Guide for Transitioning From Fixed To Flexible Scenario Format

Transcription

1 Guide for Transitioning From Fixed To Flexible Scenario Format Updated December

2 GGY AXIS 5001 Yonge Street Suite 1300 Toronto, ON M2N 6P6 Phone: Toll free: GGY-AXIS Fax: Web: Table of Contents 1. FLEXIBLE SCENARIO FORMAT OVERVIEW WHY THE FLEXIBLE SCENARIO FORMAT DESIGN? WHAT IS THE FLEXIBLE SCENARIO FORMAT SCENARIO DESIGN? MODEL TRANSITION TO FLEXIBLE SCENARIO FORMAT BEFORE ACTIVATING FLEXIBLE SCENARIO FORMAT: TO ACTIVATE FLEXIBLE SCENARIO FORMAT: CHANGES IN DATASET AFTER RUNNING DATASET TRANSITION TOOL: STEPS FOR TRANSITIONING DATASET FROM FIXED TO FLEXIBLE SCENARIO FORMAT SCENARIO IMPORT AND EXPORT IN FLEXIBLE SCENARIO FORMAT PORTFOLIO RATE CAPTURE - TRANSITION TO FLEXIBLE SCENARIO FORMAT APPENDIX ITEMS FOR TRANSITION REQUIRING USER REVIEW i -

3 1. Flexible Scenario Format Overview 1.1 Why the Flexible Scenario Format design? Reference by Market : - By the specific economic/user assumptions (e.g. 5-year bonds rate of Interest Rate Market) - Instead of by where data is stored (e.g. scenario column 6) More flexibility: - System: Can add new markets as needed (e.g. multiple yield curves in the future) - Users: Can add / remove individual markets in a scenario Better integrated for different applications one design that can be used for more advanced applications such as hedging modeling. 1.2 What is the Flexible Scenario Format scenario design? A. Market Oriented : - Each scenario rate belongs to a specific Market of a Market Type. The Fixed Market scenario format is no longer available in the Flexible Scenario Format design. Its transition to the new format is shown below: Page 1 of 27

4 B. Scenarios: - Can be customized to specific applications to contain different Market Type / Market / Value Type combinations. - For each scenario, a Scenario Format object is used to specify what economic / user assumptions are to be included i.e. the Market Types / Markets / Value Types. The Market Type describes the nature or purpose of the Market. When a new Market is created, the user must choose the Market Type. The market type defines the type of data that can be found in the Market. For example, Interest Rate market type contains data for yield curves. The Market is a user defined market name and should describe the market, for example "S&P 500 Returns" or "LIBOR Rates". The Shape determines the available Value Types. For example, the equity with volatility surface shape of an equity market would include implied volatility surface and skew slope term structure in addition to growth and dividend rates. For example, the Scenario Format object below contains (Market Type / Market / Shape): Interest Rate / Interest / 10-point yield curve Equity / NASDAQ, S&P500 / Equity with volatility surface Inflation Rate / Inflation Rate / Inflation Rate User Rate / Competitor Rate, Portfolio Rate / User Rate Page 2 of 27

5 As shown in the example above, users can create and name customized markets as needed e.g. Equity / NASDAQ; User Rate / Competitor Rate. The Rate Type specifies the format in which the rates are being specified (e.g. annual effective rate) and the Curve Type the type of yield curve (which is only applicable to Interest Market Type). - The following Market Types are supported. Please see the Help Text ( for details. C. Scenario Reference: Interest Rate Equity Inflation Rate User Rate Portfolio Rate Capture Managed Fund o o Reference is made by specifying the desired economic / user assumption (rate) using Scenario Reference object. [Users no longer need to know where the rate is being stored.] In Scenario Reference object, users would specify: Market Type, Market (i.e. Scenario Market ) and Value Type Depending on the market and value types, AXIS will ask for additional information for scenario reference. For example, for Interest Rate Market Type: For example, for Equity Market Type: Page 3 of 27

6 o Examples on how Scenario Reference objects are being applied will be presented in the next section. D. Other Notes o Scenario Processing Screen object has been redesigned. Please see this Help Text for detailed information. Please note that adjustments to values in scenario are no longer supported and the Yield Curve Interpolation and Forward Rate Extrapolation assumption settings for Interest Rate Markets has been moved into the Scenario Format object. Page 4 of 27

