OFS Market Risk 2.5.1.0.0 User Guide
Contents
1. eese nennen nnne nens enean nuns 3 3 3 ZCYC Estimation Method Selection Edit Screen 3 2 4 Spread Over Sovereigns an asi O E O OO E 3 29 5 EIERE 336 Pern EE 3 4 INTEREST RATE MODEL SELECTION arinaren cd cuc ee EAEE A NEE NN NN 341 Interest RateModel Add Scree E 3 4 2 Interest Rate Model Selection View Screen 3 4 3 Interest Rate ModelEdit Sereen ii stt cetera a a a UR AREE usd Rd EA 3 5 PORTFOLIO MANAGEMENT eege Pex Y UUNE Denis or ped VENE Vis rs magus Eege 3 5 1 Portfolio Management Add el iii esee ear ea aerae ET Cur veux FUE end O Vir vine van Eur VU 3 5 2 Portfolio Management View Screen 3 5 3 Portfolio Management ee uereg 3 6 INEREMENTAL VAR 555 oioe fonte o sib EE Man E ventas p LA cM bU sep EA TIO MES 3 0 1 dnceremental erbei 3 6 2 Maceme VOR VIEW SCFEBII S io poeta Orte oce VE ctus porns tuU EE 3 6 89 JIncremenital VAR EUN Sree uai eese aiit oot Qoi etui e etd redu Pod get ue dco duas iue deca duces 3 7 PROCESS DESCRIPTION acc ba o a o AO X A EE NO EN YE EE t PO EUER EE PNEU a tier RESTI ELI a vH ATE DIS CEU EC 3 8 EXATININGO EE EEN ANNEXURE A GENERATING DOWNLOAD SPECIFICATIONS ccccscscscevsvevees Oracle Financial Software Services Confidential Restricted ii User Guide Oracle Financial Services Market Risk Release 2 5 1 1 Introduction Oracle Financial Services Market Risk estimates the market risk of a portfolio through the estimation of loss distribution based risk mea2. e Currency Selection From the currency browser a single currency needs to be selected Multiple selections are not allowed Once a particular currency selected then all the interest rates available in that currency will be displayed e Interest Rate Model Mapping For each Interest Rate Asset Class one Interest Rate Model needs to be selected from the following Black Model Hull White Model Ho lee Model Ornstein Uhlenback Model Oracle Financial Software Services Confidential Restricted 17 User Guide Oracle Financial Services Market Risk Release 2 5 1 New Interest Rate Model Selection Microsoft Internet Explorer sis Currency Selection Currency T Interest Rate Model Mapping Interest Rate Asset Class Interest Rate Model amp User Into Created By MRY25USER Creation Date 24 Apr 2009 Last Modified By Last Modified Date Interest Rate Model Selection Add Screen Once a model is defined for a particular interest rate currency combination it can be edited and a different model can be selected The selection will not be allowed to save unless an interest rate model is mapped to every Interest Rate Asset Class for the selected currency If spread over sovereign yield curve is specified for any Currency Interest Rate Asset Class combination then a separate Interest Rate Model is not allowed to be selected for that combination 3 4 2 Interest Rate Model Selection View Screen To v
3. www oracle com financial_services Copytight 2015 Oracle and or its affiliates All rights reserved No part of this work may be reproduced stored in a retrieval system adopted or transmitted in any form or by any means electronic mechanical photographic graphic optic recording or otherwise translated in any language or computer language without the prior written permission of Oracle Financial Services Software Limited Due care has been taken to make this Oracle Financial Services Market Risk User Guide and accompanying software package as accurate as possible However Oracle Financial Services Software Limited makes no representation or warranties with respect to the contents hereof and shall not be responsible for any loss or damage caused to the user by the direct or indirect use of this User Manual and the accompanying Software System Furthermore Oracle Financial Services Software limited reserves the right to alter modify or otherwise change in any manner the content hereof without obligation of Oracle Financial Services Software Limited to notify any person of such revision or changes All company and product names are trademarks of the respective companies with which they are associated Oracle Financial Software Services Confidential Restricted 32
4. 05 04 2008 Last Modified By Last Modified Date l Done 2 Local intranet ZCYC Estimation Method Selection Edit Screen 3 3 4 Spread Over Sovereign The first method is spread over sovereign once this 1s selected further selection needs to be made from e Time vertex spread e Parallel Spread It specifies the type of spread to be applied to the sovereign yield curve These spreads can be applied only to the standard time vertex e Time vertex spread Under time vertex spread multiple spread value needs to be inserted for each standard time vertex The spread value will be in basis points e Parallel spread A single value needs to be inserted which will be applied to all time standard vertices Oracle Financial Software Services Confidential Restricted 13 User Guide Oracle Financial Services Market Risk Release 2 5 1 e Define ZCYC Eztimation Method Microsoft Internet Explorer Interest Rate Selection Currency em Interest Rate Asset Class Rating CCC ZCYC Estimation Method Selection Spread over Sovereign Yield Curve Bootstrap Yield Curve External Data Spread Specification O Time Vertex Spread Parallel Spread User Info Created By MRY25USER Creation Date 11 May 2009 Last Modified By Last Modified Date l Done J Local intranet ZCYC Estimation Method Selection Spread Over Sovereign Screen 3 3 5 Bootstrap Yield Curve Spread spe
5. Risk Release 2 5 1 Define New Portfolio Microsoft Internet Explorer Portfolio Definition Portfolio Name 2i Bank Instrument Type Browser Web Page Dialog Filter Specificatior Hierarchy Dimensions Hierarchical Bank Instr Available Bank Instrument Type Selected Bank Instrument Type Line of Bu iscrete Asian Option on Commodity e Bank Instrument Type CliquetRatchet Option on Commodity Currency Commodity Forward Option Commodity forward forward Commodity Futures Option Commodity Futures Commodity forward Continuous Asian Option on Commodity Discrete Asian Option on Commodity Barrier Option on Commodity Commodity Basket Option Cliquet Ratchet Option on Commodity Digital Option on Commodity Fixed Lookback Option on Commodity Floating Lookback Option on Commodity Commodity Quanto Option Shout Options on Commodity Commodity Option Snot Commonite Portfolio Description MRY25USER Creation Date 77 May 2009 Portfolio Management Dimensions Screen Bank Instrument Type Browser 3 5 2 Portfolio Management View Screen The portfolio management view screen is displayed in the view mode To view an existing Portfolio click the View button L amp I which is present on the right hand side RHS corner of the Portfolio Management Screen In order to View first select an existing record by activating the select button DI then click the View button present on the RHS corner of the sc
