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Insight Risk [Market Risk] - Technical Guide Release R15.000 June 2015
©2015 Temenos Headquarters SA - all rights reserved. Warning: This document is protected by copyright law and international treaties. Unauthorised reproduction of this document, or any portion of it, may result in severe and criminal penalties, and will be prosecuted to the maximum extent possible under law.
Table of Contents Introduction
4
Purpose of this Guide Intended Audience
4 4
System Requirements
5
Hardware Software
5 5
Architectural Overview
6
Web Server - Internet Information Services (IIS)
7
Enable IIS Security IIS configuration if working on (64-bit) operating system DefaultApp Pool - Network service Uninstall Before Reinstall Installing Insight Risk Application IIS Configuration after Installation Adding User in Insight Risk Database Configuring Market-Risk module in Insight Risk Market Risk - Home Page
7 8 9 10 10 14 15 18 18
Reference Data
20
Currencies Data Publishers Interpolation Methods Market Curves Market Indexes Risk Factor Methods Source Types Volatility Types Confidence Factors Statistical Distribution Calculation Criteria Trading Units Instruments TermStructure Code
20 20 20 20 21 21 21 21 22 22 22 22 23 23
Yield Curve Modelling
24
Dash Board View Term Point View Chart Display View Interpolated Yields
24 25 26 27
Value At Risk
28
Volatilities Correlations Price Histories Setting VaR Parameters Dash Board View Parametric VaR Monte Carlo VaR Historical VaR Marginal and Incremental VaR Marginal VaR Incremental VaR Stress Testing Scenario Building Interface Debt Pricing
28 28 29 30 30 31 31 32 33 33 33 34 34 36
Bond Pricing FRN Pricing Updating Bond Details
36 37 38
Market Risk - Tech Guide - Release R15.000 - Page 2 of 45
Adding Benchmark
39
Market Risk Reports
40
Value At Risk Report Holdings - Non-Cash Report Installing Insight Risk Updates Exception Handling System Overview Exception Handling Process
Market Risk - Tech Guide - Release R15.000 - Page 3 of 45
41 41 42 45 45
Introduction Purpose of this Guide The purpose of this document is to describe the steps for the installation of the Insight Risk - Market Risk application and also to set up the parameter tables related to Market Analytics.
Intended Audience The guide intended for all levels of business users who will install and maintain the Insight Risk product.
Market Risk - Tech Guide - Release R15.000 - Page 4 of 45
System Requirements Hardware l
Intel based server with a minimum of 2 x 3GHz processor with ability to add additional processors as required
l
16 GB RAM, allowing for inclusion of additional memory as required
l
320 GB Hard drive
Note that the precise server configuration will depend upon processing volumes.
Software T24 Software l
T24 Banking Server
l
DW.Export for Insight-Risk
Server Software l
Microsoft Windows Server 2003 Enterprise Edition or later Microsoft .Net Framework 3.5
l
Microsoft Internet Information Services 6.0 or later
l
Microsoft SQL Server 2008 Enterprise Edition or higher (with latest SP installed)
l
Microsoft SQL Server Reporting Services (SSRS) 2008 (component of SQL Server)
l
Microsoft Internet Explorer 7.0 or later
Client PC Software l
Microsoft Windows XP or later
l
Microsoft Internet Explorer 7.0 or later
Market Risk - Tech Guide - Release R15.000 - Page 5 of 45
Architectural Overview
As a standard interface Insight Risk is interfaced with T24 using DW.EXPORT. However, interfacing with other sources could be possible with additional development.
Market Risk - Tech Guide - Release R15.000 - Page 6 of 45
Web Server - Internet Information Services (IIS) Enable IIS Security To setup IIS Security features in order to enable the required authentication: l
Go to Control Panel Programs Programs and Features Turn Windows features on or off and enable all the security features for IIS and restart the system.
l
Go to C:\Windows\System32\inetsrv\config\applicationHost.config
Market Risk - Tech Guide - Release R15.000 - Page 7 of 45
l
Search for authentication Section Group name and set overridemodedefault= Allow w here it was earlier set as œdeny .
IIS configuration if working on (64-bit) operating system l
Enable 32 bit application in Default App pool in Internet manager Goto->run->inetmgr->app pool->advanced setting
Market Risk - Tech Guide - Release R15.000 - Page 8 of 45
l
In advanced setting set the œenable 32-bit application=true
DefaultApp Pool - Network service l
Set default Application pool identity as Network Service
Market Risk - Tech Guide - Release R15.000 - Page 9 of 45
This section shows how to install the Market Risk Application and the Reports deployment software of Insight Risk, which will enable the user to access the Market-Risk module via the Insight Risk Application menu. There will be a Database called InsightRiskDB and two MSIs namely “ Insight-Risk Market Risk Deploy.msi and Insight-Risk Reports Deployment.msi released along with the package. It is recommended to take the backup of InsightRiskDB Database whenever the reports are run. It is recommended to deploy the Insight Risk and Reports deployment MSI in the following way.
Uninstall Before Reinstall If you have already installed the installation software then first go to Control Panel and use the Add or Remove Programs or the Programs Uninstall a program option depending on the operating system version. Next, locate and select the Insight-Risk Market Risk m odule and then either Remove or Uninstall again depending on the operating system version. Repeat these steps for the removal of Insight-Risk Reports and Data.
