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The pricing methods for instruments that generate cash flows in any application of SAS Risk Management for Banking and in SAS Market Risk Management for Insurance assume continuously compounded interest. This is inappropriate for such instruments and therefore resulting valuations are incorrect. Correct instrument valuations should use simple interest calculations.

As an example of the difference, consider the future value (FV) of a principal (P) at rate (r) and term (y).

Assuming annual simple interest:

Assuming continuously compounded interest:

For information about an available fix for this issue, contact SAS Technical Support. After application of the fix, the pricing methods in SAS Risk Management for Banking and in SAS Market Risk Management for Insurance perform simple interest calculations. Furthermore, they expect that annual discrete interest rates are provided via the input data columns listed in the following tables.

Operating System and Release Information

A fix for this issue for SAS Risk Management for Banking 3.1 is available at: