RiskMetrics RiskManager 3.

7 RMClient Batch Application

Table Of Contents
RiskManager ................................................................................................................................. 1 Help Resources .............................................................................................................................. 1 Getting Started with RiskManager .................................................................................................... 3 Read Me First - Getting Started..................................................................................................... 3 Loading Positions - Getting Started................................................................................................ 4 Import the portfolio file - Getting Started ....................................................................................... 6 Creating a Report - Getting Started ............................................................................................... 7 Report Reference Guide ............................................................................................................... 8 Statistics Reference Guide .......................................................................................................... 10 Getting Started Demo Map ......................................................................................................... 14 Release Notes.............................................................................................................................. 15 New User Features in RiskManager3.7 ......................................................................................... 15 Recycle Bin............................................................................................................................... 15 New Look ................................................................................................................................. 15 Position Editor .......................................................................................................................... 15 Tags ........................................................................................................................................ 15 View Managers and Filter Groups ................................................................................................ 15 Bucket Dividers......................................................................................................................... 15 Performance Improvements........................................................................................................ 16 Editors ..................................................................................................................................... 16 Encryption and Compression....................................................................................................... 16 New Administrative Features in RiskManager 3.7........................................................................... 16 AuthDB Account Changes ........................................................................................................... 16 Admin Actions........................................................................................................................... 16 Rules for access ........................................................................................................................ 16 Account Creation....................................................................................................................... 18 Session Timeout ....................................................................................................................... 18 Passwords ................................................................................................................................ 18 Change Password OnNext Login .................................................................................................. 18 Nightly Tasks............................................................................................................................ 18 Audit Logging ........................................................................................................................... 18 RiskManager 3.7.1 Analytical Features ......................................................................................... 20 RiskManager 3.7.2 Analytics Features .......................................................................................... 22 RiskManager 3.7.3 Analytics Features .......................................................................................... 23 RM 3.6 Release Features ............................................................................................................ 26 RM 3.5 Release Notes ................................................................................................................ 27 RiskManager 3.4 – New Features, March, 2002 ............................................................................. 33 Section .................................................................................................................................... 33 Location ................................................................................................................................... 33 Feature .................................................................................................................................... 33 Batch Job ................................................................................................................................. 33 RM3.4 Changes to Swaption Asset Type ....................................................................................... 35 RM3.3 Release Features ............................................................................................................. 36 RISKMANAGER ............................................................................................................................ 39 Product Summary and Architecture ............................................................................................. 39 RM3 Architecture Diagram ....................................................................................................... 39 RiskManager Product Summary ................................................................................................ 40 System Components ............................................................................................................... 41 System Functions ................................................................................................................... 42 RM3 Key Features I ................................................................................................................ 44 RM3 Key Features II ............................................................................................................... 45 Setting up RiskManager3 PC Clients............................................................................................. 46 RM3 Client PC Configuration .................................................................................................... 46 Internet Explorer Version and Plug-ins ...................................................................................... 47 PC Client Browser Settings ...................................................................................................... 48 Browser Configuration Settings - Step by Step ........................................................................... 49 Starting RM3 ............................................................................................................................ 51 Risk Services Must Be Running................................................................................................. 51 Starting the RM3 Application.................................................................................................... 54 Browsing to the RM3 Web Application Host ................................................................................ 55 Logging into RiskManager3 ...................................................................................................... 56 RiskManager Home Page ......................................................................................................... 57 Home ...................................................................................................................................... 58

