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The Financial Accounting - Financial Instrument Pricing ES bundle provides a quick, seamless means of valuing many types of sophisticated financial instruments by integrating an external pricing engine with SAP Bank Analyzer.

It allows banks to compute these key figures daily and to standardize them. They're then added to the bank's financial statement.
This ES bundle enables the SAP Bank Analyzer to send pricing information to third-party financial instrument pricing applications. The third-party application then sends back a price for the financial instrument in question. By pricing all financial instruments in the same way, consistency can be achieved. SAP Bank Analyzer then aggregates the financial instrument prices and sends them to the general ledger.
The Financial Accounting - Financial Instrument Pricing ES bundle leverages enterprise SOA by providing enterprise-service based communication between the SAP Bank Analyzer and third-party financial instrument pricing applications.

Audience

Banks that must compute pricing for a wide range of financial instruments on a financial statement will find this ES bundle helpful. These instrument valuations can include traditional ones like mortgages, stocks and bonds, as well as more complicated ones like Bermudan bond options. The bundle creates consistent daily valuations by using standardized pricing models, which can cut down on computation time, cost and inaccuracy.

Financial Accounting - Financial Instrument Pricing (click to enlarge)

For details on Service Operations, Business Objects and Process Components, please check the ES Workplace.


How To Use This ES Bundle

Accurately and seamlessly calculating the market value of many types of financial instruments is essential when compiling a financial statement. Because the pricing data can be calculated according to different mathematical models, methods, and time spans, it runs the risk of being inconsistent. That means the process can end up being inaccurate and time-consuming as pricing data is pulled from many different sources with varying parameters.

The Financial Accounting - Financial Instrument Pricing ES bundle offers a way to streamline this very important process. The financial data is priced according to three main models: Hull-White, Black Scholes, and Spot-Skew. Each pricing model is a recognized standard for pricing bonds, options, and more complicated derivatives like swaptions. That way, wide-ranging types of financial instruments are priced similarly so that fair market value is consistent and the clearest possible financial snapshot emerges. The data is sent from the external pricing application to SAP Bank Analyzer using the services in this ES bundle and then on to the general ledger.

The following use case for the Financial Accounting - Financial Instrument Pricing ES bundle illustrates the message choreography between SAP Bank Analyzer and the third-party pricing engine. This wiki is also a space for you to share knowledge and collaborate with others who are implementing the Financial Accounting - Financial Instrument Pricing ES bundle.

Use Case: Using an External Pricing Engine

An accounting professional selects the types of financial instruments that will be priced using the external pricing engine. When it is time to price the selected financial instruments, perhaps in a batch job at night, SAP Bank Analyzer invokes two enterprise services that provide input to the external pricing application: Request Working Day Calendar Creation and Request Reference Interest Rate Creation, both of which use the Interest Rate Option Cash Flow business object.
Request Reference Interest Rate Creation specifies the interest rate and the type of calculation to perform while Request Working Day Calendar Creation simply provides calendar-related details.

The order in which these two services are invoked is unimportant; it is just important that both are called prior to calling Request Pricing Model Calibration, which requests that the external pricing engine generate a price. This enterprise service uses the Interest Rate Option Pricing Model business object.

To retrieve the price, SAP Bank Analyzer invokes the Query Price Calct Pricing Result by Elements enterprise service operation, which uses the Interest Rate Option Price Calculator business object; the external pricing engine then returns the calculated price. SAP Bank Analyzer will then pass the price from its subledger to the general ledger.

Best Practices

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Using This ES Bundle with an Existing Test Application

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Using the Services in This ES Bundle with SAP Applications

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Using This ES Bundle with Partner Applications

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Existing Sample Code

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Future Directions

Future directions for this ES bundle will be market-driven.

Enterprise Services Community Engagement

System Requirements

Success Stories

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Lessons Learned

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  • More usage notes appear in the page describing each enterprise service operation.

Related ES Bundles

SAP
SAP Developer Network
Enterprise Services Wiki Homepage on SDN

1 Comment

  1. Unknown User (gar6zo1)

    Used sap BA ES bundle for a large banking merger programme to segregate profit centre and branch banking accounting from main bank and also used reporting and connector to send data to PeopleSoft GL using Ledger Connector. It is indeed helpful and handy for business to draw out periodical reports and facilitate decision making. Will update this section later with further information and sample documents, meanwhile if someone interested please send email on info@saptao.co.uk

     Rajesh Sharma