For a fixed income security, the yield is the interest rate which discounts the security's future cash flows back to a present value such as the purchase price or amortized book value. For bonds and notes, this is at maturity. For factor based securities, these future cash flows consist of the interest payments, coupons, and the redemption value that will be paid along with the coupons over the life of the security. While there are simple models for estimating the distribution and size of the payments (CPR, PSA, and so forth), it is sometimes desirable to directly specify the amount of each payment. These amounts are input to Eagle Accounting as Third Party Cash Flows. Third Party Cash Flows are used only for yield and amortization calculations and do not affect the actual paydowns processed, which are driven by the factors input.
You can specify whether to use third party cash flows as part of the amortization rule setup. In the amortization rule, if you set the Use Third Party Cash Flows field (tag 11768) to Yes, the Earnings process uses the third party cash flows in the Vendor Cash Flow table if there are cash flow records available. If you set the Use Third Party Cash Flows field to No, the Earnings process does not use third party cash flows. When the amortization rule specifies use of third party cash flows, this election overrides any other cash flow assumption such as calls, puts, prepayment model, and speeds, and tells the Earnings process to use those cash flows for the purposes of deriving an amortization yield.
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