Market Risk Key Figure Sets

If you want to calculate market risk key figures based on a specific scenario and/or based on a market data shift, you must first define the scenarios and market data shifts.
Further, you need to create the Risk Factor set to be used in the Market Risk Key Figure Set if you choose to calculate the Value at Risk. Finally, you should consider the effects of changing or deleting a Market Risk Key Figure Set.

Create, change, display, delete, or copy market data shifts with the Manage Market Data Shift app.
You use market data shifts (also known as external rules) to change current market prices as well as scenario market prices. For this, a market data shift can include risk factor shifts that are distinguished from one another within the system by a rule index.
A market data shift relates to one or more factors that affect the price. In this way, you can use market data shifts to make a fictitious change to values of the following factors:
- Exchange rate
- Yield curve
- Volatility
- Basis spreads
- Credit spreads
For each of these factors, you can define an absolute risk factor shift or a percentage-based risk factor shift.
Market data shifts are used as characteristics in the NPV evaluation. They are used to represent in simple form the effects of price changes on the NPV. The NPV evaluation displays all fictitious NPVs for each risk factor shift as well as the current NPV. Further key figures can be calculated from the NPV evaluation.

A scenario is a market data record that can contain current market data, exchange rates, exchange rate volatilities, yield curves, interest rate volatilities, and so on. You create scenarios that represent probable or possible market situations (for example, a high interest rate scenario with an inverted yield curve).

You can create, change, or delete market risk key figure sets with the Manage Market Risk Key Figure Sets application. In a market risk key figure set, you define the parameters – evaluation currency, evaluation type, scenario, shift rule – that are relevant for the calculation of market risk key figures using the Schedule Treasury Middle Office Jobs app. You also determine whether and how (value-at-risk type, risk factor set) the value at risk is calculated.
Calculate Value at Risk Indicator
If you want to calculate the value-at-risk key figures (VaR and MEL) in addition to the NPV key figures, you must mark the Calculate Value at Risk indicator.
If you set this indicator, you cannot choose a market data scenario or a market data shift. If you set this indicator, you must specify the value-at-risk type (which defines the value-at-risk calculation method) and the risk factor set (which defines the relevant risk factors).
Value at Risk Type
The VaR type specifies the valuation parameters for value-at-risk calculation in Risk Management. The following VaR types are available:
SV1 VaR – Historical Simulation
If you choose this VaR type, the mean excess loss key figure is calculated in addition to the value at risk.
SV2 VaR – Monte Carlo Simulation
If you choose this VaR type, the mean excess loss key figure is calculated in addition to the value at risk.
SV3 VaR – Variance/Covariance
Real-Time Update indicator
Set this indicator if you want changes made to objects covered by the market risk key figure set (such as when a financial transaction, a security position, or an exposure position are changed or new ones are created) to trigger an automatic adjustment run of the Calculate Market Risk Key Figures report.
NoteThe adjustment run uses the same parameters (derived from the market risk key figure set) as the basic run. Even if you have changed the market risk key figure set in the meantime, the adjustment run uses the same parameters as the basic run. This ensures that all financial objects are processed according to the same parameters on a key date.

If you selected the VaR calculation, you must choose a Risk Factor Set. The risk factor set defines which kinds of risk need to be considered (FX risk and/or interest rate risk) and the specific risk factors relevant for the calculation of the value at risk. You also define the risk factor set in this app.
To create a new Risk Factor set, choose the New Entries button. Create the entry considering the following:
FX Risk
If you choose the FX risk, FX spot rates are used as risk factors. In this case, you must also specify the Risk Currencies in the risk factor set.
Interest Rate Risk
If you choose the IR risk, the grid points of the yield curves are used as risk factors. A grid point is identified by the yield curve type, the currency, and the reference interest rate. The yield curves used for discounting as well as the yield curves for the forward calculation are considered. The yield curves for discounting are taken from the evaluation type, while the yield curves for forward calculation are taken from the specific reference interest rates.

Dependent on your settings in the Scenario and Shift Rule columns, the market risk key figures are calculated as described in the table.
NoteIf you also calculate the value at risk within a market risk key figure set, you cannot use scenarios or shift rules.

You should consider the following when working on Market Risk Key Figure Sets:
Change a Market Risk Key Figure Set
Even if market risk key figure values based on this market risk key figure set exist, it is nevertheless possible to change the market risk key figure set. Note that such a change in the calculation parameters can lead to a break within the historical time series of the calculated values, with the result that these values are no longer consistently comparable.
Delete a Market Risk Key Figure Set
If market risk key figure values based on these market risk key figures exist, it is not possible to delete the market risk key figure set.