Installing Insight Risk Application Sign onto the Insight Risk Server as a local Administrator account, then run the Insight-Risk Market Risk Deploy.msi to install the Market Risk module. l
You will then be prompted with an installer splash screen from the installation setup wizard.
Market Risk - Tech Guide - Release R15.000 - Page 10 of 45
l
In the above screen shot, click the Next button to continue the Insight Risk installation and then confirm the installation by clicking Next button again to install it in the default location.
l
The below screen shot shows the progress of the Market Risk Installation setup.
Market Risk - Tech Guide - Release R15.000 - Page 11 of 45
l
Complete the Web.config Configuration by setting SQL Server, Report Server etc...
Market Risk - Tech Guide - Release R15.000 - Page 12 of 45
l
Next, run the Insight-Risk Reports Deployment.msi to install the Market-Risk Reports.
l
You will be prompted with an installer splash screen from the installation setup wizard, click Next to continue the installation.
l
You will be prompted with the Server Settings screen. Set SQL Server name, Insight Risk Database, and ReportServer in which database and server it is located.
Market Risk - Tech Guide - Release R15.000 - Page 13 of 45
l
Click the Ok button to continue the installation.
l
On the Reports & Folder Settings page select the Default instance and clicking the Close and Continue button to deploy the MarketRisk reports.
IIS Configuration after Installation l
Go to->inetmgr->select our installed application->authentication
Market Risk - Tech Guide - Release R15.000 - Page 14 of 45
Adding User in Insight Risk Database l
Restore TRiskDB to the SQL Server as below.
Market Risk - Tech Guide - Release R15.000 - Page 15 of 45
l
Go to the User table in TRiskDB, Right Click User table and select the Edit option as below:
l
Add the current Domain Windows User and assign the RoleID as 3 and Display name as below
l
If the application is installed in a system with XP windows configuration or more lower versions, add the below login.
Market Risk - Tech Guide - Release R15.000 - Page 16 of 45
l
Where [MAAD10912505] refers to the machine name, the sqlserver will contain the corresponding machine name and give sysadmnin roles to the [machine\ASPNET] login.
Market Risk - Tech Guide - Release R15.000 - Page 17 of 45
Configuring Market-Risk module in Insight Risk Market Risk - Home Page Insight Risk home page provides the user a complete summary of the portfolio architecture and can drilldown to individual holdings within each portfolio (called Trading Unit in the System). We can expand the trading unit by clicking the + button to know the list of child trading units and by clicking the select button we can Re-price and display Holdings of the selected Trading Unit /Portfolio.
By clicking the Select button, we can see the list of holdings available for that trading unit/Portfolio.
Market Risk - Tech Guide - Release R15.000 - Page 18 of 45
We can display the cash flow of the individual or all the Holdings and also re-price the individual or all the holdings by clicking the re-price all holdings with the settlement date.
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Reference Data All the calculations setups and configurations are done using the reference data tabs. Reference data is maintained for pre defined risk calculation criteria. In Insight Risk (Market Risk) module, following reference data have been provided.
Currencies Can be used for defining currency code, description and day count basis (Pre-Defined)
Data Publishers This can be used to define various combination of Holding Period and Confidence Factors based on user requirement to calculate VaR
Interpolation Methods Pre defined to linear interpolation method and Cubic Spline method.
Market Curves This can be used to create various market curves for individual currency under marked Indexes such as LIBOR, MIBOR, etc..,
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Market Indexes Various indexes can be created based on the market and Banks portfolio requirements such as House, LIBOR and Treasury etc¦
Risk Factor Methods Insight Risk uses a pre defined cash flow mapping methodology for cash instruments are âweighted duration methodâ and cash
Source Types Source Types can be modified to add Term point source for term structure construction
Volatility Types Insight Risk uses a pre defined methodologies for volatility and correlation Calculation => œStd Deviation of price and log changes .
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Confidence Factors Used for defining confidence factors for data publishers based on the requirements.
Statistical Distribution Insight Risk has pre defined Normal Distribution method.
Calculation Criteria Calculation criteria are to be updated for all portfolio / Trading Unit for VaR calculation. During VaR calculations the values are picked up from this table.
Trading Units Here we need to define / set up trading units and portfolio hierarchy.
l
Identifier “ Trading Unit ID
l
Description “ Trading unit description
l
Currency “ base currency of the trading unit
l
Security domicile “ the base currency of the trading unit
l
Portfolio code “ portfolio code in T24
l
Parent Unit “ parent unit to which the trading unit is linked
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Instruments an Can be used to add out the portfolio securities and / or modify existing securities details.
Instrument Types To define or to set up the instrument types used in our system. There are few pre “defined values added into it.
TermStructure Code We can define the TermStructure code based on the price history available or used in the system to calculate the volatility, correlations and VaR.
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Yield Curve Modelling Insight Risk can be setup to calculate and store yield curves and interest rates curves for term structures. The following functionality can be set up: l
Flexible term structure definition, to allow for the definition of both standard curves and specific house curves.
l
Ability to map data from different sources (MM, Bonds, Futures, Swaps) to par curve points, so for example money market rates may be used at the short end of the curve, followed by blending with FRA rates or Futures rates and then use of Swap rates or benchmark bonds to constitute the long end of the curve
l
Linear interpolation of points along the yield curve
l
Derivation of Zero Coupon Curves from the Par Curve using the Bootstrap approach
l
Derivation of Implied Forward Curves from Zero Rates
l
Calculation of discount rates from par rates
Dash Board View This view provides a complete snapshot of the Term Structures setup in the system. User can also see basic yield curve details.
