Value at Risk

TS calculates VaR using historical scenario, full revaluation approach. It Is possible to get a total value, portfolio value and also see each deals contribution for the VaR to analyze the details and to find easily abnormalities or missing market data. 

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 and Commercial Paper 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)                         The value at risk for the specific deal part

Value at Risk Contribution                      The contribution to Value at Risk for the specific deal part

Value at Risk (Portfolio)                            Aggregation type needs to be average

Value at Risk Contribution (Portfolio)     The contribution to the Value at risk from the deal part within the portfolio. 

Value at Risk (Total)                                 Calculated value at risk for the entire selection, Note Aggregation type needs to be                                                                   average. 

Possibility to  set 

Probability level between 0-1 default is 0.95 and 

Horizon use datecode specifying the time frame of the potential loss deafult 1d. 

TS does not calculate VaR for Forecast transactions, Bank account transaction, Fees or Credit facility