3453662 - FX Forward Valuation using Forward Rates - SAP S/4HANA Cloud Public Edition

Symptom

Is there a workaround possible to do FX forward valuation using forward Rate.

NPV is calculating based on Yield curve and Spot rate but not considering forward rate for calculation of NPV?

How to ensure that Forward point/Forward rate is used for NPV computation?

Environment

SAP S/4HANA Cloud Public Edition

Reproducing the Issue

Create FX Forward transaction.
Settle FX Forward transaction.
Do Valuation for this FX Forward deal on 24.03.2024 (app- TPM60).
Checking the calculation basis.

Resolution

To use forward as opposed to spot FX rates in the valuation of FX forward contracts is not controlled via the yield curve type definition.

Use the SSCUI (configuration activity) "Define and Set Up Evaluation Type", Tab "Evaluation Control 2", setting "FX valuation method". Use F1 value help to know more.

1.) Valuation Method for future FX Cash Flows

The valuation method controls how the price calculators perform NPV
calculations for financial transactions with future cash flows in
different currencies, such as FX forwards.

2.) Discounting Before Currency Conversion

Selecting this option, cash flows are first discounted using the
respective yield curves of the cash flow currencies, and then the system
performs a currency conversion into the evaluation currency using spot
rates. This method is also referred to as the "zero coupon method".

3.) Currency Conversion Before Discounting

Selecting this option, cash flows are first converted into the
evaluation currency using forward rates and then discounted using the
yield curve of the evaluation currency. This method is also referred to
as the "par method".

Keywords

Define and Set Up Evaluation Type, FX, forward, spot FX, TPM60, SAP S/4HANA Cloud Public Edition, FX forward Valuation using forward Rate , KBA , FIN-FSCM-TRM-TM-AC , Position Management and Accounting , How To

Product

SAP S/4HANA Cloud Public Edition all versions