6. Specification 8 Equity Risk Factor Selection Time Vertex Specification ZCYC Estimation Method Selection Interest Rate Model Selection Pal Incremental VaR CH RiskMetrics Time Vertices O Custom Time Vertices Time Vertex Specification Risk Matrices Screen 3 2 2 Custom Time vertices As per the specification you can change the standard time vertex to customized time vertex The custom time vertices need to be entered on the basis of maturity and time unit The first time vertex is always spot which cannot be edited These custom time vertices should be specified in the ascending order and they are editable Apart from the default 16 rows provided for entering custom time vertex You can add new rows to the custom time vertices screen and provide the additional input data 3 3 ZCYC Estimation Method Selection Zero Coupon Yield Curve is selected for each and every interest rate for asset class and currency combination The ZCYC Estimation Method Selection must be preceded by Time Vertex Specification This screen is divided into 2 sections e Interest Rate Selection e ZCYC Method selection Oracle Financial Software Services Confidential Restricted 9 User Guide Oracle Financial Services Market Risk Release 2 5 1 Oracle Financial Services Market Risk Windows Internet Explorer Sel Financial Services Market Risk User gluser e RN al iS ICYC Estimation Method Selec
7. Date 5 8 2009 15 34 17 Last Modified By MR Y25USER Last Modified Date 05 08 2008 l Done SA Local intranet Incremental VaR Edit Screen 3 7 Process Description Following is the description of processes in Market Risk version 2 5 1 Positions Data POSITIONS DATA This module loads the positions data from stage table to FACT table if positions data is given as download POPULATION FACT table if market data is given as download Commodity COMMODITY FUTURE This module loads the commodity future curve from stage Future Curve CURVE POPULATION table to FACT table if commodity future curve is given as Population download Equity Corporate CORPORATE ACTIONS This module loads the corporate action data from Stage Actions Data DATA POPULATION table to FACT table Population Instruments OBLIGORS DATA This module loads the obligors details from stage table to Obligors Data POPULATION FACT table Population Instruments INSTRUMENT SCHEDULE This module loads the Instruments Schedule from stage Schedule Data POPULATION table to FACT table Population MR VaR Data Currency and Interest Rate This module does the Instrument Reclassification of Preparation Instruments Re classification instruments with risk factor type as Currency and Interest Rate Commodity and Equity This module does the Instrument Reclassification of Preparation Instruments Re classification instruments with risk factor type as Commodity and Equity Preparation Classification w
8. Factor Volatility Instruments Correlation Estimation Module and calculates the price of all the OTC Instruments available with the bank Along with the price calculation module also calculates the Greeks for all the option instruments and Modified Duration for all the bonds Estimation Model Monte Carlo Model for the model as defined by you Market Risk VaR Simulated_PL_Bucketing This module buckets the P amp L distribution as generated in Estimation Monte Carlo or Historical VaR Estimation Methodology for plotting the curve of P amp L distribution VaR Estimation defined by you added in the selected portfolio Table 1 Process Description Note e Hypothetical P amp L Hypothetical portfolio value at time t 1 is calculated based on the actual prices of the instruments as on time t 1 and the position held in the instruments at time t Hypothetical P amp L is calculated as the difference between the hypothetical portfolio value as of time t 1 and the portfolio value as of time t e Actual P amp L Actual portfolio value at time t 1 is calculated based on the actual prices of the instruments as on time t 1 and the position held in the instruments at time t 1 Actual P amp L is calculated as the difference between the actual portfolio value as of time t 1 and the portfolio value as of time t Oracle Financial Software Services Confidential Restricted 30 User Guide Oracle
9. Financial Services Market Risk Release 2 5 1 3 Oracle Financial Services Market Risk Solution UI and Process Description Oracle Financial Services Market Risk Release 2 5 1 estimates the market risk of a portfolio through the estimation of loss distribution based risk measures such as VaR CVaR Component VaR Marginal VaR Incremental VaR and so on It covers estimation of risk arising out of movements of multiple risk factors like interest rates equity prices commodity prices and exchange rates Once you have accessed the Oracle Financial Services Analytical Application Infrastructure OFSAAT product click Market Risk which is present on the left hand side LHS of the screen The Oracle Financial Services Market Risk Display Screen shows the list of modules related to Market Risk Solution on the left hand side LHS corner Oracle Financial Services Market Risk Windows Internet Explorer PE Financial Services Market Risk User gluser ORACCE Infodom amp Market Risk Reference Data Management Equity Risk Factor Selection Time Vertex Specification ZCYC Estimation Method Selection Interest Rate Model Selection Portfolio Management Incremental VaR Oracle Market Risk Display Screen 3 1 Equity Risk Factor Selection The first screen that comes up after clicking Equity Risk Factor Selection is the Equity Risk Factor Selection Display Screen It displays the list of equity risk factors