Adding a new Yield Curve: From the Dash Board view, Add link takes to the yield curve addition page. (Add or Select required Term Structure)
Market Risk - Tech Guide - Release R15.000 - Page 24 of 45
l
Is this a benchmark Term Structure: If the yield curve being constructed is a benchmark curve, check the box. Else, leave this unchecked. This will be reflected when pricing bond over a Benchmark.
l
Currency: Currency is selected from the drop down menu based on the underlying currency of the term structure.
l
Interpolation method: Straight or LINEAR SIMPLE
l
Market Index: Will be either House or LIBOR depending on the index of the term structure. Additional Market Index can be setup from the Reference Data
l
Market Curve: Will be the respective curve set up done in the Reference data.
l
TermStructure Code: Will be the unique code and it is linked to price history so that yield curves will generate properly.
Once we have added all this detail, the term structure is now added to the Dash Board of yield curves on the yield curve modeling page.
Term Point View This view displays all the term points for the selected yield curve along with par rates and source type.
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Generate Curves (Discount, Zero and Implied Forward): Displays the computed Discount Rate, Zero Rate and Forward Rate derived from Par rates.
Chart Display Displays in chart for the above computed rates.
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View Interpolated Yields Interpolated yields for all significant term points using linear interpolation between the first defined term point to the last term point
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Value At Risk Volatilities The volatilities for the selected instruments can be calculated in Insight Risk. The volatilities are calculated based on the date range selected and also depends upon the instruments and its yield curve.
Correlations The correlation between the instrument can be identified / calculated in Insight Risk for the selected instruments and the date range.
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Price Histories There is an option in Insight Risk to see the price history of different instrument types based on the date range.
Value At Risk: Following Value at Risk functionality is available in Insight Risk: l
Covariance VaR / parametric VaR§
l
Monte Carlo VaR
l
Historical VaR
l
Marginal and Incremental VaR
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Setting VaR Parameters Set the calculation criteria from the Reference Data. This has to be set for all the portfolios and sub-portfolios for the system to perform calculations.
Descriptions: l
Trading unit “ the trading unit / portfolio for which calculation criteria is being set
l
Currency - base currency of the trading unit
l
Interpolation method “ STRAIGHT for trading units having bonds. Else, leave blank.
l
Market Index “ select from drop down for trading units having bonds. Else, leave blank.
l
Market curve “ select from drop down for trading units having bonds. Else, leave blank.
l
Risk factor generation method “ CASH for trading units having bonds. Else, leave blank.
l
Risk factor mapping method “ weighted duration method for bonds. Else, leave blank.
l
Risk data publisher “ needs to be updated for all the trading units from the drop down list.
l
Volatility type “ can be one of the three 1. Standard Deviation of Price History 2. Standard Deviation of daily Price Change and 3. Standard Deviation of log of daily Price Change
Dash Board View Dash board view gives a complete snapshot of Value at Risk for all portfolios.
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Parametric VaR From the dash board view clicking on the parametric VaR link (or Not Run link to run the VaR) figure will re-compute VaR and display the VaR using variance covariance methodology.
Monte Carlo VaR From the dash board view clicking on the Monte Carlo VaR figure will display the number of iteration to be used for generating correlated random return series.
Market Risk - Tech Guide - Release R15.000 - Page 31 of 45
Historical VaR From the dash board view clicking on the Historical VaR figure will re-compute VaR and display it in either graphical or tabular format. For more detailed analysis, users can drill down to each individual simulated scenario and see the portfolio impact. Tabular View:
Graphical View:
Market Risk - Tech Guide - Release R15.000 - Page 32 of 45
Marginal and Incremental VaR Select the term point for which marginal VaR needs to be computed. Enter the marginal percentage uplift and update. Insight Risk will compute Marginal VaR and display for that term point. Marginal VaR is used for all cash portfolios only. And incremental VaR can be calculated for all the portfolio instruments.
Marginal VaR Enter the marginal percentage uplift and update to compute the Marginal VaR.
Incremental VaR By selecting the Issuance and the nominal value, click the Calculate Incremental VaR to get the values.
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Stress Testing Insight Risk has stress testing for portfolios with bonds (cash flow instruments) capability. Portfolio sensitivity to market change using parallel shift to Interest rates/market prices of investment portfolios can be measured for each term point on the curve.
Scenario Building Interface
Three scenarios can be built at a time with entering three parallel shifts in the yield curve (in bips). It can be defined for either of the following (1) Par Curve (2) Zero curve (3) Discount. Scenario effects on Portfolio:
Market Risk - Tech Guide - Release R15.000 - Page 34 of 45
Note:“ Stress testing can be performed for portfolios for which there are defined cash flows and is linked to a yield curve.
