The next step is to set up the pricing model points and model point file.
Typically, when pricing in SLOPE, the asset assumptions are built into the pricing variables for each individual product. This means that asset returns and total income amounts can be calculated at an individual model point level. Therefore, in SLOPE, it is possible to price multiple cells in a single pass.
To set up the model point file, we will want to create individual records for each pricing cell we want to calculate, as well as set up these model point records in such a way that we can calculate a sales distribution across the full set. This will allow us to calculate pricing premiums for each cell as well as to get metrics on total overall profitability all in a single run.
Model Point File Template
To begin, we want to get a model point file template to begin working with that we can put our data in to. To make it easier, we're going to use an Excel file to build our model point file. First, load the Whole Life product in the Model Development module and open the model point file definition.
To create a template file, we can use the 'Download File Template' link at the top of the model point details. This will create and download an Excel file that has the header row pre-populated with all the expected columns for this product. This will include any custom edits made up to this point to the model point file definition as well.
Creating Model Points
To create model points, we are going to start adding records to the model point file template in Excel. We will add one row for each individual cell that we want to calculate a pricing premium for. This can be done in whatever manner you choose or need for your specific business purposes. For this guide, we will be setting up a very simple model point file for a set of cells. We will also be assuming a distribution for new sales as we build this.
|Face Amount Band||Avg. Face Amount||Allocation|
Each individual row of the model point file will contain the necessary information to calculate the pricing premiums for a single policy, as an average policy of that cell. And we will use the Policy Count on the model point file to create our distribution. This works in SLOPE because the library calculates all values on a per-policy basis first and then scales all the final numbers up using the policy count in force at each point in time, including any future decrements.
The process of creating all of the rows can be quite tedious, especially if your pricing allocation includes a large number of different pricing cells. To help with this, we've created a helpful Excel macro that can help with the process. You can find an example of it attached at the bottom of this article with values filled in to create the model point file shown above. In this workbook, you will see that the 'Final MPF' tab has values that are calculated as formulas and other columns of data on the same worksheet. This is perfectly fine and will not cause any problems to use in SLOPE.
Once you have your model point file set up, save it locally. You can either upload the file into SLOPE now using the File Manager or hold on to it until the next step where we will be creating a projection template to run the pricing.