10. Financial Services Market Risk Release 2 5 1 3 8 Examining Results Creating and viewing of reports are described in detail in the Active Portal User Manual In order to examine results you have to check in the corresponding tables After execution is completed check the T2T logs and the Run Rule logs It can be found out from the log files whether the execution is a success or failed Errors will be displayed in the same log files The logs will also mention the name of the table in which the Output is populated You have to access the particular table to view the results The final outputs can also be viewed in the Reports section This can be accessed by clicking Information Delivery on the left pane of the OFSAAI Infrastructure Under that click Insight and then click Viewer to view all the reports Annexure A GENERATING DOWNLOAD SPECIFICATIONS Data Model for Market Risk Release 2 5 1 is available on customer request as an ERwin file Download Specifications can be extracted from this model Refer the whitepaper present in OTN for more details Oracle Financial Software Services Confidential Restricted 31 User Guide Oracle Financial Services Market Risk Release 2 5 1 ORACLE Oracle Financial Services Market Risk 2 5 1 User Guide August 2015 Version number 1 0 Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores CA 94065 U S A Worldwide Inquiries Phone 1 650 506 7000 Fax 1 650 506 7200
11. Oracle Financial Services Market Risk User Guide Release 2 5 1 August 2015 ORACLE FINANCIAL SERVICES User Guide Oracle Financial Services Market Risk Release 2 5 1 Contents l INIRODUGCIION zei aee neu nu E Dmm nate uEE ue MERE 1 1 ANTEE E s AEAN PEN AEA E AE IAS T N AIE AT E AI AA T ETA EF ENA EIE AI ET N E TN 1 2 KEEN 25 MNS TALEING THE EE 2 1 WIDER NIP OW Dates tr Ee ce Ee te ese e eee el ce cei e te ae E ae eee E 2 2 KONDIS OEE ADINE Tees net eS EE Ot PNG AIRSET EE ONSET OR ES De FEE Rf 3 ORACLE FINANCIAL SERVICES MARKET RISK SOLUTION UI AND PROCESS PES CRP La IEN 3 1 EQUITY RISK FACTOR SELECTION iitriesc siot s reos soa rera Pasa lex sad eer Ex pla E DO ania ees send a cix Ex te ECHO riv es 3 1 1 EQUITY Risk Factor Add SEEM E Jd sEQUITY RISK FACTOR VIEW SCIeelTu uiam aera a e nea d or e o er ran A ere xpo n o esu eu Ames 3d EQUITY RISK Eactor Edit SCreenassusstitstnstus is tco dece fte iode fatui odi teda itte odios deam ebe 3 2 TIME VERTEX SPECIFICATION 23s serviert Sa extre or Eon A Ova ues Pa E Re Ee Dua reu Dre cra es eu D osa o Le Duae up poa Uc Dua FO UP CORO Ee 320 TusciMethics Time Vertibesustasenites vitu mv touc nn m e sede 32 2 HOUSTON ee che T Tu m 3 3 ZCYC ESTIMATION METHOD SELECTION nocuit ad tct addu aca dea t dit bc ati de te a uu dau hu bte ak cas 3 3 1 ZCYC Estimation Method Selection Add Screen 3 3 2 ZCYC Estimation Method Selection View Screen
12. Reclassification This set of modules does the Reclassification of Asset Class MR VaR Data POSITION DATA This module loads the Position Data of Instruments from MR VaR Data MARKET INSTRUMENT This module loads the Instrument Parameter from stage MR VaR Data EQUITY INDEX DATA This module loads the Equity Index Data from stage Table MR VaR Data PORTFOLIO DATA This module loads the Portfolio data like VaR Limit and Actual P amp L from Stage Table to FACT Table MR VaR Data YIELD CURVE This module loads the Yield Curve Data from stage table to Preparation POPULATION FACT Table for all the Rating and Currency combinations for which you have selected the download option MR VaR Data CDS SPREAD This module loads the CDS Spread data from stage Table to Preparation POPULATION FACT Table MR VaR Data Interpolate CDS Spreads This module maps the given CDS spread to the standard Preparation time vertices as specified by you If the standard time vertices are not in the downloaded CDS Spread then spread values are interpolated for the intermediate time vertices MR VaR Data Pop Correlation AC This module populates the Funds and Benchmark Codes as Preparation Asset Class this module is purely for calculation purposes where correlation between Benchmark Codes Funds and Oracle Financial Software Services Confidential Restricted 29 User Guide Oracle Financial Services Market Risk Release 2 5 1 Risk Factors is required for Calculatin
13. Software Services Confidential Restricted User Guide Oracle Financial Services Market Risk Release 2 5 1 2 Installing the Solution Once the OFSAAI Infrastructure has been loaded the Market Risk solution has to be loaded To install Oracle Financial Services Market Risk refer to the Oracle Market Risk Solution Installer Manual 2 1 Model Upload In order to carry out the Model Upload click Unified Metadata Manager on the left pane of the OFSAAI Infrastructure Under that click Import Model to open the Business Model Upload screen Choose the type of Upload as New Upload Enter the Erwin XML File Path and click Upload and the model will get uploaded 2 2 Loading the data The uploading of data involves the loading of all the Stage tables The Stage tables that have to be loaded are You h tables stg dim bank instrument type stg dim commodity stg dim instrument contract stg dim mr asset stg dim stock index stg equity corporate actions stg fct bank positions stg fct cds spreads stg interest rate parameters stg mkt instrument contract stg mr risk factor statistics stg commodity future curve stg fct equity indices stg fct instrument schedule stg fct funds composition stg fct obligors details stg fct portfolio data stg fct yield curve ave to run the Slowly Changing Dimensions SCDs to populate the required DIM and FCT Oracle Financial Software Services Confidential Restricted 3 User Guide Oracle