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Table Of Contents

Application Site Map ............................................................................................................... 58 Administration Specific Site Map............................................................................................... 59 RiskMetrics Contact Information ............................................................................................... 60 Links..................................................................................................................................... 61 Messages .............................................................................................................................. 62 Administration .......................................................................................................................... 63 Administration and Security ..................................................................................................... 63 Administrator Home Page ........................................................................................................ 64 Creating Users ....................................................................................................................... 65 User Group Maintenance ......................................................................................................... 68 Send Multiple Messages .......................................................................................................... 72 User Hierarchy Commands ...................................................................................................... 74 Work with ............................................................................................................................. 78 Positions .................................................................................................................................. 94 Selecting Positions from the Home Page .................................................................................... 94 Working With Positions............................................................................................................ 95 Working with Positions - Commands ......................................................................................... 96 Position View Manager ............................................................................................................ 97 Import Positions ................................................................................................................... 100 Export Positions ................................................................................................................... 103 Editing Positions ................................................................................................................... 108 Duplicate Multiple Positions.................................................................................................... 123 Delete Multiple Positions........................................................................................................ 124 Position Group Maintenance ................................................................................................... 125 Index Builder .......................................................................................................................... 130 Index Builder Overview ......................................................................................................... 131 Fixed Income Index Example ................................................................................................. 137 Fixed Income Euro Example................................................................................................... 151 User File System ..................................................................................................................... 157 User File System Management ............................................................................................... 157 Market Data ........................................................................................................................... 159 Selecting Market Data from the Home Page ............................................................................. 159 About the Market Data Viewer................................................................................................ 160 Viewing Data Step by Step .................................................................................................... 161 Market Data Table Report ...................................................................................................... 163 Market Data Graphs.............................................................................................................. 164 Market Data Scatter Chart ..................................................................................................... 165 SVG Graphics....................................................................................................................... 167 SVG Viewer Help .................................................................................................................. 168 Preferences ............................................................................................................................ 169 Selecting Preferences from the Home Page .............................................................................. 169 Preferences - Instructions...................................................................................................... 170 Password............................................................................................................................. 171 Lines Per Page ..................................................................................................................... 172 Email .................................................................................................................................. 173 User Profile.......................................................................................................................... 174 Base Currency ..................................................................................................................... 175 Stress Testing......................................................................................................................... 176 Selecting Stress Testing from the Home Page .......................................................................... 176 Create Stress Test Scenarios ................................................................................................. 177 Edit Stress Test.................................................................................................................... 184 Duplicate Stress Test ............................................................................................................ 191 Duplicate Multiple Stress Tests ............................................................................................... 192 Delete Stress Test ................................................................................................................ 193 Delete Multiple Stress Tests ................................................................................................... 194 Report Statistics...................................................................................................................... 195 Report Statistics................................................................................................................... 195 Underlying Present Value....................................................................................................... 196 Future Value Statistic............................................................................................................ 200 Bond Equivalents.................................................................................................................. 202 Duration.............................................................................................................................. 206 Delta Equivalents ................................................................................................................. 217 Generalized PVBP Statistic ..................................................................................................... 220 Generalized Greeks............................................................................................................... 223 Reports.................................................................................................................................. 228 Selecting Reports from the Home Page ................................................................................... 228

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Table Of Contents

Customizable Table Report .................................................................................................... 229 Risk Attribution in Practice..................................................................................................... 233 Multiple RiskSetting Report .................................................................................................... 270 Credit Exposure.................................................................................................................... 275 MDI Report .......................................................................................................................... 285 Market Data Volatility & Correlations....................................................................................... 292 Portfolio Volatility and Correlations ......................................................................................... 298 Simulation Returns Analysis................................................................................................... 300 Market Group Report ............................................................................................................ 302 VaR Histogram Report........................................................................................................... 304 Other Report Topics .............................................................................................................. 306 Working with Risk Settings .................................................................................................... 322 Working with Horizons .......................................................................................................... 332 Working with Market Data Groups .......................................................................................... 338 Legacy Reports .................................................................................................................... 339 Graphics and Charts ................................................................................................................ 341 3D Data Charts .................................................................................................................... 341 Pie Charts............................................................................................................................ 343 ScatterPlots Charts ............................................................................................................... 345 Market Data Line Charts ........................................................................................................ 347 HeatMap Charts ................................................................................................................... 348 Histogram Charts ................................................................................................................. 350 Exporting Graphics ............................................................................................................... 351 Batch Control.......................................................................................................................... 352 Work with Batch Jobs............................................................................................................ 352 Create a Batch Job ............................................................................................................... 354 Batch Job Position Import ...................................................................................................... 356 User File System .................................................................................................................. 360 Batch Job Client Data Import ................................................................................................. 362 Batch Job Reports ................................................................................................................ 365 Batch Notification and Logs.................................................................................................... 366 Admin Batch Sequences ........................................................................................................ 369 Admin Batch Market Data Download ....................................................................................... 372 RMClient Batch Application .......................................................................................................... 373 RiskManager Batch Client Architecture ....................................................................................... 373 RMClient Download & Setup ..................................................................................................... 374 RMClient Step1 ....................................................................................................................... 375 RMClient Step2 ....................................................................................................................... 376 RMClient Step3 ....................................................................................................................... 377 RMClient Step4a ..................................................................................................................... 378 RMClient Step4b ..................................................................................................................... 382 RMClient Step5 ....................................................................................................................... 383 RMClient Step6 ....................................................................................................................... 384 RMClient Steps7-9................................................................................................................... 385 Scheduling RMClient Batch Runs ............................................................................................... 386 Index ....................................................................................................................................... 389