7 2. Model Transition to Flexible Scenario Format Two transition tools are available in AXIS: i) Dataset Tool: When activating the Flexible Scenario Format in a dataset, AXIS will automatically transform all the objects in the dataset to work with the Flexible Scenario Format. ii) Tool for Portfolio Rate Capture setup: To transform setup for relatively more complex Portfolio Rate Capture functionalities in which the captured earned rate(s) is being referred to in Cell processing. Please see section 4 Portfolio Rate Capture - Transition to Flexible Scenario Format in this Guide. Note that while we strive to make this transition process as automated as possible, users may still need to make manual changes in a dataset after running the transition tools above. The amount of manual changes needed depends on the particular setup and objects included in a dataset. Please review the appendix Items for Transition Requiring User Review. Please contact us if you have any questions. Your feedback will help us continue to improve on the transition tools. When the transition tool encounters tables which can t be automatically transformed to work with the Flexible Scenario it flags them using Dataset Alerts. Starting with AXIS version , AXIS will not allow cells to run if they contain tables with Dataset Alerts. This will help draw attention to problems that arise during the transition process. Note that this restriction only applies to the cell level calculations. Higher level objects will still be able to run even if they contain tables which have been flagged. 2.1 Before Activating Flexible Scenario Format: Must backup dataset (cannot perform backward transition) Users may want to use the following tool in AXIS to search in a dataset for a list of existing tables that are referencing one or more scenario columns. The search results can be exported to AXIS Import/Export Database which can then be used (e.g. in an AXIS query or export to Excel) to identify tables to be reviewed after transitioning to the Flexible Scenario Format. o In the table list screen ( View Table All Tables ), click the Actions button and select Advanced Tables Which Reference Scenario 2.2 To Activate Flexible Scenario Format: In Dataset Parameters: o o For AXIS version upto and including : Go to Custom Codes tab and turn on feature code #242 For AXIS version and later: Go to Scenario tab and check the box for Flexible Scenario Format in the top left corner. 2.3 Changes in Dataset after Running Dataset Transition Tool: 1) All Historic and Future Scenarios Page 5 of 27

8 o o After transition, the Market(s) in each Scenario (Historic or Future) is specified by the Scenario Format object linked to the Scenario. Historic Scenario vs. Future Scenarios: One Historic Scenario in each dataset (same as before transition) Historic Scenario and Future Scenarios can have different scenario formats The set of Markets in Future Scenarios has to be a subset of that in Historic Scenario. (This is actually part of a more general check in the scenario manager. In general, if one scenario takes over from another at a point in time, such as the future scenario taking over from the historic scenario, or an embedded block scenario taking over at a pivot date, the second scenario must be a subset of the first scenario in terms of the markets included. Note that the markets do not have to be the same Shape in the two scenarios.) 2) Scenario Set Object o o Scenarios included in a static scenario set object would be in Flexible Scenario Format after the dataset transition processing is done. Limitation: In cases where the yield curves in static scenarios being included in a scenario set are not of the same curve type, the curve type of the yield curves may not be set properly after the transition process. Please review. GGY is currently working to improve the transition process on this at the time this guide is written. 3) Tables with scenario referencing Fixed scenario format: link to one or more of the scenario columns Flexible scenario format: use Scenario Reference objects ( SRO ) to make reference to scenario rates. a) In a table column, link to any scenario column(s) that can vary over time (e.g. by policy year). Example: Annuity Cell Pricing Assumptions Interest table Page 6 of 27

9 Fixed scenario format: Flexible scenario format: Note that, when the SRO is referring to rates in Interest Rate Market Type, the Term Option switch can be set to option Term defined by calling object so that the numeric values ( 2 in this case) in the column represent the Term on the yield curve and this value can vary by rows. Limitation - Each Scenario Reference object can make reference to rates in a single Market. In Fixed scenario format, a scenario column link may refer to rates belonging to different Markets in the Flexible Scenario Format. For example, in Annuity Cell Statutory Reserves Interest table, column 3 is referring to column 31 (User Rate 9) in first eight policy years and then to column 23 (User Rate 1) afterward as shown in screenshot below. Page 7 of 27