14. TEQFYWDSFYVD17 2 User Info Liser MRY25USER Creation Date 24 Apr 2009 Last Modified By Last Modified Date 1 Done SA Local intranet Incremental VaR Add Screen 3 6 2 Incremental VaR View Screen The Incremental VaR view screen is displayed in the view mode To view an existing defined Incremental VaR Portfolio click the View button which is present on the RHS corner of the Incremental VaR Screen In order to View first select an existing record by activating the select button DI then click the View button present on the RHS corner of the screen The chosen Incremental VaR Portfolio is displayed and it cannot be edited Oracle Financial Software Services Confidential Restricted 26 User Guide Oracle Financial Services Market Risk Release 2 5 1 Incremental VaR Specification for View Microsoft Internet Explorer Incremental VaR Details Incremental Portfolio Name te stttt Reference Portfolio Run Execution Date 05 07 2008 Market Risk VaR Model Name Position Specification s Instrument ID Instrument Hame Instrument Type Position Type INSTCMOPTS V AN13 CMOP 1700 2036 USD CALL NCDEXRMSEEDJPR 6 2 2009 Commodity Option Short BSE MADRASCEM MADRASCEM INR Spot Equity Long BSE HP HP INR Spot Equity Long User Info User MRY25USER Creation Date 5 8 2009 15 34 17 Last Modified By MRV25USER Last Modified Date 05 08 2008 l Done J Local intranet Incremental VaR View Screen 3 6 3 Incremental VaR Edi
15. cification is not applicable if the Bootstrap Yield Curve is selected Sovereign and Money Market Asset Classes are always estimated using a bootstrapping procedure or obtained as a download On selection of either of these Interest Rate Asset Classes Spread over Sovereign Yield Curve icon will get de activated Oracle Financial Software Services Confidential Restricted 14 User Guide Oracle Financial Services Market Risk Release 2 5 1 Define ZCYC Eztimation Method Microsoft Internet Explorer Interest Rate Selection Currency Interest Rate amp sset Class Rating CCC ZCYC Estimation Method Selection Spread over Sovereign Yield Curve Bootstrap Yield Curve External Data User Info Created By MR 25USER Creation Date 11 May 2008 Last Modified By Last Modified Date ZCYC Estimation Method Selection Bootstrap Yield Curve Screen 3 3 6 External Data You can provide Zero Coupon Yield Curve as a download by selecting the External Data Spread specification is not applicable if the external data is selected Oracle Financial Software Services Confidential Restricted 15 User Guide Oracle Financial Services Market Risk Release 2 5 1 e Define ZCYC Eztimation Method Microsoft Internet Explorer Interest Rate Selection Currency xad Interest Rate Asset Class Rating CCC ZCYC Estimation Method Selection Spread over Sovereign Yield Curve Bootstrap Yield Curve 9 E
16. ction Add Screen 3 3 2 ZCYC Estimation Method Selection View Screen To view an existing ZCYC Estimation Method click the View button which is present as the ZCYC Estimation Method In order to View first select an existing record by activating the select button e then click the View button present on the right hand corner of the ZCYC Estimation Method The chosen ZCYC Estimation Method will be displayed in view mode and it cannot be edited Oracle Financial Software Services Confidential Restricted 11 User Guide Oracle Financial Services Market Risk Release 2 5 1 View ZCYC Eztimation Method Microsoft Internet Explorer Interest Rate Selection Currency ZCYC Estimation Method Selection Spread over Sovereign Yield Curve Bootstrap Yield Curve External Data Spread Specification Time Vertex Maturity Spread in basis points Vertex Spot Vertex2 1 Month Vertex3 3 Month Vertex4 6 Month Verte 12 Month Vertexb 15 Month Vertex 18 Month Vertexa 24 Month Vertexd 27 Month Vertex10 36 Month Vertex11 4 Year Time Vertex Spread Parallel Spread User Info Created By MRY 25USER Creation Date 05 04 2008 Last Modified By Last Modified Date l Dnne ZCYC Estimation Method Selection View Screen 3 3 3 ZCYC Estimation Method Selection Edit Screen J oral intranet In order to edit ZC YC Estimation Method first select a defined estimation method that needs to be e
17. dited by clicking the select button DI then click the Edit button L4 present at the right hand corner of the ZCYC Estimation Method Screen Under Edit screen you can only modify ZCYC Estimation Method Selection the changes can only be done to the previously defined ZCYC Estimation Method The Interest Rate Selection part cannot be edited or changed You are free to change the estimation method from spread over sovereign to any other Bootstrap or External Data or can change the defined spread specification from time vertex spread to parallel spread Once the changes are made the screen needs to be saved using the Save button displayed at the end of the page Oracle Financial Software Services Confidential Restricted 12 User Guide Oracle Financial Services Market Risk Release 2 5 1 Edit ZCYC Eztimation Method Microsoft Internet Explorer Interest Rate Selection Currency Interest Rate Asset Class Rating ASA ZCYC Estimation Method Selection Spread over Sovereign Yield Curve Bootstrap Yield Curve External Data Spread Specification Time Vertex Spread Parallel Spread Time Vertex Maturity Spread in basis points Vertex Spot 50 Vertex2 1 Month 100 Vertex3 3 Month 125 Vertex4 6 Month 100 Vertex5 12 Month 140 Vertex6 15 Month 160 Vertex 18 Month 150 Vertexa 24 Month 170 Vertex9 27 Month 180 Vertex10 35 Month 180 Vertex11 4 Year 200 User Info Created By MRY25USER Creation Date
18. fining a portfolio are configurable as per your preference Accordingly a position may belong to more than one portfolio You may define a portfolio as a combination of multiple levels under each dimension Define New Portfolio Microsoft Internet Explorer Portfolio Definition Portfolio Name 2 Dimension Browser Web Page Dialog Filter Specificatior Hierarchy Dimensions Here Available Hierarchies Selected Hierarchies Portfolio Description Currency Market Risk Asset Class Line of Business Trading Desk Legal Reporting Bank Instrument Type Market Risk Instrument Types Counterparty Market Risk Asset MR Bank Asset Class Close http 10 184 74 54 1985 reveleus MarketRisk hierTree jsp infodom MRV25INFO amp strLocale en LISe a Local intranet User Info MRY25USER Creation Date 24 Apr 2009 EN iavaccrink l eJ neal intr anat Portfolio Management Add Screen Under each dimension one or multiple nodes can be selected A combination of different dimensions and different nodes make a unique portfolio Once the dimensions are selected from the Dimension browser depending upon the selection leaf nodes of each dimension needs to be selected For example from Bank Instrument Type Browser you need to select one or more instruments which need to be included in a particular portfolio Oracle Financial Software Services Confidential Restricted 22 User Guide Oracle Financial Services Market