Market Risk - Tech Guide - Release R15.000 - Page 35 of 45
Debt Pricing Insight Risk has three pricing functionality that can be used to price illiquid debt securities. l
Pricing out of portfolio bonds / Bond Pricing
l
Price using spread to Benchmark
l
Price using Yield
l
Yield using Price (both clean and dirty price)
l
Discount Margin pricing for FRNs for out of portfolio FRNs
Bond Pricing
l
Issuance - Select the issuance that needs to be priced. (This is added from the Instruments page in Reference Data)
l
Nominal Value - The nominal value of the bond
l
Settlement Date - The date of settlement of the bond. This will be current date, if pricing for the current day.
l
Select function - Select any of one of the options: 1. Calculate price using spread to benchmark o Benchmark - select any benchmark from the dropdown (this is created from the Instruments page) o Spread - enter the spread to the benchmark to price the bond 2. Calculate price using yield o Yield (%) - enter the yield for which the price to be computed 3. Calculate yield using price o Price - enter the bond price o From the drop down select whether its Dirty Price or a Clean Price.
Market Risk - Tech Guide - Release R15.000 - Page 36 of 45
The above screen displays the dirty price, accrued interest and clean price or calculated yield depending on the option selected.
FRN Pricing For pricing FRNs select FRN Pricing from the menu. There will be a popup to enter the bond details, as depicted below.
l
Issuance - Select the issuance that needs to be priced. (This is added from the Instruments page in Reference Data)
l
Last reset rate - The rate at which the bond was last reset. i.e. œCurrent Indicator Rate + Quoted Margin
l
Quoted Margin - spread over index
l
Current indicator rate - current index rate
l
Discount margin - discount margin quoted for the bond
l
Price - price of the bond
Market Risk - Tech Guide - Release R15.000 - Page 37 of 45
Updating Bond Details Select Instruments from the Reference Data page. From the dropdown select the type of instrument that needs to be added / priced. And click on Add.
In the Cash Instrument Form select Fixed Rate Bond or Floating Rate Bond depending on the type of bond being priced. Once you have clicked the following form will be opened to add the bond details:
l
Issuance - define an issuance ID for the bond
l
Description - description of the bond
l
Currency - from the dropdown select the currency
l
Issue date - date of issue (MM/DD/YYYY)
l
Maturity date - date of maturity (MM/DD/YYYY)
l
Redemption date - date of redemption (MM/DD/YYYY). Can be the date of maturity of non callable
l
Redemption %age - price of redemption or at maturity
l
First coupon date - first coupon date of the bond (MM/DD/YYYY)
l
Last coupon date - last coupon date of the bond (MM/DD/YYYY)
Market Risk - Tech Guide - Release R15.000 - Page 38 of 45
l
First accrual date - first accrual date of the bond (MM/DD/YYYY)
l
Last accrual date - last accrual date of the bond (MM/DD/YYYY)
l
Periodicity - from the dropdown select whether annual, semi-annual, quarterly or monthly
l
Coupon rate - the coupon %
l
Day basis - from the dropdown select whether 30/360, 30/365, ACT/360 or ACT/365
Adding Benchmark Select Instruments from the Reference Data page. From the dropdown select Benchmark Bond and click on Add. It will open Insight Risk Benchmark Instrument Form. Add all the information in the form as described below: l
Issuance ID - define an issuance ID for the benchmark
l
Issuance description - description of the benchmark
l
Currency - currency of the benchmark
l
Spread (%) - spread over defined term structure for the benchmark
l
Default term structure - term structure (yield curve) defined for the benchmark
Market Risk - Tech Guide - Release R15.000 - Page 39 of 45
Market Risk Reports Install the Insight Risk Reports using the instruction given in 1.2.2. The lists of Market Risk Report available in the Insight Risk are: l
Back Testing Report
l
Bond Guide Report
l
Holdings Report
l
Price History
l
Price History Non-Cash
l
ValueAtRisk Report
Select the MarketRiskReports:
For Example: When you click the Run button the reports will be opened with the output in case there is no parameter to be passed.
Market Risk - Tech Guide - Release R15.000 - Page 40 of 45
Value At Risk Report
Holdings - Non-Cash Report
Market Risk - Tech Guide - Release R15.000 - Page 41 of 45
Installing Insight Risk Updates To install Insight Risk update file (.seq extension), which is the outcome / output of any script fixed by development team and sent to client as an update file. Go to Insight Risk menu > packages > Install updates. Browse the update file (.seq file) and then click the install button. Pack Scripts “ To create an Encrypted (.seq file) file onto the same folder where the script file was placed .This is for development purpose hence not highlighted as part of standard menu Pack scripts are hidden to the clients as it is used for the development purpose alone. These Menus will be released as part of the Base database for Market Risk.
Browse Update File
Select Update file
Market Risk - Tech Guide - Release R15.000 - Page 42 of 45
Update successfully installed into Insight Risk system, upon successful execution of the Update file, the fix is available in the Insight Risk database and the client can proceed with the next step towards Insight Risk implementation process.
Navigate From Packages - Data Load
Reporting Unit setup:
Market Risk - Tech Guide - Release R15.000 - Page 43 of 45
Load Data:
xxxx_Import_process_log Table: This will show what are all the process happened during the DataLoad. select * from [20120422_Import_Process_Log]
Market Risk - Tech Guide - Release R15.000 - Page 44 of 45
xxxx_Import_Exception_log: This will have the output of any error occurred during the load process. select * from [20120422_Import_Exception_Log]
Exception Handling System Overview Exception handling system has been developed to handle information log and exception log arising out of every Stored Procedure in Insight Risk.