10 In Flexible Scenario Format, in each SRO users have to specify one combination of Market Type / Scenario Market / Value Type. For example, the SRO cannot refer to different markets over time. In the above example, each of User Rate 9 and User Rate 1 is a Market on its own of Market Type User Rate. This is not supported in the Flexible Scenario Format. Please contact GGY if you are using a similar setup in Fixed scenario format. b) In a table column, interest rate links to a particular yield curve term that can vary over time. Example: Annuity Interest Rate % table Int Rate Links To Yield Curve Fixed scenario format: Flexible scenario format: Page 8 of 27

11 c) In a table column, link to any column in the scenario or interest rate term that varies by table row and does not vary over time. Example: Rolling Average "Benchmark i" table in Investment Account Fixed scenario format: Flexible scenario format: Page 9 of 27

12 d) In table header, link to one of the User Rate columns. Example: Annuity Cell Pricing Assumptions Modification table Fixed scenario format: Page 10 of 27

13 Flexible scenario format: Page 11 of 27

14 2.4 Steps for Transitioning Dataset from Fixed To Flexible Scenario Format 1. If you are also upgrading your AXIS version, you can upgrade the AXIS version in Fixed Scenario Format first. Rerun the dataset in Fixed Scenario Format in the new version and compare results. 2. Activate Flexible Scenario Format (see section 2.2) and make a backup of the dataset in Fixed Scenario Format. 3. Review the warnings and errors produced during the automatic transition process. You may need to make manual changes for certain specific setup. Please refer to information in the Appendix in this guide. 4. Run the dataset in Flexible Scenario Format. In most cases, other than the items listed in the Appendix, the results would be the same as in Fixed Scenario Format in the same AXIS version. 5. *IF* your dataset has setup for running Portfolio Rate Capture Batch, there is an extra step needed for the transition. Please see section 4 on Portfolio Rate Capture. Page 12 of 27

15 3. Scenario Import and Export in Flexible Scenario Format Export Scenarios o o o This is done in the same ways as before. You can export scenarios interactively or in batch mode, using Batch Output. However, the structure of the import-export table is different. In Fixed Scenario Format, there were 2 options for exporting scenarios: use column numbers or column names. If the user selected use column numbers, then columns in the import-export table had names such as C1-C29. If use column names was selected, then columns in the table had the same names as Fixed AXIS scenario columns. In Flexible Scenario Format, after enhancement request #35253 (to be released in August 2015), there will be 2 export options: use full name or short name for scenario columns. To avoid Market or column names being truncated during the export, the short name option is recommended. The columns in the scenario data exported to the import-export table will be identified by the name of the Market and the column name (with a dash in between the two). The table type of the import-export table is Flexible format scenario data. Please note that only the scenario data is exported, not including the Scenario Format linked to the scenarios. Import Scenarios o The new Import Flexible Format Scenarios batch (on the Other tab when creating a new batch) should be used. This batch allows great flexibility in defining data source and AXIS scenario format. The first screen allows selecting the source: either DataLink table or importexport table. The second screen allows defining the scenario format and timing format for loading the input data. The third screen allows mapping the input data columns with columns in the selected scenario format. Once created, the batch can be run in all usual ways, plus it can be invoked from the import-export database viewer by clicking on the table of type TBD and selecting the Import action. o Importing scenarios in the old style (done by import-export macro batch) is still supported in Flexible Scenario Format. (If given a choice, the new Import Flexible Format Scenarios batch above should be used.) This allows users to bring existing outside data into new AXIS datasets. Importing scenarios in this way cannot be used to update existing scenarios, but only to create new ones. The scenarios will be imported and converted to new scenario format at the end of the batch step. Page 13 of 27

16 4. Portfolio Rate Capture - Transition to Flexible Scenario Format The information in this section pertains to the Portfolio Rate Capture process already set up in a dataset undergoing the transition from the Fixed Scenario Format to the Flexible Scenario Format. Portfolio Rate Capture ( PRC ) setup - redesign in Fixed Scenario Format: In Fixed Scenario Format, there was a PRC redesign implemented in version Prior to the redesign, there were two switches in the Portfolio Rate Capture Batch setup wizard step 1: After the redesign, the Type and Earned Rate To Capture switches in the batch have been replaced by the Investment Expenses and Earned Rate To Capture switches respectively in the new Capture Rate Basis ( CRB ) object required in the Fund Assumptions screen: If feature code #242 is activated in a dataset in a version prior to , the automatic transition process would first convert the dataset in Fixed Scenario Format reflecting the redesign above by creating CRB objects required in the Fund Assumptions screen as follows: (i) If an Office/Fund object is only included in one PRC batch, the two new switches Page 14 of 27