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RiskManager Help Resources
Help Resources News
What's New in the Help! RM 3.7 Release Notes - Lists Features in version 3.7.1 through 3.7.3 Inputs for EUR and USD Curve Construction Correction in RM3D v3.7 fxSingleBarrierOption Field 13 now reads - Specifies whether the barrier is initially above the asset price (1) or below the asset price (0). Credit Grades Names Reference Sheet Equity Exchange List for mapping equity positions in RM3D RM3D v3.7 - Tab Delimited Position Import Specification for Release 3.7 RM3D v3.7 Print Document Date Jan 26, 2004 Jan 5, 2004 Nov 13, 2003 Nov 5, 2003 Nov 3, 2003 Oct 31, 2003 Sep 22, 2003 Aug 28, 2003 July 14, 2003 June 12, 2003

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RM 3.7 Release User Features RM 3.7.1 Analytic Features

Stress Tests updated to reduce correlation errors. (unzip and import stress xml file) Download a local copy of the Help Resources right click and save as... (download) 48mb file! FX Exotic Options Financial Instrument Topics RM3D New Edition: • Equity Swaps added • 3 new fields in exchangeTraded instrument • RML and RM3D Equity Name field descriptions edited for all equity & credit grade instruments RML v 3.6 print document RM3D v 3.6 print document Equity Volatility Surface Table with ISIN & Ticker references for underlying stocks RMClient 3.6 Batch Application updated download installer here RM3.6 RMClient Application upgrade All users must now upgrade. Users must also update their scripts to include domain information Generalized PVBP Statistic updated - added ability to shift volatility surface. Credit Default Swaps & RML definitions Futures data reference table updated RM3.6 Release Features - hyperlinks to additional information and working papers are included Risk Attribution in Practice with worked examples

May 20, 2003 Feb 24, 2003 Feb 14, 2003 Feb 10, 2003 Jan 29,2003 Jan 17, 2003 Jan 7, 2003 Jan 2, 2003 Jan 2,

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Watson (New York) Gregg Berman (New York) John Duncan (London) Keith Koenigsberg (New York) Ron Papanek (New York) Kaylash Patel (London) Thomas Ta (New York) Allan Malz Jorge Mina Ninghui Liu George Zhou 2 . 2002 Resource Editor Resource Contributors Research Contributors (New York) Gavin W.RiskMetrics RiskManager 3.7 RMClient Batch Application 2003 Market Data Volatility Spreadsheet Example Dec 4.

2. However.create your first reports Once you master the basics of #1 and #2.get you trades and investments into RiskManager Create Risk Reports . Import position holdings . 4.Getting Started Getting starting using RiskManager doesn't take too long. Some users prefer a demo while others prefer start using the application right away. Detailed supporting reports which provide background data to support the Risk Analysis figures. Everyone must learn how to: 1. each user learns differently. 5. you need to learn how to: 3. 3 .Getting Started with RiskManager Read Me First .

