11.9 Revaluation of Commitment
Oracle Lending process revaluation of a commitment as an EOD batch process. The system identifies active distinct commitment contracts, for each CUSIP/ISIN and revaluates net outstanding amount of the commitment as the Settled Position using market price. During revaluation, the system considers Settled Position as Total Position.
The EOD batch programs MTMREVL/ MTMRRVL process revaluation entry and the reversal entry for past revaluation entry, for a commitment in OL module, if a Market price is maintained for the CUSIP at Loan and Commitment Maintenance level.
During MRVL event at EOD batch, the system posts the accounting entries for the commitment contract.
During MREV event at BOD batch of the next working day, the system posts the accounting entries, posted on the previous EOD, with a negative symbol.
Example
| Day | Unrealized PL Computed | Entry Posted at BOD (MREV event) | Entry posted at EOD (MRVL event) | ||
|---|---|---|---|---|---|
| 1 | (400,000.00) | - | - | Dr UNREAL_MTM_ EXP | 400,000.00 |
| - | - | - | Cr UNREAL_MTM_ OFF | 400,000.00 | |
| 2 | (300,000.00) | Dr UNREAL_MTM_ EXP | (400,000.00) | Dr UNREAL_MTM_ EXP | 300,000.00 |
| - | - | Cr UNREAL_MTM_ OFF | (400,000.00) | Cr UNREAL_MTM_ OFF | 300,000.00 |
| 3 | (1,000,000) | Dr UNREAL_MTM_ EXP | (300,000.00) | Dr UNREAL_MTM_ EXP | 1,000,000 |
| - | - | Cr UNREAL_MTM_ OFF | (300,000.00) | Cr UNREAL_MTM_ OFF | 1,000,000 |
| 4 | 32,500.00 | Dr UNREAL_MTM_ EXP | (1,000,000) | Dr UNREAL_MTM_ OFF | 32,500.00 |
| - | - | Cr UNREAL_MTM_ OFF | (1,000,000) | Cr UNREAL_MTM_ INC | 32,500.00 |
| 5 | - | Dr UNREAL_MTM_ OFF | (32,500.00) | - | |
| - | - | Cr UNREAL_MTM_ INC | (32,500.00) | - | |
- As part of Day1 EOD:
Loan= $10mm and Price 96%
Par value of total facility * price = value of the total facility
10,000,000 * (96/100) = 9,600,000
PnL = 10,000,000.00 – 9,600,000.00 = 400,000.00
DR 442303301 TradRev/Loss-CommlLns-FVOptFAS159 400000
CR 125107202 CommercialLoansFVOptionSFAS159 MTM 400000
- As part of Day2 BOD:
DR 442303301 TradRev/Loss-CommlLns-FVOptFAS159 -400,000
CR 125107202 CommercialLoansFVOptionSFAS159 MTM -400,000
- As part of Day2 EOD where price changes to 97%
10,000,000 * (97/100) = 9,700,000
PnL = 10,000,000.00 – 9,700,000.00 = 300,000.00
DR 442303301 TradRev/Loss-CommlLns-FVOptFAS159 300,000
CR 125107202 CommercialLoansFVOptionSFAS159 MTM 300,000
After the above entry the MTM loss is 300000, creating a daily MTM P&L impact of $100,000 profit. - As part of Day3 BOD:
DR 442303301 TradRev/Loss-CommlLns-FVOptFAS159 -300,000
CR 125107202 CommercialLoansFVOptionSFAS159 MTM -300,000
- As part of Day3 EOD where price changes to 90%
10,000,000 * (90/100) = 9,000,000
PnL = 10,000,000.00 – 9,000,000.00 = 1,000,000.00
DR 442303301 TradRev/Loss-CommlLns-FVOptFAS159 1,000,000
CR 125107202 CommercialLoansFVOptionSFAS159 MTM 1,000,000
After the above entry the MTM loss is 1,000,000, creating a daily MTM P&L impact of $700,000 loss.
Note:
During revaluation of commitments of CUSIP, the system assumes 100% holding cost/ weighted average cost for Total Position.Parent topic: Processing a Commitment