Add a flag, index or discount factor
Openbox makes it easy to add pre-built components to your model, so you can include whole sections with a few clicks. Some parts of financial models are so frequently used that the ability to add them is built into Openbox: flags, indexes and discount rates.
When you think about the things that models represent, like projects or companies, they typically go through different stages. A project for example will go through a construction period, and then an operational period, with possibly a post-operational/ clean-up period afterwards. Corporate models can have ‘historic’ and ‘forecast’ periods. There can also be key events, such as the drawdown of key debt instruments, or the project’s start of operations, or the date at which a key contract (such as a PPA) ends.
A common way to manage these stages and events is through flags – calculations that give the value 1 at the date of the key event, or during the key period, and zero otherwise.
Openbox makes it easy to add flags automatically. Click ‘Insert’, then the ‘Flags’ dropdown, then ‘<new flag>’.
Openbox will ask you what type of flag you want. There are five basic types:
- On a date. A flag that triggers on only one date e.g. a drawdown date or end of life date
- Until a specified date. A flag that is active up to a given date e.g. an asset lifetime flag.
- After a specified date A flag that activates after some date – e.g. a commissioning date
- Between two specified dates. A flag that starts inactive, then activates for a period, then is deactivated – e.g. an asset that is commissioned and then decommissioned
- Periodically. A flag that is active once a month, quarter or other period – e.g. a payment period flag
Select the type, enter the relevant dates, name it, and click OK. Openbox then adds a new block of calculations to the model.
You can then apply that flag to any item by selecting the item, then clicking ‘Insert’ then the ‘Flags’ dropdown again. Click the name of the flag you want to apply. Openbox will modify the item’s formula to include the flag.
Indices and discounting
Models often include indices – factors showing how much a price or payment grows over time, relative to a base value. A typical case would be inflation.
Openbox lets you add indices easily. Click ‘Insert’ then ‘Indexes’, then ‘Add new…’. .
You will be asked for the key dates, and whether you want to calculate the index at the start, beginning or end of the period. Openbox will then insert the necessary calculations.
Discounting works in a similar way.
To apply an index or discount factor, select the item you want to apply it to, then click ‘indexation’ or ‘discount’ and the name of the index or discount factor you want.