3. The example below is a tiny portfolio of equity positions. 2. Note the tags. Most users learn quickly by example. 4. RM3D is an import format that is tab or comma delimited. Download the RM3D specification document for later reference. Users of RiskManager can use Excel or a text editor such as TextPad www.Getting Started 1. especially when loading & formatting position files. You can have as many as you wish. The positions represent 20 stocks held by the most accounts at Merrill Lynch as reported by the New York Times as of September 2002.7 RMClient Batch Application Loading Positions .com or notepad. Tags will enable your reports come to life.RiskMetrics RiskManager 3.textpad. Sector Basic Materials Capital Markets Consumer Cyclical Consumer Stable Energy Finance Health Services & Systems Industrial Cyclical Insurance Network Technology Security Weight % CITIGROUP INC 5 EXXON MOBIL CORP 5 GENERAL ELEC CO 5 15 AVAYA INC CISCO SYS INC LUCENT TECHNOLOGIES INC 5 5 5 15 JOHNSON & JOHNSON MERCK & CO INC PFIZER INC 5 5 5 10 HOME DEPOT INC WAL MART STORES INC 5 5 5 5 10 MICROSOFT CORP ORACLE CORP 5 5 10 AGERE SYS INC INTERNATIONAL BUSINESS MACHS 5 5 15 AT&T CORP AT&T WIRELESS SVCS INC VERIZON COMMUNICATIONS 5 5 5 Pharmaceuticals Retail Semiconductors Services Software & Services INTEL CORP AOL TIME WARNER INC Systems Hardware Telecommunications 4 . You can learn from this example by comparing the column positions with the import format guide for RM3D.

you could proxy to another stock or market index. The RM3D file looks like the image below: • Note: in the above example we have chosen to use an optional field 'G' to and set the equity price of each stock to $1 to scale each position to $1000 invested (1000 shares of $1). you would set the price of that proxy using column G and then select a beta to leverage the volatility. The correlation of your proxied stock would follow the proxy. Why would you ever override the equity price? • If you RiskMetrics didn't have an equity series... 5 .Getting Started with RiskManager Utilities • • Download this sample to your computer (right click and save as.). Next.

Getting Started • The next step is to import the sample equity portfolio.RiskMetrics RiskManager 3. Choose Positions/Import • 6 . The import process will take the file from your computer and send it to the RiskMetrics RiskManager system and place it in the position database.7 RMClient Batch Application Import the portfolio file .

select create a new report. 7 . 7.Getting Started 1. keep the position set 'all positions'. For now. go with the default risk settings. 6. 3. 2. From the report tab.Getting Started with RiskManager Creating a Report . Choose the drill-down dimension of 'position'. 5. It is Historical Simulation & 95% confidence. 4. For now. The most flexible report is the customizable table report. Keep the VaR statistic (one column). Choose the customizable table report.

Statistics . divide risk by account. risk type. sector). strategies. (b) Multiple blocks of positions. sector. Features include ability to limit the display to top or bottom N rows under any dimension (ie top 5 riskiest stocks within each sector. risk type. MultiRisk Setting Report Histogr am VaR Report Origina l Single Statisti c Report (Legac y) Use this report to look at each statistic under: (a) different risk settings. maturity bands. Compare VaR at different confidence levels. such as multiple look back periods. examine duration bets using contributional duration and divide curves by maturity sector. decay factors. Note: must have show legacy reports turned on in Preferences/Report Setup Risk Attrib ution Risk Attributi on Report Calculate Tracking Error and Incremental Tracking Error. and scenarios. all on one report. currency. cashflow maturity sectors. Each position block will be calculated separately. and sensitivities across multiple funds. pricing dates or base currencies. and stress scenarios across asset groups. detail. traders. currencies. etc. industry group.the left column lists all the types of reports in the RiskManager application. and Bets taken alongside the risk. For Fixed Income.compare side-by-side analysis of risk and stress measurements against different assumptions. regions. etc. Each report type is a layout manager from which users may construct a wide variety of customized risk. Tabul ar Repor t Type Generali zed Table Reports Description Uses Customi zable Table Report Lay out statistics column-wise with multiple tag dimensions row-wise. 8 . To be discontinued (legacy report). etc. sector. Buy Side: Measure Relative VaR of an account versus a benchmark. country. Sell Side Equity: Divide risk and stress measurements by country. Analysis may be relative to Benchmarks if desired. etc. Stress Tests. Each analysis block may be relative to benchmark. Sell Side Fixed Income: Measure VaR statistics. For Equity and balanced funds. Decomposition of Risk into Country and Sector Allocation Risk and Security Selection risk. VaR horizons. Asset Managers Only . Show Benchmark Weights. Report may contain mixed relative and nonrelative analysis. portfolio manager. Hedge Funds: Measure VaR statistics. desks. regions.Relative Risk to Benchmarks.RiskMetrics RiskManager 3. desk. fund.7 RMClient Batch Application Report Reference Guide RiskManager report types .all report types are built with statistics defined column-wise and tag dimensions row-wise. Calculate VaR for multiple confidence intervals and is used to generate a VaR histogram. All the functionality of this report is available in the Customizable Table Report. Portfolio Weights. Multiple Position Blocks . columns may be subdivided into one dimension (ie total/long/short. asset class. Note: the customizable table report can produce the same information. Divide Risk by long/short/net. The graphics output for 'Histogram' will show a picture of the return distribution. and data reports. DV01. Multi Risk Setting . shocks.Pull together separately calculated portfolios & accounts (ie not commingled). In addition. Measure relative underperformance due to stress tests. analysis dates. Bond Equivalents. Duration.