17 will be set according to the selections in the batch. (ii) If an Office/Fund object is included in two or more PRC batches, the two new switches will be set according to any one of these batches and a warning message will be produced. Portfolio Rate Capture ( PRC ) setup transition to Flexible Scenario Format Step 1 Preserving earned rates previously captured in Fixed Scenario Format This is part of the automatic transition process when Flexible Scenario Format is activated. The Portfolio Rate and the ten User Rate (1 to 10) columns in Fixed Format will be transformed to new User Value Markets in Flexible Format named User value (portfolio rate), User value 1, User value 10. Rates saved in these Scenario columns will be preserved. Also, Scenario Reference Objects ( SRO ) will be created to refer to these Markets. Below is an SRO example referring to the User value (portfolio rate) Market. After the automatic transition process, running an Office/Fund object in Flexible Format using a Scenario with rates captured prior to the transition should produce the same results as those in Fixed Format. Please make a backup of the dataset at this point. This step 1 is illustrated in the pictures below. The first picture illustrates the setup in Fixed Format prior to activating Flexible Scenario Format. Page 15 of 27

18 After the automatic transition process from activating Flexible Scenario Format, the setup in Flexible Format looks like: Step 2 Setup for performing portfolio rate capture in Flexible Scenario Format The tool described in this step can be used on Office/Fund/Block/Portfolio Rate Capture Batch objects. For Embedded Block with PRC setup, please see the next section Embedded Block with PRC setup. Before performing portfolio rate capture in Flexible Format, this manual step must be done Page 16 of 27

19 first by right-clicking on the Fund or Office object and selecting Advanced Convert captured rates setup in current object either Convert SRO included in current object or Convert all dataset SRO. Running this tool will create new SRO objects replacing the SROs created in step 1 above. Below is an example of such new SRO: Notice that the SRO named User rate (portfolio capture) from step (1) above is being used in the Default scenario reference field of the new SRO created in step (2). This step is needed because each set of rates captured in Flexible Format is stored in the new Portfolio Rate Capture Market Type and uniquely identified by a combination of [Liability Category, Captured Rate Basis] objects. The Liability Category and Captured Rate Basis are names of those objects specified in the Fund Assumptions screen: Page 17 of 27

20 With the example above, the following four sets of earned rates will be captured: [General Account, My Captured Rate Basis], [General Account, My Captured Rate Basis 2] [Total Portfolio, My Captured Rate Basis], [Total Portfolio, My Captured Rate Basis 2] In addition, if the Sub-segment Captured Rate Basis for Liability Categories field is populated with a CRB object as shown in the example above, one set of earned rates will be captured for each Liability Category linked to a Reinvestment Strategy in the Liability Matching Reinvest Strategy Table using the parameters specified in that CRB object. Each such set of captured rates is also stored in the Portfolio Rate Capture Market Type in Scenario and uniquely identified by the combination [Liability Category, Capture Rate Basis]. For example, after running the manual tool in step (2) and then rerunning the PRC batch, the earned rates captured for [Total Portfolio, My Captured Rate Basis] are stored in the Portfolio Rate Capture tab of the Scenario: The setup after running the manual tool in this step is illustrated below: Page 18 of 27

21 Note: Default Scenario Reference field in Portfolio Rate Capture SRO This field requires another SRO object to identify the default Market in this PRC SRO in addition to the Portfolio Rate Capture Market identified by the [Liability Category, Captured Rate Basis] combination specified in the same PRC SRO. The PRC SRO will first try to fetch rates from the Portfolio Rate Capture Market. If rates for such a PRC Market are not available in the Scenario, the PRC SRO will then fetch rates from the default Market. For example, when running a PRC batch, the rates for the PRC Market may not be available in the first iteration of the batch. The rates in the default Market will then be used as input for the first iteration. Convert SRO included in current object vs Convert all dataset SRO The two options offered by the manual tool in step (2) define the scope for searching for the SRO s object either searching for SROs used in the current Fund/Office object and any other objects linked to and used by the Fund/Office, or searching for all SROs in the current dataset. For example, in the dataset example shown below: Page 19 of 27

