VaR Calculation
Credit Risk Management
Credit Risk Professional
![Credit Risk Professional](/images/services/var-calculation/Credit_Risk_Professional.png)
Methodology
- Monte Carlo Simulation
- Based on Merton Structural Model (Merton [1974])
- Mersenne Twister, Numerical Recipes ran2
- Quadratic resampling, Probability matching
Portfolio Analysis and Evaluation
- Expected Loss, Unexpected Loss, VaR, Marginal VaR, Conditional VaR, Risk Contribution
- Display aggregated values via Obligor or Transaction level
- Evaluation method can be defined at the individual transaction level
- Supports three types of Fair Value calculation methods
Supported Financial Instruments
- Interest related product (Loan, Bond)
- Spot product (Stock, Fund)
Results Display
- OLAP feature allow users to analyze their portfolio in segments according to Obligor or Transaction attributes
- Aggregated transaction information (VaR, ES, Book value, Market value, Profit/Loss etc.)
- Detailed transaction information (Cash Flow Table, Evaluation Scenario and Exposure etc.)
Market Risk Management
Market Risk Professional Lite
![Market Risk Professional Lite](/images/services/var-calculation/Market_Risk_Professional_Lite.png)
Methodology
- Variance-Covariance
- Historical Simulation
Portfolio Analysis and Evaluation
- Expected Loss (EL), Unexpected Loss (UL), VaR, Marginal VaR, Conditional VaR
- Sensitivity Analysis (Duration, BPV, Modified Convexity)
- Option Greeks (Delta, Gamma, Vega, Rho)
- Supports three types of Fair Value calculation methods
- Supports prepayment
Supported Financial Instruments
- Interest related product (Loan, Deposit, Bond, Swap etc.)
- Spot and Forward product (Stock, Fund, FX etc.)
- Option Product (Stock, Index, FX, Swap, Bond)
Results Display
- OLAP feature allow users to analyze their portfolio in segments according to Obligor or Transaction attributes
- Aggregated transaction information (VaR, ES, Book value, Market value, Profit/Loss etc.)
- Ladder report (Maturity Ladder, Cash Flow Ladder, Exposure, GPS etc.)
- Detailed transaction information (Cash Flow Table, Evaluation Scenario and Exposure etc.)
Market Risk Professional
![Market Risk Professional](/images/services/var-calculation/Market_Risk_Professional.png)
Includes all features from Market Risk Professional Lite with the added features below.
Methodology
- Monte Carlo Simulation
- Principal Component Analysis (PCA) Monte Carlo Simulation
- Yield curve extrapolation using the Smith-Wilson method
- Mersenne Twister, Numerical Recipes ran2
- Quadratic resampling, Probability matching
Integrated Market and Credit Risk
Market and Credit Risk Enterprise
![Market and Credit Risk Enterprise](/images/services/var-calculation/Market_and_Credit_Risk_Enterprise.png)
Includes all features from Credit Risk Professional and Market Risk Professional with the added features below.
Methodology
- Integrated Market and Credit Risk calculation
- Monte Carlo Simulations will support up to 1,000,000 iterations
Portfolio Analysis
- No limitations on OLAP segments
- Supports restructuring of OLAP segments
Feature Comparison
Credit Risk | Market Risk | Market and Credit Risk | ||||
---|---|---|---|---|---|---|
Professional | Professional Lite | Professional | Enterprise | |||
Methodology | Monte Carlo Simulation | Market + Credit Risk | ||||
Credit Risk | ||||||
Market Risk | ||||||
Historical Simulation | Market Risk | |||||
Cumulative Historical Simulation | Market Risk (Profit/Loss calculations are always based on the value of the instrument at t=0) | |||||
Variance-Covariance VaR | ||||||
Merton Structural Model (Merton [1974]) | ||||||
Random number generator | Mersenne Twister, Numerical Recipes ran2 | |||||
Convergence Improvement | Quadratic resampling, Probability matching | |||||
Yield Curve Scenario | Principal Component Analysis Monte Carlo Simulation | |||||
Extrapolation using the Smith-Wilson method | ||||||
Portfolio Analysis and Evaluation | VaR Indicators | EL, UL, VaR, Marginal VaR, Conditional VaR | ||||
Risk Contribution | ||||||
Sensitivity Analysis | Duration, BPV, Modified Convexity | |||||
Option Greeks | Delta, Gamma, Vega, Rho | |||||
Aggregated display | Transaction based or Obligor based | |||||
Accounting method | Historical Cost or Mark-to-Market at individual transaction level | |||||
Fair Value calculation methods | ||||||
Prepayment | Fixed deposit, Mortgage loan etc. | |||||
Supported Financial Instruments | Interest related products | Loan, Bond | ||||
Loan, Deposit, Bond, Swap etc. | ||||||
Spot products | Stock | |||||
Spot & Forward products | Stock, Fund, FX etc. | |||||
Option products | Stock, Index, FX, Swap, Bond | |||||
Results Display | OLAP (Online Analytical Processing) | Allows analysis by segments according to Obligor or Transaction attributes | ||||
Aggregated transaction information | VaR, ES, Book value, Market value, Profit/Loss etc. | |||||
Detailed transaction information | Cash Flow Table, Evaluation Scenario and Exposure etc. | |||||
Ladder report | Maturity Ladder, Cash Flow Ladder, Exposure, GPS etc. |