Credit Exposure Report MDI Report (Credit Manager Format) Original Credit Exposure Report (Legacy) Calculate credit exposure for multiple counter parties and netting dimensions. Base Credit Exposure 2. trader. sectors. Credit Exposure report to be discontinued (legacy report). Tabulate time series prices & rates date-wise.Getting Started with RiskManager Credi t Expo sure Calculate: 1. For example. Show the volatility and correlation between time series in the RiskManager price and rates database. Produce a table of returns date-wise (Historical Simulation) or by simulation trial (Monte Carlo Simulation) by dimension. tabulate the returns by sector. Note: must have show legacy reports turned on in Preferences/Report Setup Detail ed & Interm ediate Result s Portfolio Correlatio ns and Volatilitie s Volatilities and Correlations of a portfolio using one drilldown dimension. Graphics: Display by Histogram shows the shape and details of the distribution that enters the VaR calculation of any dimension. The Market Driven Instrument report can be imported directly into Credit Manager. Report to export the RiskMetrics Credit Manager application. all the way down to the position level. Show the volatility and correlation between positions. Maximum Credit Exposure Report can attach a limits by dimension list to show exposure excessions against policy limits. 9 . Expected Credit Exposure 3. Simulatio n Portfolio Returns Generates the simulated returns for a portfolio using one drilldown dimension Marke t Data Repor ts Market Data Correlati ons and Volatiliti es Market Data Returns Volatilities and Correlations of a group of market data time series. Report depends on a market group definition. or any dimension. Lists the historical returns for multiple time series of market data. strategy. portfolios.

Fixed Income Specific Bond The interest rate sensitivity of one portfolio with respect to another. Marginal VaR is best thought of as the amount that the total VaR across all positions would decrease by if a particular position were completely removed. Many instruments in RiskManager allow the user to include the current price. if 99% confidence is specified. The drilldown for this statistic must include riskFactor. Asset Manager Specific Relative to Benchmark Portfolio Calculates the beta of a security vs the whole benchmark or vs the securities in a dimension level such as a specific sector. This statistic gets the underlying present value in each report cell for the given drilldown. With bonds. calculate the beta of a investment Beta dimension level (sector) vs the benchmark sector. Computes the marginal Value-at-Risk contribution for each position or dimension level. Statisti c Description General Statistics Computes the net Present Value (mark-to-model). by a small Increment amount). Counts the number of positions in each report cell for the given drilldown. Computes the base Value-at-Risk. Incremental VaR is best thought of as the amount that the total VaR across all positions would change by if the size of a particular position were incrementally changed (i. Standard Deviation The standard deviation of returns. RiskManager will parallel shift the spot rate curve such that the PV will match the bond price given. the returns of the worst 1% Shortfall are averaged.7 RMClient Batch Application Statistics Reference Guide Reports are built column-wise with Statistics. Computes the notional (in the local currency for each position) of the positions in each report cell. Risk Contributi on Incremental Tracking Error. With stocks. the price series of the mapped time series. At the dimension level. al VaR Averages the loss returns in the distribution with a greater loss than specified by the Expected confidence interval. This statistic computes the Delta Equivalents using price sensitivity.RiskMetrics RiskManager 3. Frequently the reference 10 . Marginal VaR Computes the incremental Value-at-Risk contribution for each position defined in this Query. Computes the notional (in the base currency of the valuation specification) of the positions in each report cell. For example. Present Value Underlying Present Value Future Value Statistic Notional in Local Currency Notional in Base Currency Position Count Delta Equivalent s Value at Risk VaR Estimate the value of the portfolio at a time in the future with respect to the current analysis date.e.