Exception Handling Process DW_Export_LoadData is a procedure used to create Insight Risk staging table which also create a Log tables for each Rundate Following are the Log tables in Insight Risk
Above tables are created during the time of Data load. Here 20120422 is the MIS_DATE, which is taken from BNK_COMPANY staging table, from which we update Rundate table in Insight Risk, originally being the extract date. XXXX_Import_ Process_ Log table - used to log a procedures Information which ran during the time of Insight Risk Data Load, where XXXX is the Run date. XXXX_Import_Exception_ log table - Used to log a procedure information which raised any error during the time of Insight Risk data load with Proper Exception details, where XXXX is the Run date.
Market Risk - Tech Guide - Release R15.000 - Page 45 of 45
©2015 Temenos Headquarters SA - all rights reserved. Warning: This document is protected by copyright law and international treaties. Unauthorised reproduction of this document, or any portion of it, may result in severe and criminal penalties, and will be prosecuted to the maximum extent possible under law.
Table of Contents Introduction
4
Purpose of this Guide Intended Audience
4 4
System Requirements
5
Hardware Software
5 5
Architectural Overview
6
Web Server - Internet Information Services (IIS)
7
Enable IIS Security IIS configuration if working on (64-bit) operating system DefaultApp Pool - Network service Uninstall Before Reinstall Installing Insight Risk Application IIS Configuration after Installation Adding User in Insight Risk Database Configuring Market-Risk module in Insight Risk Market Risk - Home Page
7 8 9 10 10 14 15 18 18
Reference Data
20
Currencies Data Publishers Interpolation Methods Market Curves Market Indexes Risk Factor Methods Source Types Volatility Types Confidence Factors Statistical Distribution Calculation Criteria Trading Units Instruments TermStructure Code
20 20 20 20 21 21 21 21 22 22 22 22 23 23
Yield Curve Modelling
24
Dash Board View Term Point View Chart Display View Interpolated Yields
24 25 26 27
Value At Risk
28
Volatilities Correlations Price Histories Setting VaR Parameters Dash Board View Parametric VaR Monte Carlo VaR Historical VaR Marginal and Incremental VaR Marginal VaR Incremental VaR Stress Testing Scenario Building Interface Debt Pricing
28 28 29 30 30 31 31 32 33 33 33 34 34 36
Bond Pricing FRN Pricing Updating Bond Details
36 37 38
Market Risk - Tech Guide - Release R15.000 - Page 2 of 45
Adding Benchmark
39
Market Risk Reports
40
Value At Risk Report Holdings - Non-Cash Report Installing Insight Risk Updates Exception Handling System Overview Exception Handling Process
Market Risk - Tech Guide - Release R15.000 - Page 3 of 45
41 41 42 45 45
Introduction Purpose of this Guide The purpose of this document is to describe the steps for the installation of the Insight Risk - Market Risk application and also to set up the parameter tables related to Market Analytics.
Intended Audience The guide intended for all levels of business users who will install and maintain the Insight Risk product.
Market Risk - Tech Guide - Release R15.000 - Page 4 of 45
System Requirements Hardware l
Intel based server with a minimum of 2 x 3GHz processor with ability to add additional processors as required
l
16 GB RAM, allowing for inclusion of additional memory as required
l
320 GB Hard drive
Note that the precise server configuration will depend upon processing volumes.
Software T24 Software l
T24 Banking Server
l
DW.Export for Insight-Risk
Server Software l
Microsoft Windows Server 2003 Enterprise Edition or later Microsoft .Net Framework 3.5
l
Microsoft Internet Information Services 6.0 or later
l
Microsoft SQL Server 2008 Enterprise Edition or higher (with latest SP installed)
l
Microsoft SQL Server Reporting Services (SSRS) 2008 (component of SQL Server)
l
Microsoft Internet Explorer 7.0 or later
Client PC Software l
Microsoft Windows XP or later
l
Microsoft Internet Explorer 7.0 or later
Market Risk - Tech Guide - Release R15.000 - Page 5 of 45
Architectural Overview
As a standard interface Insight Risk is interfaced with T24 using DW.EXPORT. However, interfacing with other sources could be possible with additional development.
Market Risk - Tech Guide - Release R15.000 - Page 6 of 45
Web Server - Internet Information Services (IIS) Enable IIS Security To setup IIS Security features in order to enable the required authentication: l
Go to Control Panel Programs Programs and Features Turn Windows features on or off and enable all the security features for IIS and restart the system.
l
Go to C:\Windows\System32\inetsrv\config\applicationHost.config
Market Risk - Tech Guide - Release R15.000 - Page 7 of 45
l
Search for authentication Section Group name and set overridemodedefault= Allow w here it was earlier set as œdeny .
IIS configuration if working on (64-bit) operating system l
Enable 32 bit application in Default App pool in Internet manager Goto->run->inetmgr->app pool->advanced setting
Market Risk - Tech Guide - Release R15.000 - Page 8 of 45
l
In advanced setting set the œenable 32-bit application=true
DefaultApp Pool - Network service l
Set default Application pool identity as Network Service
Market Risk - Tech Guide - Release R15.000 - Page 9 of 45
This section shows how to install the Market Risk Application and the Reports deployment software of Insight Risk, which will enable the user to access the Market-Risk module via the Insight Risk Application menu. There will be a Database called InsightRiskDB and two MSIs namely “ Insight-Risk Market Risk Deploy.msi and Insight-Risk Reports Deployment.msi released along with the package. It is recommended to take the backup of InsightRiskDB Database whenever the reports are run. It is recommended to deploy the Insight Risk and Reports deployment MSI in the following way.