19. g of VaR and other Risk Measures MR VaR Data RISK FACTOR This module loads the Variance Co variance Mean and Preparation STATISTICS Correlation Data between all the Risk Factors from stage POPULATION table to FACT table This module will be useful if you want to give the Variance Co variance Mean and Correlation data as download MR VaR Data RunningAccCalc This module calculates the Running Accumulator for Asian Preparation Option and updates the value for the corresponding instrument MR VaR Data ZCY CEstimation This module calculates the Yield Curve for all the Rating Preparation and Currency combinations for which you have selected either Bootstrap method or choose to apply spread over Sovereign Yield Term Structure Preparation all the Commodity futures traded in the market Interest Rate IRMeanReversion This module calculates the Mean Reversion Rate for Mean Reversion Interest Rate instrument Estimation Risk Factor EWMA 0 94 This module first fetches the historical data of all the Risk Volatility Factors given by you and applies the corporate action if Correlation available to the equities Once the corporate action has been Estimation applied then the module will check for the missing value and fill up the missing values using the method as selected by you Thereafter the module calculates the Variance Co variance Mean and Correlation for all the Risk Factors Pricing OTC OTCPricing This module uses the output of Risk
20. ierarchy browser e Market Risk VaR Model Name Select single market risk VaR model name from the market risk VaR model hierarchy browser to which this particular Incremental VaR model will be mapped e Position Specifications In order to select position specifications click the Add button B situated on the RHS corner of the Position Specifications section in the Incremental VaR screen Multiple instruments mapped to the portfolio can be selected from the hierarchy browser but only one instrument at a time can be selected The following parameters of each instrument need to be specified for the purpose of computing incremental VaR Units Position Type Oracle Financial Software Services Confidential Restricted 25 User Guide Oracle Financial Services Market Risk Release 2 5 1 A Incremental VaR Specification Microsoft Internet Explorer 3i Hierarchy Browser Microsoft Internet Expl E E A Search Reference Portfolio ER EN Instruments 1to 50 of 2266 Instruments Market Risk VaR Model Name Er 3f Instruments HP INR MADRASCEM INR ORA CLEFIN INR E SUBEXLTD INR EQFYVOP 133 426 USD PUT INSTEQFYWDSFYVD24 1 27 2010 EGFWWOP 245 526 INR CALL INSTEQFYYDSFYVD1 5 24 2010 EQFYYOP 2290 026 INR PUT INSTEGFVVDSFVVD18 124 9 2009 EQFYVOP 133 426 USD PUT INSTEQFYWDSFVVD8 8 29 2009 EQFYVOP 26 086 USD CALL INSTEQPADSPAD22 8 10 2010 EQFYYOP 125 826 INR CALL INSTEQFYYDSFYVD22 119 2010 gs EQFYVOP 2290 026 INR PUT INS
21. iew an existing Interest Rate Model click the View button which is present on the right hand corner of the Interest Rate Model Selection Screen In order to View first select an existing record by activating the select button then click the View button present on the right hand corner of the screen The chosen Interest Rate Model will be displayed in view mode and it cannot be edited Oracle Financial Software Services Confidential Restricted 18 User Guide Oracle Financial Services Market Risk Release 2 5 1 A View Interest Rate Model Microsoft Internet Explorer Currency Selection Currency Interest Rate Model Mapping Interest Rate Asset Class Interest Rate Model Sovereign Rating Hull vhite Government Agency Black Process User Info Created By MRY25USER Creation Date 05 04 2008 Last Modified By Last Modified Date Interest Rate Model Selection View Screen 3 4 3 Interest Rate Model Edit Screen In order to edit an Interest Rate Model first select a defined Interest Rate model that needs to be edited by clicking the select button DI then click the Edit button L4 present at the right hand corner of the Interest Rate Model Selection Screen Under Edit screen you can only add or modify the already defined models for a particular Asset Class The currency once defined cannot be edited You are free to change the model from any one to the other model Once the changes are made the screen needs to be sa
22. imation Methods defined in that Asset Class 3 3 1 ZCYC Estimation Method Selection Add Screen In order to add or define a new ZCYC Estimation Method click the Add button ES in the ZCYC Estimation Method Display Screen Currency Selection The currency browser will display all available currencies for selection A single currency needs to be selected from the currency browser multiple selection of currency is not allowed e Interest Rate Asset Class The Interest Rate Asset Class drop down list will display all the interest rates defined in the currency selected A single asset class needs to be selected from the drop down The Available Interest Rate Asset Classes are AAA AA A BBB BB B CCC D Government Agency Money Market Sovereign Swap Oracle Financial Software Services Confidential Restricted 10 User Guide Oracle Financial Services Market Risk Release 2 5 1 e ZCYC Estimation Method Selection There are 3 methods available for ZCYC estimation Spread Over Sovereign Bootstrap Yield Curve External Data From the above 3 methods a single method needs to be selected for the defined currency interest rate combination se Interest Rate Selection Currency W Interest Rate Asset Class Rating AAA v sc ZCYC Estimation Method Selection Spread over Sovereign Yield Curve O Bootstrap Yield Curve External Data Save Close ZCYC Estimation Method Sele