22 After running step (1) of the PRC setup transition to Flexible Format above, some SROs would have been created to refer to User Value Markets (such as User Value (portfolio rate) ) storing rates previously captured in Fixed Format. Using the Convert SRO included in current object option in step (2) on Fund 1 will search for these SRO objects used in Fund 1, Subfund 1, Cells 1, 2 and 3. For each such SRO object found, it will be replaced by a new PRC SRO with the following settings: Liability Category and Captured Rate Basis fields populated according to Fund 1 settings i.e. Total Portfolio and CRB1 in the picture above. Default Scenario Reference field populated with the User Value Market SRO created from step (1) If the Convert SRO included in current object option in step (2) is used on Fund 2 instead, then AXIS will search in Fund 2, Subfund 2, Cells 3, 4 and 5 and make the necessary SRO changes. Note that, in this case, the new PRC SRO in Cell 3 will be set according to settings in Fund 2 (i.e. [Total Portfolio, CRB2]) which are different than that in Fund 1. Alternatively, using the Convert all dataset SRO option on Fund 1 will search for all SRO objects in the dataset i.e. including Subfund 2 and Cells 4 and 5. Also, the new PRC SRO will be set according to the settings in Fund 1 (i.e. [Total Portfolio, CRB1]) including the new PRC SRO in Subfund 2 and Cells 4 and 5. In deciding which one of the two options to use, you need to review the PRC setup and the related linkages in the dataset (such as the one shown in the picture above). Usually, using the option Convert SRO included in current object is sufficient unless you want to override the PRC SRO setup in the whole dataset. Embedded Block with PRC setup Manual steps for transition to Flexible Scenario Format: The SRO Conversion tool described in step (2) above does not work with Embedded Block with PRC setup. Users will need to make manual changes to the SROs to point to the Portfolio Rate Capture Market Type. The following steps are suggested. Please make a backup of the dataset before performing the steps below. Page 20 of 27

23 Note: The manual steps described below may be replaced by using the Convert captured rates setup utility tool with a work-around (see Workaround below) if the PRC setup in the dataset has no conflicts. 1. Go back to the dataset in Fixed Format. For each Block Projection Assumptions object used in the Fund level Embedded Block with PRC setup, make note of the three fields: Captured Rate Basis, Capture Rate and in (for specifying the scenario column) as shown in the screenshot below: 2. In the dataset in Flexible Format after the automatic transition process, the same section in the Block Projection Assumptions object would look like: i) The same Captured Rate Basis object is used. ii) The Capture Rate switch option 1 - Net earned rate (or 0 - General account earned rate ) in Fixed Format is replaced by the Total Block Liability Category (or General Account Liability Category ) field in Flexible Format. iii) In Flexible Format, there is no need to specify a scenario column for the captured rates. The captured rates will be saved in Portfolio Rate Capture Market Type identified by the [Liability Category, Captured Rate Basis] combination ([ Total Portfolio, Block Proj Assumptions CRB ]) in the above example. iv) Any assumption field referring to the in column ( User Rate 1 in the above example) in Fixed Format would have an SRO referring to the corresponding User Value Market in Flexible Format. 3. Create a new SRO object referring to Portfolio Rate Capture Market Type ( PRC SRO ) with the Liability Category and Captured Rate Basis fields set to the objects identified in (2)(ii) and (2)(i) above respectively. Populate the Default Scenario Reference field with the User Value Market SRO in (2)(iv) above. 4. In the dataset in Flexible Format, search for all objects using the SRO in (2)(iv) above. This can be done by first showing the object in the Navigation Panel by right-clicking it: Page 21 of 27

24 Then click on the funnel icon on the top-left corner and select the Show selected objects which use current (not showing objects in between) option to show objects using the SRO object. 5. In each dependent object identified in the previous step, go into the object and replace the User Value Market SRO in (2)(iv) with the PRC SRO in (3) above. Workaround - using the Convert captured rates setup utility tool to replace manual steps 1 to 5 above: Note: If the PRC setup in the dataset has conflicts (such as the same liability Cell being shared by different Funds with different PRC setup s or PRC setup s exist in both Fund level and Embedded Block level capturing rates to the same scenario column in Fixed Format but with different PRC assumptions), then the manual steps 1 to 5 above will be required and this workaround will not be applicable. Since the Convert captured rates setup utility tool works on a Block object, this workaround involves creating a Block object with: A Cell Set object that contains the same liability Cells as used by the Fund with the Embedded Block PRC setup. Select the same Block Projection Assumptions object as used by the Fund with the Embedded Block PRC setup. After setting up such a Block object, use the Convert captured rates setup utility tool on Page 22 of 27