Uninstall Before Reinstall If you have already installed the installation software then first go to Control Panel and use the Add or Remove Programs or the Programs Uninstall a program option depending on the operating system version. Next, locate and select the Insight-Risk Market Risk m odule and then either Remove or Uninstall again depending on the operating system version. Repeat these steps for the removal of Insight-Risk Reports and Data.
Installing Insight Risk Application Sign onto the Insight Risk Server as a local Administrator account, then run the Insight-Risk Market Risk Deploy.msi to install the Market Risk module. l
You will then be prompted with an installer splash screen from the installation setup wizard.
Market Risk - Tech Guide - Release R15.000 - Page 10 of 45
l
In the above screen shot, click the Next button to continue the Insight Risk installation and then confirm the installation by clicking Next button again to install it in the default location.
l
The below screen shot shows the progress of the Market Risk Installation setup.
Market Risk - Tech Guide - Release R15.000 - Page 11 of 45
l
Complete the Web.config Configuration by setting SQL Server, Report Server etc...
Market Risk - Tech Guide - Release R15.000 - Page 12 of 45
l
Next, run the Insight-Risk Reports Deployment.msi to install the Market-Risk Reports.
l
You will be prompted with an installer splash screen from the installation setup wizard, click Next to continue the installation.
l
You will be prompted with the Server Settings screen. Set SQL Server name, Insight Risk Database, and ReportServer in which database and server it is located.
Market Risk - Tech Guide - Release R15.000 - Page 13 of 45
l
Click the Ok button to continue the installation.
l
On the Reports & Folder Settings page select the Default instance and clicking the Close and Continue button to deploy the MarketRisk reports.
IIS Configuration after Installation l
Go to->inetmgr->select our installed application->authentication
Market Risk - Tech Guide - Release R15.000 - Page 14 of 45
Adding User in Insight Risk Database l
Restore TRiskDB to the SQL Server as below.
Market Risk - Tech Guide - Release R15.000 - Page 15 of 45
l
Go to the User table in TRiskDB, Right Click User table and select the Edit option as below:
l
Add the current Domain Windows User and assign the RoleID as 3 and Display name as below
l
If the application is installed in a system with XP windows configuration or more lower versions, add the below login.
Market Risk - Tech Guide - Release R15.000 - Page 16 of 45
l
Where [MAAD10912505] refers to the machine name, the sqlserver will contain the corresponding machine name and give sysadmnin roles to the [machine\ASPNET] login.
Market Risk - Tech Guide - Release R15.000 - Page 17 of 45
Configuring Market-Risk module in Insight Risk Market Risk - Home Page Insight Risk home page provides the user a complete summary of the portfolio architecture and can drilldown to individual holdings within each portfolio (called Trading Unit in the System). We can expand the trading unit by clicking the + button to know the list of child trading units and by clicking the select button we can Re-price and display Holdings of the selected Trading Unit /Portfolio.
By clicking the Select button, we can see the list of holdings available for that trading unit/Portfolio.
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We can display the cash flow of the individual or all the Holdings and also re-price the individual or all the holdings by clicking the re-price all holdings with the settlement date.
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Reference Data All the calculations setups and configurations are done using the reference data tabs. Reference data is maintained for pre defined risk calculation criteria. In Insight Risk (Market Risk) module, following reference data have been provided.
Currencies Can be used for defining currency code, description and day count basis (Pre-Defined)
Data Publishers This can be used to define various combination of Holding Period and Confidence Factors based on user requirement to calculate VaR
Interpolation Methods Pre defined to linear interpolation method and Cubic Spline method.
Market Curves This can be used to create various market curves for individual currency under marked Indexes such as LIBOR, MIBOR, etc..,
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Market Indexes Various indexes can be created based on the market and Banks portfolio requirements such as House, LIBOR and Treasury etc¦
Risk Factor Methods Insight Risk uses a pre defined cash flow mapping methodology for cash instruments are âweighted duration methodâ and cash
Source Types Source Types can be modified to add Term point source for term structure construction
Volatility Types Insight Risk uses a pre defined methodologies for volatility and correlation Calculation => œStd Deviation of price and log changes .
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Confidence Factors Used for defining confidence factors for data publishers based on the requirements.
Statistical Distribution Insight Risk has pre defined Normal Distribution method.
Calculation Criteria Calculation criteria are to be updated for all portfolio / Trading Unit for VaR calculation. During VaR calculations the values are picked up from this table.
Trading Units Here we need to define / set up trading units and portfolio hierarchy.
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Identifier “ Trading Unit ID
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Description “ Trading unit description
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Currency “ base currency of the trading unit
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Security domicile “ the base currency of the trading unit
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Portfolio code “ portfolio code in T24
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Parent Unit “ parent unit to which the trading unit is linked
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Instruments an Can be used to add out the portfolio securities and / or modify existing securities details.
Instrument Types To define or to set up the instrument types used in our system. There are few pre “defined values added into it.
TermStructure Code We can define the TermStructure code based on the price history available or used in the system to calculate the volatility, correlations and VaR.
