Value at Risk

This article will give you an overview of the process of Value at Risk (VaR) analysis by historical values

System Setting  Activate "Should create Value at Risk Scenarios" Select consolidation currency (Key Currency)

Risk Portfolio Rules - are used to categorise different deals into various risk portfolios. It is needed if the VaR should be calculated at the risk portfolio level.

Autopilot 

There is an activity in the Autopilot to calculate the VaR Scenarios. This is scheduled to run after market date is imported and off business hours. 

    Only update error scenarios - If you need to run an update due to missing market data during the day

    Valuation date - Today

    Scenario Min Date-  (default  and also maximum -252 weekdays)

    Scenario Max Date-  (default valuation date but can be earlier)

Normal selection is also available.

VaR Scenarios

A view to look at the market values and profit/loss effect for each deal

Z-spread calculation - A Z-spread is calculated for Bonds as a fixed spread based on the difference between the Bond price and the Yield curve and is used in the VaR calculation to get a more correct profit and loss value, including the counterparty risk. 

Report Columns

To see the VaR and analyse per portfolio and deal, there are new report columns to be added in a profit and loss report: 

Value at Risk  (Deal Part)

Value at Risk (Portfolio)

Value at Risk Contribution

Value at Risk Contribution (Portfolio)

Value at Risk (Total)

Possibility to  set Probability level and Horizon