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Content-type: text/html RiskSvr(TM): Position Module Simulations

Position - Trade Capture Module

1		Position Capabilities
2		Quick Trade entry
3		Mandatory Fields
4		3 Step Process
5		Field Shortcuts
6		Complex Structures
7		Custom Cash-Flows

Position - Trade Capture Capabilities

The Position Trade Capture Module is designed to make Trade entry a cinch and yet provide all the power and flexibility to define complex exotic structures..

All standard fields are preset to industry standard conventions but can be modified to suite special needs.

Quick and Simple Trades
Trades can be completed with the minimum amount of information, the module then generates the trade on-the-fly from Terms and Conditions according to:

You Personal Settings
Industry standard Terms and Conditions.

Complex Structure: Complex structures can be customized so that Either part or whole series of cash-flow events (Reset Flows, False Resets, Contingent Rates, Bullets, Full-Cash-Flows, Constant Maturity Flows, Barrier Flows or Fixed Payments) can be stored with the trade

Complex Structures can be defined to override default Terms and Conditions.
Each Asset can have added custom flows stored into the database.
Cash-Flow Capabilities:
- Reset Flows and Contingent Rates: With or Without Averaging and Compounding. Either in Arrears or Advance, EOM, IMM,...
- False Resets (Equity and Commodity Swaps)
- Fixed Flows: Bullets or Full Cash Flows
- Constant Maturity Flows.
- Barrier Flows, either constant or Contingent
- Strike or Exercise Dates.
- Fixed Payment/ Notional Exchange. (ISDA compliant)

Quick Trade entry.

The Trade capture screen is designed so that Every financial product, be it plain vanilla or exotic, can be entered in about 30 seconds.

Only a minimum of fields, called Mandatory Fields are required to enter a valid trade. Optional fields are defined by default and can always be overridden.

The Default Portfolio, Position Tag (Risk slice and Dice), Default Counterparty Account, Discount and Forward Daycount conventions as well as Calendar are taken from your personal settings. Other terms and conditions are taken from Industry standard conventions. All these fields can be modified if needed.

Mandatory and Optional Fields

Most fields that require amounts accept short-cuts (see below)

All Mandatory Fields are in red
All optional fields are typed in white or Grey

You must therefore fill out all fields that have red labels.

(for further details, see alternative fields below).

3 Step Process

step

Select the ASSET CLASS from the listbox

Equity
Commodity
Foreign Exchange Rate
Interest Rate Related.

This step is mandatory, you cannot proceed until you have selected the asset class.

step

Select the instrument from the listbox,...

Then choose a Portfolio or Enter a New name, if needed.
Create or select a TAG if you want to analyse sub-group within your portfolio.

If you are analysing credit (Advanced), sSelect the Counterparty Account against which your trade will be assigned .

Depending on the asset class & instrument, select a Currency, Curve Equity or Commodity.

Enter the Rate, Yield, Coupon or Price. The Notional Amount.
Perhaps a Maturity or Expiration date (if any).

step

Click on SAVE

The Trade Ticket will Appear.

Press on Done to Continue or Click on TradingBoard to Run the Risk Analysis.

Alternate Fields:

In some rare instances, you might get two or perhaps three fields that carry other colors. These are alternate fields: You can choose to select an item from a list or enter a specific value and or perhaps an another.(see below)
The Equity price and Beta fields are such fields. If a full history of the stock has been defined and the stock ticker is available in the listbox, neither field is required, but if it isn't you must select the stock index to which it belongs, the Beta and it's last price so that the engine can extract the risk without a full history of the stock's price.
Other examples might include dividend yield and dividend. If you provide one, the other is not expected. You can also assume there are no dividends and leave both fields blank.

Short-Cuts - Accepted Formats

Amounts:

Amounts can be entered as:

m(M) -> 1'000'00-=

k(K) -> 1'000.-

h(H)-> 100.-

Example

7.254m(M) =7'254'000.-

3.3k(K) = 3'300.-

Rates - Coupons

P(p)% -> Convert to Percent (/100).

BP-> Convert Basis Point (/10000).
or Absolute

Rates can be quoted in either absolute or percentage terms.
i.e. a Coupon of 5.5 % can be entered as

Example
5.5 (for 5.5% coupon) or 0.055.

You can also type 5.5% or 5.5P(100%) to get 0.055. You can also type 55 BP to get 0.055. to divide by 10'000.

Spreads are assumed quoted in BasisPoints

If you enter absolute values the engine will convert them automatically.

Complex Structures

Benchmark & Underlying.

The Benchmark Structure for complex instruments is defined as any other Trade. Care must be taken however to define appropriate Account and Tag(s). The Type of position must be defined as Benchmark. If you have defined a Benchmark Tag dimension, then the Position Type can be ignored.

Complex Index Basket Structures:

The Index structure Screen provides a grid like layout in order to define multiple underlying baskets. Currently, the Basket accepts Equities or Commodity Assets. Other assets might be included depending on demand.

CDO Tranche Screens:

The Tranche screen expects a pool of assets.
The pool must be defined with Trades that have a valid obligor or Counterparty that is attached to an obligor. the Pool is defined either as a Portfolio or a Tag hierarchy.

As with Benchmarking. Tag dimension hierarchies supersede Portfolio Definitions.

Complex Structures

There are essentially 3 ways to define complex structures.

You can use the Multi-legged product. As its name implies, the multi-legged structure provides a position with one or a series of receivable and/or payable exposure legs with their own terms or conditions.
You can Bundle Custom Taylor made flows to standard instruments.
You can define A Complex Structures as a series of Trades that are bundled together with an Identical Tag,

For highly unusual instruments for which no existing pricing formula exists but which can be defined in terms of sensitivities (delta, gamma, theta, .. ) Trades can be complemented with a Taylor-series expansion instrument. The Taylor series expansion screens provides the necessary fields to define the instrument's behaviour against risk factors for each time step in the simulation.

Financial Instruments carry many risks... & rewards for those whomaster them!