Analysis > Slice & Dice

Report Slice and Dice

Risksvr™ is a generic multivariate stochastic engine that can generate vast amounts of data.
This data might or might not be of interest to your anallysis, so it is important to understand how you this accumulated so that it winds up in your reports.

The first element of importance  is your Risk Exposure:

The risk exposure determines the type of risk(s) that will be available.
For example, if you want to analyze Country Risk, Credit Risk exposure must be active.

Then choose how to Slice and Dice Results. (i.e. your Risk Dimensions);

  1. Market Risk are tags associated with your position: Tags, Trade Id or Product. if you have not defined any tag(s) select Product, Trade Id, Country, Risk-Factor, Maturity, This way Risksvr, will use the Product type, Trade Identifier, Country, Risk Factor, Maturity, etc to generate dimensions.
  2. Credit Risk: Tags, Counterparty or Accounts. if you have not defined any credit tag(s) select Counterparty (Cpty) or Accounts. This way Risksvr, will use the The Cpty, Account, Country etc Identifiers to generate dimensions.
  3. Risk Factor: Tags, Counterparty or Accounts. if you have not defined any credit tag(s) select Counterparty (Cpty) or Accounts. This way Risksvr, will use the The Cpty, Account, Country etc Identifiers to generate dimensions.
  4. Risk Factor: Tags, Counterparty or Accounts. if you have not defined any credit tag(s) select Counterparty (Cpty) or Accounts. This way Risksvr, will use the The Cpty, Account, Country etc Identifiers to generate dimensions.

Why are tags so Important

Tags are used to slice and dice risk according to your views of the world. Each time you associate a Tag to a position, an account, etc you create a "Personal Risk Dimension Accumulator".

How do you Define Tags ?
  1. Market Risk Tags are defined in the Positioj Screen.
  2. Credit Risk Tags are defined in the Account section of the Credit Module.

What is a Tag Hierapchy ?

A Tag can represent a hierarchy of dimensions. Each Dimension is separated by a forward slash "/". A Tag hierarchy looks veby much like a we` address or URL. For example, you might associate a tag hierarchy to your positions /strategy_1/ bonds/ highOyield for a corporate bond. /strategy_1/ bonds/ riskless for a government bond.  The engine will then generade risk statistics for each individual and aggregated dimension Each tag creates a new report dimension, however each additional tag hierarchy in this diiension will increase the report's size exponentiadly
  • In Design <-span>view, select the inline frame you want to work with by moving the pointer to the top border of the inline frame until it changes to a left-pointing arrow Button image, right-click, and then click Inline Frame Properties.
  • In the Inline Frame Properties dialog box, do the following:
    Feature Description
    Var VaR is the Mean Zero Value-at-Risk, also known as Absolute VaR.
    VaR is computed by multiplying the portfolio's standard deviation by the confidence multiplier
    DEaR DEaR or Earnings-at-Risk. Also known as Relative VaR or Expected Mean VaR..
    Expected Mean VaR takes the average position as the mean which will be subtracted from the position's volatility and then multiplied by the confidence multiplier.
    VaR as Percent: Produces results relative to Market Value. this makes results easier to compare.
    Multiple Confidences Multiple Confidence generate Value-At-Risk results for multiple confidence multipliers: 
    Market Risk is produced with  99%, 95% and 90% Confidence Levels whereas
    Credit Risk   is produced for 99%, 98% and 97.5 % Confidence Levels.
    Note: Multiple Confidences are note produced in the Dynamic/JavaScript Report since you can select confidence multipliers dynamically
    Ageing This feature is active by default except for Correlated Delta-Gamma. If. you disable position ageing, the engine will assume positions do not mature as they evolve over simulation horizons.
    Alignment Select the position for the inline frame on the page.
    Show border Select this check box if you want a border drawn around the inline frame.
    Scrollbars Set your preferences for displaying scrollbars.
    Alternate text 
    Moments Of Distribution: Mean Volatility, Skew-ness and Kurtosis
    This option will display the first four moments of your portfolio and its constituents. 
Advanced user often select this report to assess the return distribution of their portfolio and positions..

I.e. test Normal Distribution, test Student-T / fat-tail distribution (i.e. even or odd moments at 0, etc )
 
    Diversification Benefit:
    Diversification Benefit is calculated automatically for certain reports. You can however decide to disable this feature if you find it irrelevant. 
      
    Credit Risk: Exposures & Losses  
    Credit Losses assume a proper credit curve or transition matrix.
    Please note you cannot run Credit Losses when performing Parametric Value-at-Risk.
Historical Simulation is not really recommended, since Credit analysis assumes a high number of samples.

    Credit Exposures:
    Credit Exposures are active by default. Credit Exposure Tail Probability as well as individual buckets can be defined for each Account or Tag in the Exposure Section of the Credit Module. 

The Credit Exposure Bucket Tails are set to 5% by default, which assumes a 95% confidence level, which is the standard practice in industry. 

The credit Exposure Tail Probability can be set to any valid number between 0 and 99.999%. 


    Losses Due To default:
    The loss option enable loss given default computation. 
Loss computation assumes a proper Default probability curve or Transition Matrix has been set . If you have not defined one yourself, the engine will take the default credit curve or transition matrix defined in the credit module.

    Credit Draws Per Market Sample:

    The Credit Draw field s defines the number of random draws that will be performed for each Market Risk Run.
For example, if you define 10, the engine will draw ten random samples to simulate Bankruptcy for each Market Simulation.
    Detail Losses Due To default:
    Provides detailed statistics of Defaults Loss Computation: the number of default states as well as the amount computed as the loss. Each individual default event, including average, peak and individual loss amount and senior counterparty status can be requested., 
 
    Pay Receive by Rating:
    Pay Receive by Rating displays the overall payable and receivable positions per rating rank at inception (at time 0). 
If migration is active in the analysis and a one (for all the time steps) or multiple )one for each time step) transition matrices is/are specified, then payable and  receivable amounts as well as a separate  received / paid interest (to/from cash-accounts) tables are displayed for each simulation horizon and rating rank defined.

    Country Risks: Exposures and Losses:
    Both Country Exposures and Country Default Losses depend on Credit Loss and country devaluation and limit settings in the credit module.

      
    Par at Inception:
    This flags assumes all Interest Rate Swaps, Bond Forwards and other related fixed income instruments begin at Par
when the simulation kicks off (i.e. at time 0). 
    If this feature is disabled, the engine computes the market fair value.

    Revalued Collateral:
    On by default. This flags activates Collateral Revaluation at each simulation horizon.
If this feature is disabled, the engine assumes the same collateral value computed at inception.

    Mean Reversion:
    This flags activates mean reversion calculation in the stochastic simulation of interest rate vertices of yield curves.
    DV/DP Increment Size: 
    This fields sets the size of the Parametric Simulation dv/DP change of Price.
By default the size is assumed to be 0.01 i.e. 1%. 
For each Position in the Portfolio and For each risk factor that affects a positions, the engine computes the Market Fait Value, then shifts the risk factor up by  0.5% and then re-computes the new fair-value, it then 
bumps the risk factor down by 0.5 % and then re-computes the new fair-value. The engine then takes
 the average of the difference between the two changes in order to obtain the price change for a given risk factor change. Then it proceeds to the next risk factor(s) and this for each and every position in the portfolio(s).
    DV/DP Increment Type: 
    This fields sets the type of the Parametric Simulation dv/DP change of Price. Either Relative or Absolute.
By default the size is assumed to be Relative. 


    Liquidity Risk:

Liquidity Risk is defined at the position level in the liquidity field of the position screen, at a group level in the liquidity field of the tag exposure screen.  
     
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