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New Yield Curve Method (November, 2017)

Article Summary:

In version 20181202 of AXIS we have changed the data structures and code used for storing and manipulating yield curves. For applications of AXIS which use yield curves, this may change results in some cases.

Why did we do this? For many years AXIS has largely relied on a single ten point yield curve definition. New regulatory requirements and client applications require more flexibility in defining the points used to represent yield curves and spreads, as well as new methods for interpolating and extrapolating these points.

Why does this change results when upgrading models to version 20181202 or later? In order to provide this additional flexibility we have had to restructure many sections of code. In some cases this can change results simply due to different rounding effects. In other cases results may be sensitive to changes in the order of operations. For example, the new code is designed to be more robust and easier to reconcile, by enforcing consistent ordering to sequences of operations such as applying spreads, interpolating, and applying floors. We did extensive testing and made every effort to minimize these effects, but in some cases they could not be avoided. 

If my results are affected, is there any way I can restore the old results? AXIS includes two Feature Codes which can reactivate old code. Feature Code 614 "Old Yield Curve Method” will restore all previous results by completely disabling the new logic. Feature Code 598 "Old Short Rate Method” will partially restore previous results by disabling new logic for calculating short rates (interest rates with term less than or equal to 6 months). These should be used with caution. They are provided as a temporary measure to help confirm the cause of result changes. New features requiring enhanced yield curve functionality will not run with Feature Code 614 enabled. These Feature Codes, along with the old code, will be removed from AXIS in the future. To get the passwords needed to activate these Feature Codes, please contact GGY.

For more information on the new yield curve method, please refer to Knowledge Base articles 1026 - Yield Curves in AXIS and 2105 - New Yield Curve Shapes - Shocks.


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