25 such Block object as described in Step 2 Setup for performing portfolio rate capture in Flexible Scenario Format above. Items for PRC setup transition to Flexible Format requiring user review: The following steps are recommended for validating the transition of a dataset with PRC setup from Fixed Format to Flexible Format: - Make a backup of the dataset in Fixed Format. - Activate Flexible Scenario Format (see section 2.2). This will also initiate the automatic transition process. - In Flexible Format, without performing any portfolio rate capture, run the Fund/Office object using Scenarios with rates previously captured in Fixed Format. Results should be the same as those in Fixed Format. - Make a backup of the dataset in Flexible Format. - Run the SRO Conversion tool in step (2) above. Review the SROs used for referring to captured earned rates. They should refer to the Portfolio Rate Capture Market Type and look similar to the example below. That is, they should no longer be referring to User Value Market, such as User Value (portfolio rate), which stores previously captured rates. - For Embedded Block PRC setup, follow the instructions in Embedded Block with PRC setup above. Review the SROs used for referring to captured earned rates. They should refer to the Portfolio Rate Capture Market Type and look similar to the example below. - Perform portfolio rate capture in Flexible Format by running the Block or PRC Batch. Review and compare results (to those in Fixed Format), including all captured earned rates. To be sure the results are not using rates previously captured in Fixed Format, you may want to clear these previously captured rates in the corresponding User Value Markets before performing the portfolio rate capture (for Embedded Block PRC, these Markets would be in the Embedded Block Scenarios). Rate 3 is no longer supported in Flexible Format. Portfolio Rate Capture in Block and Embedded Block: - In Block processing, portfolio rate capture is available in Flexible Format starting in AXIS version In Flexible Format, earned rates captured in Block/Embedded Block processing are saved in the individual Scenarios stored in the results cubes of the corresponding Block/Embedded Block projections. You can view these Scenarios and the captured rates by viewing the Block/Embedded Block results. [In Fixed Format, the rates captured Page 23 of 27

26 in Block/Embedded Block processing are saved in Future Scenarios, rather than the Scenarios in Block/Embedded Block results cubes.] Page 24 of 27

27 Appendix Items for Transition Requiring User Review Below is a list of items that require user review after activating the Flexible Scenario Format ( Flexible Format ) in a dataset originally in Fixed Scenario Format ( Fixed Format ). Negative Rates on Yield Curve - In Fixed Format, values on the yield curve (the first 10 columns in Fixed Format Scenario) are floored at 0 (unless beta feature code #309 Allow negative interest rates in the yield curve is applied). Such a flooring is not done in Flexible Scenario Format. - Please note that, in both Fixed and Flexible Format, without beta feature code #309, the implied forward rates calculated by AXIS in the Processed Scenario are floored at 0. - The beta feature code #309 Allow negative interest rates in the yield curve has been removed in version The feature is now available using the Negative rates switch in Scenario tab of Dataset Parameters. Scenario Sets - In cases where the yield curves in static scenarios being included in a scenario set are not of the same curve type, the curve type of the yield curves may not be set properly after the transition process. Scenario Generation - In Fixed Format, when generating values for a non-yield-curve column (e.g. Inflation), users can choose a Rate Type for the column. - In Flexible Format, all generated non-yield-curve values are assumed to be annual effective rates. For any User Defined Stochastic scenario generator, please review that all non-yield-curve values are in annual effective format. - For Regime Switching LN Market Model, if the Output By Column table section is used (instead of Output To Equity Markets [Set] table section), the two output columns (growth rate and dividend rate) for each Index (i.e. each row) in the table must point to the same Market. - For User Defined Stochastic Model, the output function SetYieldCurve available in formula tables has two additional arguments InterpolationMethod and ExtrapolationMethod. Please see Help Text for further details. Scenario Processing Screen in Fixed Format - This object has been redesigned in Flexible Format. Please see this Help Text for detailed information. Adjustments to values in scenario are no longer supported. The Yield Curve Interpolation and Forward Rate Extrapolation settings will be defined for each Interest Rate Market in the Scenario Format object. Processed Scenario - The Combination view will not be available in Flexible Format (since the Historic and Future Scenarios may have different formats). - If the dataset does not have any Historic Scenario before the transition, after the transition to Flexible Format, a Historic Scenario will need to be created and selected in Dataset Parameters. Assumption Tables - In Fixed Format, a Scenario Link column within an assumption table may refer to rates belonging to different Markets in Flexible Format. In Flexible Format, using Scenario Reference Object can make reference to rates within a single Market. - When importing a table with reference to scenario rates, in Fixed Format, the numeric values of a Scenario Link column (i.e. the scenario column numbers) are imported as part of all numeric values specified for the table. In Flexible Format, a Scenario Reference Object ( SRO ) link needs to be imported for the Scenario Link column of the table. This SRO link import will require an additional step in the import process. Page 25 of 27

