CapeTools IR Risk
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In total there are 9 functions present within the CapeTools IR Risk category of functions.
General Description
Functions to compute detailed interest rate risk analysis on a portfolio of deal types.
All of these reports take a Structure object which is created via the CreateStructure function.
A structure object can contain object deals created from the following categories of functions :
The following types of YieldCurve risk reports can be constructed :
The Gamma report contains all the information that the Delta report does.
YieldCurve risk is conducted by first identifying the points within the yieldcurve that all the deals within the structure object are sensitive to.
Then these points are bumped and all the deals repriced. Delta and/or Gamma risk is then computed and stored. Functions within the CapeTools Query IR Risk category of functions are then used to display the generated risk number for either all deals or a user-defined criteria.
The following types of VolCurve risk reports can be constructed :
The Volga report contains all the information that the Vega report does.
VolCurve risk is conducted by first identifying the points within the VolCurve that all the deals within the structure object are sensitive to.
Then these points are bumped and all the deals repriced. Vega and/or Volga (second derivative) risk is then computed and stored. Functions within the CapeTools Query IR Risk category of functions are then used to display the generated risk number for either all deals or a user-defined criteria.
These risk reports can be expensive (in time) especially for large portfolios and so the following functions can be used to read/write the internal state of any of the 5 risk reports above to a file.
These functions are useful for archiving risk reports or to quickly read a risk report in and then apply the same risk analysis one would normally do using the functions present within the CapeTools Query IR Risk category of functions.
The CreateSABRReport() is an very useful report as you can specify any of the three SABR parameters ('ALPHA', 'BETA' and 'RHO').
If the underlying VolCurve that is passed to the VegaRiskReport or VolgaRiskReport is a SABRVolCurve object that you will have realistic movement within the interest rate volatility smile than that of using the ExpiryKVolMatrix or ATMVolMatrix VolCurve objects. Normally when the At-The-Money volatility is bumped by 0.01, for example, the volatility smile does not move by 0.01 at all points. Traditional methods of bumping each point by 0.01 do not give a realistic movement of the volatility smile. The SABRVolCurve object captures this dynamic movement.
Function list.
- CreateDeltaReport - Creates a Delta report object given a Structure object and a shift parameter.
- CreateGammaReport - Creates a Gamma report object given a Structure object, a market shift and a gamma shift.
- CreateSABRReport - Creates a SABR report object given a Structure object which has embedded within it a SABR VolCurve object.
- CreateVegaReport - Creates a Vega report object given a Structure object and a shift parameter.
- CreateVolgaReport - Creates a Volga report object given a Structure object, a vol shift and a volga shift.
- ReadVCRiskReport - Reads a saved VolCurve risk report from file.
- ReadYCRiskReport - Reads a saved Yieldcurve risk report from file.
- SaveVCRiskReport - Saves a generated VolCurve risk report to file.
- SaveYCRiskReport - Saves a generated YieldCurve risk report to file.
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