23. ith risk factor type as Currency Oracle Financial Software Services Confidential Restricted 28 User Guide Oracle Financial Services Market Risk Release 2 5 1 Preparation Classification Preparation Quanto Options Preparation Classification MR VaR Data Asset Class Classification This set of modules does the Reclassification of Asset Class Preparation Simple Derivatives on Sovereign MR VaR Data Asset Class Classification This set of modules does the Reclassification of Asset Class Preparation Compound Derivatives on Sovereign Preparation Preparation based on Rating MR VaR Data Asset Class Classification on This set of modules does the Reclassification of Asset Class Preparation Rating for Simple Derivatives MR VaR Data Asset Class Classification on This set of modules does the Reclassification of Asset Class Preparation Rating for Compound Derivative MR VaR Data Asset Class Reclassification This set of modules does the Reclassification of Asset Class Preparation for Equity MR VaR Data Asset Class Reclassification This set of modules does the Reclassification of Asset Class Preparation for Simple Equity Derivatives MR VaR Data Asset Class Reclassification This set of modules does the Reclassification of Asset Class Preparation for Compound Equity Derivatives MR VaR Data Asset Class Reclassification This set of modules does the Reclassification of Asset Class Zeg CS e ene ren e Reni t t Ci MR VaR Data Asset Class
24. ket Risk is concerned with the estimation of market risk for the portfolios held by the bank These portfolios may belong to the trading book or the banking book Oracle Financial Services Market Risk enables a bank to estimate the market risk of a portfolio based on its underlying positions through the estimation of risk measures such as Value at Risk Conditional Value at Risk and so on It also enables a bank to carry out Stress Testing and Back Testing procedures for validation Risk measures based on VaR have multiple applications the scope of Oracle Financial Services Market Risk is not only restricted to Regulatory Reporting but also extends to the internal reporting needs of the bank Oracle Financial Services Market Risk supports the estimation of market risk of user defined portfolios covering a wide range of instruments The scope of Market Risk Release 2 5 1 will be restricted to the testing following areas Oracle Financial Software Services Confidential Restricted 1 User Guide Oracle Financial Services Market Risk Release 2 5 1 e Analytic Method e Cash flows Estimation and mapping e Back testing e Constant Maturity Function Daily Pricing Historical Simulation e Incremental VaR Mean Reversion Rate Monte Carlo Simulation Scenario VaR Calculation e Stress Testing e VaR Model Pricing e Volatility Model e Zero Coupon Yield Curve Functional Verification e Performance Issues Oracle Financial
25. l Services Market Risk User gluser ORACLE Infodom CRECINFC Portfolio Management v Search and Filter Market Risk El Reference Data Management i Equity Risk Factor Selection Time Vertex Specification v ZCYC Estimation Method Selection Interest Rate Model Selection Portfolio Management Incremental VaR Portfolio Name List of Portfolios k E NEN Es Portfolio Name Portfolio Description Creation Date Portfolio Management Display Screen 3 5 1 Portfolio Management Add Screen In order to add or define a new Portfolio Management click the Add button in the Portfolio Management Screen e Portfolio Name Give an appropriate portfolio name e Portfolio Description Describe the portfolio in brief e Dimensions In order to add the dimensions to the portfolio click the Add button 4 in the Filter Specification section in Portfolio Management Add Screen e Once you click the add button Dimension Hierarchy Browser will open A portfolio is a combination of one or more following dimensions e Currency e Market Risk Asset Class e Line of Business e Trading Desk e Legal Reporting e Bank Instrument Type e Market Risk Instrument Types e Counterparty e Market Risk Asset Oracle Financial Software Services Confidential Restricted 21 User Guide Oracle Financial Services Market Risk Release 2 5 1 e MR Bank Asset Class The dimensions for de
26. onfidential Restricted 7 User Guide Oracle Financial Services Market Risk Release 2 5 1 a Equity Risk Factor Edit Microsoft Internet Explorer Currency Selection Benchmark Stock Index Mapping Benchmark Stock Index NASDAQ jc Custom Equity Risk Factor Selection List of Equity Risk Factors ES 1103 of 3 M E D A L NASDAQ Zoran Crop E NASDAQ Apple cm Fees User MRY25USER Creation Date 0445 2009 Last Modified By MR Y25USER Last Modified Date 6 May 2009 Equity Risk Factor Selection Edit Screen 3 2 Time Vertex Specification This particular screen provides the choice of selecting the time vertex for all the risk factors One of the following time vertexes needs to be selected e Risk Metrics Time vertices e Custom Time vertices 3 2 1 Risk Metrics Time vertices The risk matrices time vertex screen is the default display screen for the time vertex specification screen The risk matrices are the standard time vertices which are not allowed to be edited It specifies the time on 18 standard time vertices following the specific time unit that 1s days month and year Oracle Financial Software Services Confidential Restricted 8 User Guide Oracle Financial Services Market Risk Release 2 5 1 Oracle Financial Services Market Risk Windows Internet Explorer Financial Services Market Risk ORACCE Infodom CRE amp Market Risk Reference Data Management Time Vertex
27. pped to the portfolio Oracle Financial Software Services Confidential Restricted 24 User Guide Oracle Financial Services Market Risk Release 2 5 1 Oracle Financial Services Market Risk Windows Internet Explorer JE Financial Services Market Risk User gluser ORACLE IMOoOrmauon main A infodom Incremental VaR Y Search and Filter amp Market Risk Reference Data Management Equity Risk Factor Selection Run Execution Date Market Risk VaR Model Name Time Vertex Specification ZCYC Estimation Method Selection B tal VaR Detail Interest Rate Model Selection MED E LEE NE x P Portfolio Management Incremental Portfolio Name Reference Portfolio scopes Created By Creation Date Last Modified By Incremental Portfolio Name Reference Portfolio Incremental VaR Incremental VaR Display Screen 3 6 1 Incremental VaR Add Screen In order to add or define a new Incremental VaR portfolio click the Add button ES in the Incremental VaR Screen e Incremental Portfolio Name Give an appropriate incremental portfolio name e Run Execution Date Select an appropriate Run Execution date from the calendar browser which will be the fic mis date for you Reference Portfolio For a specific incremental portfolio single existing portfolio can be selected along with multiple instruments mapped to it from the h