28 Formula Tables ( FTs ) - Scenario Column Constants (e.g. YC_03_MONTHS ) in Fixed Format are replaced by Market Property Constants (e.g. YC_RATE_3_MONTHS ) in Flexible Format. The underlying values of these constants are different in the two formats. If any Scenario Column Constant is used in the FT script (e.g. in an IF statement) other than as a Scenario Column Parameter specified in an input or output function, please review the FT script. - For input and output functions in Fixed Format that require any Scenario Column Parameter, if the column parameter specified is neither a Scenario Column Constant nor a constant numeric value, please review these function parameters. Override Objects - Fund Override object In Fixed Format at Fund level, Investment Earned Rate section, the subsections Capture earned rate and Additional gain and loss smoothing on stock and real estate contain switches applicable for capturing Rate 1 and Rate 2. These switches are replaced by the Captured Rate Basis object in Flexible Format to define the parameters used for earned rate capture. As a result, a Fund Override object in Fixed Format using any of these switches requires the following setup in Flexible Format: (i) Create one Captured Rate Basis object to define each set of desired switch settings for earned rate capture. (ii) In the Fund Override object, Capture earned rate subsection, select the desired Captured Rate Basis object(s) to be applied. - Block Projection Assumptions Override object This is similar to the Fund Override object above. In Flexible Format, the switch Capture Rate is no longer available in the Investment Earnings section of the object. Instead, a Captured Rate Basis object needs to be selected in the Captured Rate Basis field of the Override in order to define the set of desired switch settings applicable for earned rate capture. Reserve Revaluation using Stochastically Generated Scenarios - In the Reserve Revaluation Formula Table, Define option switch #3 Seeds for scenario generators control, if switch setting (2) Use the seed defined below modified by (pricing) scenario checksum is used, the pricing scenario checksum will be different after transition to Flexible Format because the checksum calculations have been changed. Hence, the scenarios generated and the resulting financial projections will be different after the transition. Asset Cells - If Asset Cells are created using DataLink process, in Flexible Format, the DataLink process needs to be revised to also populate the Interest Market fields required. - Currency Swap Asset Cell is available in Flexible Format starting in AXIS version AG 43 and C3 Phase II Standard Scenario in Block and Embedded Block - In Fixed Format, the income rate and growth rate columns (i.e. columns 11 to 16) are not recognized as equity index related columns. They are treated the same as any other user rate columns. - In Flexible Format, these two columns are included in the new Equity Market Type and recognized as equity index related. When performing the Standard Scenario calculations in Block and Embedded Block, all equity growth rates are assumed to be 0%. Page 26 of 27

29 Hedge Asset Report - The Asset ID for hedge assets may change after transition to Flexible Format (due to changes in IDs of underlying equity indices). - If using AXIS Comparator, the results displayed for individual hedge assets may not align properly when comparing results before vs. after transition. Results changes after transitioning to Flexible Format The following setups are known to produce different results under Fixed and Flexible Formats. - Scenario Generator using the modifies generator seed by scenario checksum option: since the scenario checksums are different under the Fixed and Flexible Formats, the scenarios generated using this option will be different. To produce the same scenarios, please consider using a fixed input seed. - Annuity module Seg Fund Factors for 2001 [Composite] table: Projected required surplus amounts may change after the transition if this table is used. This is caused by rounding differences. Please contact GGY for further details. Comparing results using AXIS Comparator in Import/Export Database - If a dataset in Fixed Format does not have a scenario selected in Dataset Parameters, in order to be able to compare results before and after transition to Flexible Format using the AXIS Comparator, please create and select a blank scenario and run and export the projections before doing the transition. Then results before and after transition can be compared using a blank scenario with the same scenario object ID. Portfolio Rate Capture setup Please refer to section 4 Portfolio Rate Capture Transition to Flexible Scenario Format. Page 27 of 27