The MPS Smart Ramps Service provides the definitive solution for reliable and precise analysis of income related IRR exposure and business plan performance.
MPS Smart Ramps combine the realism of empirically defined, individually evolving driver rates with the advantage of stable rate relationships over time. They bridge the gap between naive rate ramps (which are too simplistic because all interest rates move at the same speed) and true econometric modeling-based interest rate forecasts (which often have inconsistent or confusing predictions).
All projections are based on advanced MPS econometric estimates of historic individual driver rate behaviors. Multiple rate ramp and yield curve twist scenarios present a full spectrum of rising and declining scenarios that analyze income related performance and risk completely and consistently.
With this MPS service, your institution is empowered to:
- More precisely measure income at risk IRR, compared to traditional rate scenario tests
- Specifically test for driver rate risk and changes in yield curve shape related exposures
- More comprehensively assess income at risk IRR exposure and understand its sources
MPS Smart Ramps Report
Projections are delivered as a set of scenario specific individual month end driver rates. Reports are available on a monthly or quarterly subscription type basis or as single reports. There are two components to each report.
Rate Ramp Projections: Projected key ALM model driver rates are presented for a set of defined rate ramp type scenarios. The data depict the paths of driver rates if the 3 month Treasury rate moves at specified speeds over a 12 month horizon and all other rates follow according to historic tendencies. Reports currently provide +/-50 bp, +/-100 bp, +200 bp, +300 bp, +400 bp and +500 bp rate ramps. These projections test for basis risk in income at risk IRR assessments and business plan evaluations.
Yield Curve Shape Projections: Projected key ALM model driver rates are presented for a set of hypothetical yield curve twist type scenarios. The data depict the paths of driver rates over a 12 month horizon if the 3 month Treasury changes by 100 bp and the 10 year Treasury changes by 10 bp. These projections test for yield curve related basis risk in income at risk IRR assessments and business plan evaluations.
Both MPS Smart Ramps projections include data for multiple Treasury rates (1, 3, and 6 mo; 1, 2, 3, 5, 7, 10 and 20 yr; LT rate) and LIBOR rates (1, 3, 6, and 12 mo) plus key ALM driver rates (Fed Funds, Prime, 15 and 30 yr FRM, 1 yr ARM, and auto). All projected rates are end of month values to best match most ALM models.