28. reen The chosen portfolio will be displayed in view mode and it cannot be edited Oracle Financial Software Services Confidential Restricted 23 User Guide Oracle Financial Services Market Risk Release 2 5 1 View Portfolio Microsoft Internet Explorer Portfolio Definition Portfolio Name Non Exotic Simple Instruments Portfolio Da Non Exotic Simple Instruments Portfolio Portfolio Description Filter Specification Dimensions Market Risk Instrument Types 150121 EP B B j Commodity Futures Commodity forward Commodity Option Spot Commodity Equity Futures User Info MRY 25USER Creation Date 05 07 2009 41 Dna l sa A aral intr sneak Portfolio Management View Screen 3 5 3 Portfolio Management Delete Screen In order to delete a particular portfolio first select an existing record by activating the select button e and then click the delete button mi present on the RHS corner of the screen The selected portfolio will get deleted a multiple deletion is not allowed under this screen 3 6 Incremental VaR Incremental VaR is calculated for all portfolios which are previously defined under portfolio management screen and for which risk measures have been calculated An incremental portfolio is defined based on the following parameters reference portfolio execution date VaR model and instruments Position specific details like number of units and position type are required for each instrument ma
29. rency A single currency needs to be selected from the currency browser e Benchmark Stock Index The indices corresponding to the selected currency will display in the benchmark stock index browser A single Benchmark Stock Index needs to be selected from the browser e Custom Equity Risk Factor Selection It will display all the custom equities denominated in the selected currency in equity browser You are authorized to make multiple selections or deletions of custom equities Oracle Financial Software Services Confidential Restricted 5 User Guide Oracle Financial Services Market Risk Release 2 5 1 En Equity Risk Factor Selection Microsoft Internet Explorer Currency Selection Currency Benchmark Stock Index Mapping Benchmark Stock Index ie Equity User Info User MRY25USER Creation Date 24 Apr 2009 Last Modified By Last Modified Date Equity Risk Factor Selection Add Screen Benchmark stock index mapping and custom equities selection are editable under this screen Once an Equity Risk Factor is defined under this screen it cannot be deleted 3 1 2 Equity Risk Factor View Screen To view an existing Equity Risk Factor click the View button EJ which is present in the Equity Risk Factor Screen In order to View first select an existing record by activating the select button then click the View button present on the right hand corner of the Equity Risk Factor Screen The chosen Equity risk fac
30. sures such as VaR CVaR Component VaR Marginal VaR Incremental VaR and so on It covers estimation of risk arising out of movements of multiple risk factors like interest rates equity prices commodity prices and exchange rates Oracle Financial Services Market Risk Release 2 5 1 serves the following additional functionalities to the product e Enhanced instrument coverage e Calculation of Implied volatility for instrument pricing e Calculation of additional risk measures Marginal and Incremental VaR e Calculation of mean reversion rate and speed e Calculation of Option Greeks e Impact of corporate action e Use of GARCH 1 1 for volatility computation e Calculation of Modified Duration In addition it also renders use of Oracle Financial Services Modeling framework for stress testing of market risk estimates 1 1 Purpose The objective of this document is to provide a detailed procedure for working on Oracle Financial Services Market Risk 2 5 1 The specifications include details on installation loading user interface inputs execution and the outputs reported It enables the user of the document to understand and use Oracle Financial Services Market Risk 2 5 1 product effectively The target audiences for the following User Guide are 8 Intended User Customer e Functional Engineering Group Product Management Group e SQA e Project Manager Team e Senior Management 1 2 Scope Oracle Financial Services Mar
31. t Screen In order to edit an Incremental VaR screen first select a defined Incremental VaR portfolio that needs to be edited by clicking the select button iw then click the Edit button LA present at the RHS corner of the Incremental VaR Display Screen Under Edit screen you can change the execution date and check for incremental VaR All the dimensions under position specification column can be edited or deleted for a given Incremental VaR portfolio The reference portfolio and VaR model name once defined cannot be edited You are free to make changes to the number of units and position type for a particular instrument mapped to the defined portfolio Once the changes are made the screen needs to be saved using the Save button displayed at the end of the page Oracle Financial Software Services Confidential Restricted 27 User Guide Oracle Financial Services Market Risk Release 2 5 1 Incremental VaR Specification for Edit Microsoft Internet Explorer m m incremental VaR Details Incremental Portfolio Name te sttt Reference Portfolio Run Execution Date 05 07 2008 Market Risk VaR Model Name ss Position Specification Instrument ID Instrument llame Instrument Type Units Position Type INSTCMOPTSVAN13 CMOP 1700 2036 USD CALL NCDEXRMSEEDJPR 6 2 2009 Commodity Option 2 BSE MADRASCEM MADRASCEM INR Spot Equity 23 Short Long BSE HP HP INR Spot Equity 43 Long v User Info Liser MR Y25USER Creation
