What it is, variations off, and how to create your own interest prediction
What is an interest prediction
Nordkap utilizes the market pricing of upcoming reference interest rates, such as STIBOR. The market price is determined by the average price from banks in the markets where Nordkap gathers data and how they value interest rate swaps with different maturities. From the average price, we calculate how fixed interest rates would need to evolve to match the current market price.
Market pricing is based on transactions and is therefore considered the most neutral method for assessing future interest rates, even though the market can naturally be incorrect. Nordkap does not rely on a single forecaster, bank, or institution to create interest rate forecasts.
Variations of interest predictions
Interest predictions are interest scenarios that can be recorded in Nordkap under Administration and then used when calculating the Budget Report.
There are two ways to use an interest prediction in Nordkap:
- Through an automatically generated interest rate scenario based on available market data for interest instruments.
- By manually creating one.
Interest predictions are updated every business day in line with data availability and synchronized with reference interest rates according to fixed update times before this version:
- Stibor (SEK): Approximately at 11:15 the following day
- Cibor (DKK): Approximately at 11:30 the following business day
- Euribor (EUR): Approximately at 13:10 the following business day
- Nibor (NOK): Approximately at 13:10 the following business day
You can create multiple scenarios per currency that you have access to.
For the automatically generated interest rate scenarios, we also generate additional implied curves with a margin of +1% and -1%.
These are selectable in the Budget Report and can be used for stress testing interest cost forecasts.
Create your own interest prediction
1. Click on Administration
2. Click on Interest prediction
3. Click on Create new interest prediction
4. Type a name
5. Click on Edit interest rate data and fill in the interest rate
6. Click on SAVE
