In the Rates & Indices section of the Administration page of PrecisionLender, you have the ability to create a custom funding curve. This article covers the steps for creating and editing your custom funding curve. For information about uploading a custom funding curve using our API, please visit our Developer Portal linked in the following article: Getting Started With PrecisionLender API.
Viewing Custom Funding Curves
From the Administration Screen, click "Rates and Indices" on the left hand side. Then, Under "Client Funding Curve Sources", click "New" to create a new curve. If you wish to edit an existing curve, simply click on its name and then click "Edit" in the upper left hand corner.
If the "Enabled" box is checked, the curve will be available to be selected in the setup of a product.
Creating and Editing a Custom Funding Curve
When creating a new funding curve, you can specify whether the funding curve types will be All In Rates or Raw Rates. Raw funding curves are assumed to have no intrinsic liquidity adjustment, so all liquidity adjustments and funding curve adjustments are added to the curve to get the final rate. All-in curves are assumed to have the liquidity premium embedded into the curve, which results in a different cost of funds for floating and adjustable rate loans since the liquidity premium will be calculated at the funding curve point, rather than at the time of repayment.
When creating a new funding curve, please ensure that the curve contains at least two duration points.
The Funding Curve type and Interest Rate Conversion Factor cannot be changed once the funding curve is saved.
Other notes on Custom Funding Curves:
- PrecisionLender generally assumes that input rates are Actual/Actual (similar to Actual/365).
- If custom rates are using an Actual/360 basis, users should select “Using Actual/360 for under 13 months" as the Interest Rate Conversion Factor.
- When leveraged in the Financial Statement (which is ALWAYS Actual/365), the Actual/360 rates will be converted to Actual/365 for points 0-13 in the custom curve.
- The maturity of the loan being priced does not impact the funding curve rate conversion.
Click the "Add" button to add more points to the curve. For each point on the curve, you can specify the duration and rate. The trash can beside a point can be used if you wish to delete a point from the curve.
As you make adjustments to the points you can view a graph of the curve below.
When you are finished, remember to click "Save" to keep the changes you have made.