32. that are already defined in a particular currency In this screen all equity risk factors which are specific to you will be displayed corresponding to a particular currency Oracle Financial Software Services Confidential Restricted 4 User Guide Oracle Financial Services Market Risk Release 2 5 1 Oracle Financial Services Market Risk Windows Internet Explorer JE Financial Services Market Risk User gluser e RN al iS infodom Equity Risk Factor Selection amp Market Risk El Reference Data Management Equity Risk Factor Selection Time Vertex Specification ZCYC Estimation Method Selection Interest Rate Model Selection Portfolio Management Incremental VaR GONE Created By Creation Date Last Modified By Last Modified Date Equity Risk Factor List ES Equity Risk Factor Selection Display Screen The screen also gives the search option for finding or filtering the risk factor on the basis of currency selected from the currency browser A particular currency can be entered or selected vos from the currency browser in order to filter the search Once the selection is made from the currency browser all the Equity risk factors denominated in that particular currency is displayed 3 1 1 Equity Risk Factor Add Screen In order to add or define a new Equity Risk Factor click the Add button in the Equity Risk Factor Screen The following selection needs to be made e Cur
33. tion Infodom amp Market Risk Reference Data Management Currency Interest Rate Asset Class Equity Risk Factor Selection ZCYC Estimation Method Time Vertex Specification ZCYC Estimation Method Selection ZCYC Estimation Method ES K Interest Rate Model Selection interest Rate Asset Class ZCYC Estimation Method Created By Creation Date Last Modified By Last Modified Date danner WEEN Incremental VaR ZCYC Estimation Method Selection Display Screen The screen also gives the option for searching or filtering the ZCYC estimation method selection on the basis of currency Interest Rate Asset Class and ZCYC Estimation Method The search can be done by selecting any one or more parameters from the above 3 and then by clicking the search button A particular currency can be entered or selected from the currency browser or a particular Interest Rate Asset Class can be selected from the drop down or a particular ZCYC method can be selected from the drop down in order to filter the search Once the selection 1s made from the currency browser all the ZCYC Estimation Method defined in that particular currency is displayed Once the selection is made from Interest Rate Asset Class dropdown it displays all the ZCYC Estimation Method defined in that Asset Class Once the selection is made from Interest Rate Asset Class drop down it displays all the ZCYC Est
34. tor will be in view mode and cannot be edited Oracle Financial Software Services Confidential Restricted 6 User Guide Oracle Financial Services Market Risk Release 2 5 1 Equity Risk Factor View Microsoft Internet Explorer Currency Selection Currency Benchmark Stock Index Mapping Benchmark Stock Index Yew York Stock Exchange Custom Equity Risk Factor Selection List of Equity Risk Factors ETT fF A 2 User Info User MR Y25USER Creation Date 05 05 2009 Last Modified By Last Modified Date Equity Risk Factor Selection View Screen 3 1 3 Equity Risk Factor Edit Screen To edit Equity Risk Factor first select single currency that needs to be edited by clicking the select button e then click the Edit button 4 present at the right hand corner of the Equity Risk Factor Screen Under the Edit screen you can change the Benchmark Stock Index for that particular currency and can also add or delete the Equity Risk Factors as per the requirements To add the Equity Risk Factors in the Edit screen click the add button B in the Equity Risk Factor Edit Screen To delete the Equity Risk Factor first you need to select a particular custom equity which needs to be deleted by clicking the select button then click the delete button DI to delete a selected Custom Equity Once the changes are made the screen needs to be saved using the Save button displayed at the end of the page Oracle Financial Software Services C
35. ved using the Save button displayed at the end of the page Oracle Financial Software Services Confidential Restricted 19 User Guide Oracle Financial Services Market Risk Release 2 5 1 Edit Interest Rate Model Microsoft Internet Explorer Currency Selection Currency Interest Rate Model Mapping Interest Rate Asset Class Interest Rate Model Government Agency Black Process Sovereign Rating Hull White Rating BBB Rating AA Rating C mimm Swap Rating B Rating amp Rating AAA Money Market Rating CCC Rating D Rating CC Rating BB Je 129 Se User Info Created By MRY25USER Creation Date 05 04 2009 Last Modified By Last Modified Date Interest Rate Model Selection Edit Screen 3 5 Portfolio Management Under this screen a portfolio needs to be defined on the basis of multiple dimensions A portfolio will be a combination of currency MR asset class Line of business Trading Desk Legal Reporting Bank Instrument Type Market Risk Instrument Type Counterparty Market Risk Asset and MR Bank Asset Class A portfolio will be defined on 1 or more dimensions along with one or more leaf nodes Once a portfolio is defined it can be deleted but it cannot be edited Oracle Financial Software Services Confidential Restricted 20 User Guide Oracle Financial Services Market Risk Release 2 5 1 Oracle Financial Services Market Risk Windows Internet Explorer PE Financia
36. xternal Data User Info Created By MRY25USER Creation Date 11 May 2009 Last Modified By Last Modified Date l Done Local intranet ZCYC Estimation Method Selection External Data Screen 3 4 Interest Rate Model Selection Under this screen an interest rate model needs to be mapped for each currency interest rate combination If a Zero Coupon Yield Curve Estimation Method has not been specified for all the Interest Rate Asset Classes in a particular currency then that currency should not appear for selection in the Currency Browser Oracle Financial Software Services Confidential Restricted 16 User Guide Oracle Financial Services Market Risk Release 2 5 1 Oracle Financial Services Market Risk Windows Internet Explorer JE Financial Services Market Risk User gluser ORACLE Infodom Ic CINFC Interest Rate Model Selection Y Search and Filter amp Market Risk El Reference Data Management i Equity Risk Factor Selection i Time Vertex Specification List of Selected Interest Rate Models ES AWA kB GE ZCYC Estimation Method Selection Created By Creation Date Last Modified By Last Modified Date Currency Interest Rate Model Selection Portfolio Management Incremental VaR Interest Rate Model Selection Display Screen 3 4 1 Interest Rate Model Add Screen In order to add or define a new Interest Rate Model click the Add button ES in the Interest Rate Model Screen
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