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Yield Curve Modelling Insight Risk can be setup to calculate and store yield curves and interest rates curves for term structures. The following functionality can be set up: l
Flexible term structure definition, to allow for the definition of both standard curves and specific house curves.
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Ability to map data from different sources (MM, Bonds, Futures, Swaps) to par curve points, so for example money market rates may be used at the short end of the curve, followed by blending with FRA rates or Futures rates and then use of Swap rates or benchmark bonds to constitute the long end of the curve
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Linear interpolation of points along the yield curve
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Derivation of Zero Coupon Curves from the Par Curve using the Bootstrap approach
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Derivation of Implied Forward Curves from Zero Rates
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Calculation of discount rates from par rates
Dash Board View This view provides a complete snapshot of the Term Structures setup in the system. User can also see basic yield curve details.
Adding a new Yield Curve: From the Dash Board view, Add link takes to the yield curve addition page. (Add or Select required Term Structure)
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Is this a benchmark Term Structure: If the yield curve being constructed is a benchmark curve, check the box. Else, leave this unchecked. This will be reflected when pricing bond over a Benchmark.
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Currency: Currency is selected from the drop down menu based on the underlying currency of the term structure.
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Interpolation method: Straight or LINEAR SIMPLE
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Market Index: Will be either House or LIBOR depending on the index of the term structure. Additional Market Index can be setup from the Reference Data
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Market Curve: Will be the respective curve set up done in the Reference data.
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TermStructure Code: Will be the unique code and it is linked to price history so that yield curves will generate properly.
Once we have added all this detail, the term structure is now added to the Dash Board of yield curves on the yield curve modeling page.
Term Point View This view displays all the term points for the selected yield curve along with par rates and source type.
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Generate Curves (Discount, Zero and Implied Forward): Displays the computed Discount Rate, Zero Rate and Forward Rate derived from Par rates.
Chart Display Displays in chart for the above computed rates.
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View Interpolated Yields Interpolated yields for all significant term points using linear interpolation between the first defined term point to the last term point
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Value At Risk Volatilities The volatilities for the selected instruments can be calculated in Insight Risk. The volatilities are calculated based on the date range selected and also depends upon the instruments and its yield curve.
Correlations The correlation between the instrument can be identified / calculated in Insight Risk for the selected instruments and the date range.
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Price Histories There is an option in Insight Risk to see the price history of different instrument types based on the date range.
Value At Risk: Following Value at Risk functionality is available in Insight Risk: l
Covariance VaR / parametric VaR§
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Monte Carlo VaR
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Historical VaR
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Marginal and Incremental VaR
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Setting VaR Parameters Set the calculation criteria from the Reference Data. This has to be set for all the portfolios and sub-portfolios for the system to perform calculations.
Descriptions: l
Trading unit “ the trading unit / portfolio for which calculation criteria is being set
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Currency - base currency of the trading unit
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Interpolation method “ STRAIGHT for trading units having bonds. Else, leave blank.
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Market Index “ select from drop down for trading units having bonds. Else, leave blank.
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Market curve “ select from drop down for trading units having bonds. Else, leave blank.
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Risk factor generation method “ CASH for trading units having bonds. Else, leave blank.
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Risk factor mapping method “ weighted duration method for bonds. Else, leave blank.
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Risk data publisher “ needs to be updated for all the trading units from the drop down list.
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Volatility type “ can be one of the three 1. Standard Deviation of Price History 2. Standard Deviation of daily Price Change and 3. Standard Deviation of log of daily Price Change
Dash Board View Dash board view gives a complete snapshot of Value at Risk for all portfolios.
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Parametric VaR From the dash board view clicking on the parametric VaR link (or Not Run link to run the VaR) figure will re-compute VaR and display the VaR using variance covariance methodology.
Monte Carlo VaR From the dash board view clicking on the Monte Carlo VaR figure will display the number of iteration to be used for generating correlated random return series.
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Historical VaR From the dash board view clicking on the Historical VaR figure will re-compute VaR and display it in either graphical or tabular format. For more detailed analysis, users can drill down to each individual simulated scenario and see the portfolio impact. Tabular View:
Graphical View:
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Marginal and Incremental VaR Select the term point for which marginal VaR needs to be computed. Enter the marginal percentage uplift and update. Insight Risk will compute Marginal VaR and display for that term point. Marginal VaR is used for all cash portfolios only. And incremental VaR can be calculated for all the portfolio instruments.
Marginal VaR Enter the marginal percentage uplift and update to compute the Marginal VaR.
Incremental VaR By selecting the Issuance and the nominal value, click the Calculate Incremental VaR to get the values.
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Stress Testing Insight Risk has stress testing for portfolios with bonds (cash flow instruments) capability. Portfolio sensitivity to market change using parallel shift to Interest rates/market prices of investment portfolios can be measured for each term point on the curve.
Scenario Building Interface
Three scenarios can be built at a time with entering three parallel shifts in the yield curve (in bips). It can be defined for either of the following (1) Par Curve (2) Zero curve (3) Discount. Scenario effects on Portfolio:
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Note:“ Stress testing can be performed for portfolios for which there are defined cash flows and is linked to a yield curve.
