Credit Exposures compute the Maximum, Current and Potential Exposure of each account over one or multiple simulation horizons.

Potential Future Exposure, is computed with a 95% confidence .( i.e. a 5% tail), which is the standard practice in industry
You can modify this value in the analysis screen

To compute Credit Exposures, Counterparties and Accounts must be properly defined.

For further details on Credit Exposure computations click here.

  Risksvr™ Currently offers two approaches to Measuring Credit Exposures 


You can define the distribution's Tail

This is the easiest to configure:

• You define :either the number of observations in the Tail. (i.e. the Tail size of the Distribution).
  or the Confidence Interval.
  Both are Equivalent since a 95% confidence is equivalent to 
  5% of the Distribution multiplied by the number of Simulations.
  

• You specify specifically each counterparty or bucket position and width. This can be done automatically (Pre-Runs) or customized. The latter is mostly used
  to narrow down complex asset distributions.
  

 

How do you Customize Credit Exposures?

Advanced users can narrow down exposures by specifying bucket positon and width.
This approach is much more precise, but it also assumes you have an idea of the Account's Value.

To define Credit Exposures Buckets you must:

1. Call the BucketExposure entity with a boolean (1/0) or (On/Off)
   Example:
   XML setup.xml, analysis.xml or payload data
   <bucketexposure>"on"</BucketExposure> (note: All names are converted to lowercase internally)
   or
   ASCII setup.txt
   BUCKETEXPOSURE 1
   
2. Supply the CreditExposure DataSource
   
   creditexposure.xml
   
   

   {{AUTOBUCK_NAME}, T_INT, 0, AUTOBUCK, 1, 0},

   {{BUCKETS_NAME}, T_INTV, 0, BUCKETS, -1, 0},

   {{BUCKNODE_NAME}, T_INTV, 0, BUCKNODE, -1, 0},

   {{CONFIDENCE_MULTIPLIER_NAME},T_DBL, 0, CONFIDENCE_MULTIPLIER, 1, 0},

   {{EXPOSURE_TAIL_NAME}, T_DBL, 0, EXPOSURE_TAIL, 1, 0},

   {{ACCOUNT_ID_NAME}, T_INTV, 0, MASTER_ID, -1, 0},

   {{MAXBUCK_NAME}, T_DBLV, 0, MAXBUCK, -1, 0},

   {{MINBUCK_NAME}, T_DBLV, 0, MINBUCK, -1, 0},

   {{BUCKETS_PER_ACCOUNT_NAME}, T_INT, 0, NMSTRS_TO_BUCKETS, 1, 0},

   {{NPRERUNS_NAME}, T_INT, 0, NPRERUNS, 1, 0},

   {{NULL},-1,-1,-1,-1,-1}

   };

CreditExposure.xml



You can also request automatic Buckets. If this is the case, Risksvr™ will compute the best buckets automatically by running a number of pre-simulations in order to estimate the number and width of the buckets.

Note: Netting and Collateral Values play an important role in Credit Exposure Calculation. It is therefore your responsibility to ensure they have been defined correctly.

 




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