRA. If you have activated the component, you can specify the following restrictions: This component has to be assigned and activated for each company code. A derivation strategy consists of several derivation steps that can be used to derive characteristic values and other control parameters one after another. Each of these steps, you assign a derivation type, which is used to fill a given set of target fields on the basis of a given set of source fields.

In this way, a logical link between target and source fields is defined for each step. The menu bar contains the "Maintain Rule Entries" for this purpose.

Use the "Maintain Rule Entries" button to do so. The source and target fields are separated by an equal sign. This assignment enables you to use different limit product groups in the derivatives area.

V a lua t ion Fa c tor De t e rm ina t ion You can use valuation factor determination to define whether or not attributable amounts are supposed to be determined for address risks or country risks. The internal procedure describes the risks within a company, for example, between subsidiary companies. Colla t e ra l V a lua t ion Rule Since the risks in the commercial risks and political risks areas can be very different, you must also make a distinction for the limit attribution.

The collateral valuation rule is stored in the determination procedure. The collateral valuation rule summarizes the following settings: You can choose from the following values: De t e rm ina t ion Proc edure The default probabilities, valuation principles and risk potentials can be very different.

Due to this, it is necessary to define different determination procedures. Differentiation between settlement risks and credit risks. This definition can be demonstrated as follows: This would allow you, for example, to valuate the transaction risk for regulatory purposes and for internal purposes at the same time.

Rec ove ry Ra t e The recovery rate grade describes the insolvency rate in percent and can therefore be assigned to the rating grades 1: De fa ult Risk Rule Each single transaction must be assigned a default risk rule in order to group transactions from a business perspective and to classify them.

Sc he m a s for De t e rm ining t he Att ribut a ble Am ount Financial transaction Determination procedure 1 exposure Determination procedure 2 Default risk rule trader limit Determination procedure 3 counterparty limit Default probabilities Recovery rates Formula 1 Formula 2 Formula 3 Add on factors This is controlled by your choice of determination procedure. The determination procedure is a set of methods used to determine attributable amounts for credit risk for all transactions that represent a particular risk category.

This means that if a transaction contains both credit risk and settlement risk, then at least two determination procedures are required to measure both these risks. If required, you can use two determination procedures to value the credit risk of a money market transaction, for example. One procedure could match your internal risk control requirements, and the other would fulfill legal requirements.

You can value transactions that have different risk characteristics by differentiated methods within one determination procedure. This gives you the option of allowing the nominal amount of a money market transaction to count towards a limit, and taking the NPV in the case of derivatives.

You can adapt this to your individual requirements. This defines which criteria are used to determine the market value change period and the risk commitment period of a transaction.

You can choose from the options "End of term of the transaction" or "Interest commitment period of the transaction". The recovery rate determination is also stored in the default risk rule.

Edit ing De t e rm ina t ion Proce dure s Since the individual components were defined beforehand, the assignment takes place in the next step. The worse the rating and the longer the risk commitment period, the higher the default probability. Each of these combinations of rating and risk commitment period is valuated with a percentage value and can be adjusted time-dependently. Re cove ry Ra te s The defined recovery rates are now assigned a percentage value that, if the business partner defaults, describes the amount of receivables that will probably be paid in case of insolvency.In order to limit the number of currencies per payment method in advance, you can enter the values here.

You can also choose to calculate just volatilities or just correlations. In SAP, these are known as flow types. The graphic below illustrate of the cash position in the Sap system Cash Budget Management Is to identify control payment flows in light of liquidity considerations While cash management takes a short term view, Cash budget management deals with medium-term and long — term liquidity developments Before you can use cash budget management you must also having the financial accounting.

Le a rning Object ive s After completing this topic, you will be able to:

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