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Debt Pricing Insight Risk has three pricing functionality that can be used to price illiquid debt securities. l
Pricing out of portfolio bonds / Bond Pricing
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Price using spread to Benchmark
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Price using Yield
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Yield using Price (both clean and dirty price)
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Discount Margin pricing for FRNs for out of portfolio FRNs
Bond Pricing
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Issuance - Select the issuance that needs to be priced. (This is added from the Instruments page in Reference Data)
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Nominal Value - The nominal value of the bond
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Settlement Date - The date of settlement of the bond. This will be current date, if pricing for the current day.
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Select function - Select any of one of the options: 1. Calculate price using spread to benchmark o Benchmark - select any benchmark from the dropdown (this is created from the Instruments page) o Spread - enter the spread to the benchmark to price the bond 2. Calculate price using yield o Yield (%) - enter the yield for which the price to be computed 3. Calculate yield using price o Price - enter the bond price o From the drop down select whether its Dirty Price or a Clean Price.
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The above screen displays the dirty price, accrued interest and clean price or calculated yield depending on the option selected.
FRN Pricing For pricing FRNs select FRN Pricing from the menu. There will be a popup to enter the bond details, as depicted below.
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Issuance - Select the issuance that needs to be priced. (This is added from the Instruments page in Reference Data)
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Last reset rate - The rate at which the bond was last reset. i.e. œCurrent Indicator Rate + Quoted Margin
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Quoted Margin - spread over index
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Current indicator rate - current index rate
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Discount margin - discount margin quoted for the bond
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Price - price of the bond
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Updating Bond Details Select Instruments from the Reference Data page. From the dropdown select the type of instrument that needs to be added / priced. And click on Add.
In the Cash Instrument Form select Fixed Rate Bond or Floating Rate Bond depending on the type of bond being priced. Once you have clicked the following form will be opened to add the bond details:
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Issuance - define an issuance ID for the bond
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Description - description of the bond
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Currency - from the dropdown select the currency
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Issue date - date of issue (MM/DD/YYYY)
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Maturity date - date of maturity (MM/DD/YYYY)
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Redemption date - date of redemption (MM/DD/YYYY). Can be the date of maturity of non callable
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Redemption %age - price of redemption or at maturity
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First coupon date - first coupon date of the bond (MM/DD/YYYY)
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Last coupon date - last coupon date of the bond (MM/DD/YYYY)
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First accrual date - first accrual date of the bond (MM/DD/YYYY)
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Last accrual date - last accrual date of the bond (MM/DD/YYYY)
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Periodicity - from the dropdown select whether annual, semi-annual, quarterly or monthly
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Coupon rate - the coupon %
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Day basis - from the dropdown select whether 30/360, 30/365, ACT/360 or ACT/365
Adding Benchmark Select Instruments from the Reference Data page. From the dropdown select Benchmark Bond and click on Add. It will open Insight Risk Benchmark Instrument Form. Add all the information in the form as described below: l
Issuance ID - define an issuance ID for the benchmark
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Issuance description - description of the benchmark
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Currency - currency of the benchmark
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Spread (%) - spread over defined term structure for the benchmark
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Default term structure - term structure (yield curve) defined for the benchmark
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Market Risk Reports Install the Insight Risk Reports using the instruction given in 1.2.2. The lists of Market Risk Report available in the Insight Risk are: l
Back Testing Report
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Bond Guide Report
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Holdings Report
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Price History
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Price History Non-Cash
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ValueAtRisk Report
Select the MarketRiskReports:
For Example: When you click the Run button the reports will be opened with the output in case there is no parameter to be passed.
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Value At Risk Report
Holdings - Non-Cash Report
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Installing Insight Risk Updates To install Insight Risk update file (.seq extension), which is the outcome / output of any script fixed by development team and sent to client as an update file. Go to Insight Risk menu > packages > Install updates. Browse the update file (.seq file) and then click the install button. Pack Scripts “ To create an Encrypted (.seq file) file onto the same folder where the script file was placed .This is for development purpose hence not highlighted as part of standard menu Pack scripts are hidden to the clients as it is used for the development purpose alone. These Menus will be released as part of the Base database for Market Risk.
Browse Update File
Select Update file
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Update successfully installed into Insight Risk system, upon successful execution of the Update file, the fix is available in the Insight Risk database and the client can proceed with the next step towards Insight Risk implementation process.
Navigate From Packages - Data Load
Reporting Unit setup:
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Load Data:
xxxx_Import_process_log Table: This will show what are all the process happened during the DataLoad. select * from [20120422_Import_Process_Log]
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xxxx_Import_Exception_log: This will have the output of any error occurred during the load process. select * from [20120422_Import_Exception_Log]
Exception Handling System Overview Exception handling system has been developed to handle information log and exception log arising out of every Stored Procedure in Insight Risk.
Exception Handling Process DW_Export_LoadData is a procedure used to create Insight Risk staging table which also create a Log tables for each Rundate Following are the Log tables in Insight Risk
Above tables are created during the time of Data load. Here 20120422 is the MIS_DATE, which is taken from BNK_COMPANY staging table, from which we update Rundate table in Insight Risk, originally being the extract date. XXXX_Import_ Process_ Log table - used to log a procedures Information which ran during the time of Insight Risk Data Load, where XXXX is the Run date. XXXX_Import_Exception_ log table - Used to log a procedure information which raised any error during the time of Insight Risk data load with Proper Exception details, where XXXX is the Run date.
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