Duration Credit Exposure Specific Base Credit Exposure Base credit exposure. and default to zero if left blank. The units for this are in relative percent.25% to 23. a specified shift of 5. This field can be any real number.75%. This field can be any real number. Stress Test & Sensitivit y Analysis Ability to show the PV after the shift and the change in market value due to the shift Precedence note: <volatilityShiftInBasisPoints> takes precedence over <volatilitySurfaceShiftInBasisPoints>. a specified shift of 150 would raise a given volatility from 22. For example. <equityShiftInPercent> allows users to specifiy a uniform shift to all equity prices. and default to zero if left blank. s The duration of any fixed-income instrument is most generally defined as the ratio of its interest rate sensitivity to its current value. and current value is simply the Present Value of a position.50 would drop a given equity price from 40 to 39. This computation is known as Effective Duration and has the attractive property of being calculable for many instrument types. allows users to specifiy a uniform shift to all fx rates relative to their base currency. For example. The units for this are in absolute basis points. should be optional. and default to zero if left blank. Maximum Credit Exposure Maximum credit exposure across all horizons. a specified shift of 150 would raise a given volatility from 22. For example. a specified shift of -2. including those that do not have well-defined yield-to-maturities (as would be required for Macaulay Duration).75%. RiskManager measures interest rate sensitivities by parallel shifts of all the zero-rate vertices that comprise a particular yield curve. <volatilitySurfaceShiftInBasisPoints> allows users to specifiy a uniform parallel shift to all volatility curves. For example.5 to 1. This field can be any real number. For an option-based position. The units for this are in relative percent.25% to 23.50 would increase a GPB/USD rate of 1.5825 (assuming a base currency of <fxShiftInPercent> Generalize d PVBP 11 . the implied volatility can be either specified by the user or calibrated by RiskServer if left blank. This field is consistent with the present tag <shiftInBasisPoints> that stresses interest rate curves. should be optional. The units for this are in absolute basis points. should be optional. <volatilityShiftInBasisPoints> allows users to specifiy a uniform shift to all implied volatilities.Getting Started with RiskManager Equivalent portfolio will contain just one security such as the UST 10YR Note. Expected Credit Exposure Average of credit exposure at a given horizon.

This field can be any real number. should be optional. stress Test PV Net PV after application of a predefined Stress Scenario. and default to zero if left blank. <commodityShiftInPercent> allows users to specifiy a uniform shift to all commodity curves. This field is consistent with the present tag <shiftInBasisPoints> that stresses all interest rate curves. estGa Compute P1 = <dvbpDeltaPV> for <shiftInBasisPoints>= –2. Compute P2 = <dvbpDeltaPV> for <shiftInBasisPoints>= 1.2.5%. and default to zero if left blank. Generalize d Greek Sensitivitie s Computational Procedure Compute P2 = <dvbpDeltaPV> for <equityShiftInPercent>= 0. Sensi tivity Type 12 . Note this is only a best-effort determination of what is risk-free and what is considered a spread curve. <equit Compute P1 = <dvbpDeltaPV> for <equityShiftInPercent>= –0.2)2. should be optional. The user can always run a report on only those positions considered spreadbased in order to better distinguish instruments. yDelta Set <greekSensitivity> = (P2 – P1) / (2 * 0. <spreadShiftInBasisPoints> allows users to specifiy a uniform parallel shift to all non-riskfree interest rate curves. yGam Set <greekSensitivity> = (P2 + P1) / (0.1).2.7 RMClient Batch Application USD). This field can be any real number. ma/> Resulting units are in base currency per % squared.0 would drop a 3-Month Gold price from 300 to 225. The units for this are in absolute basis points. The units for this are in relative percent. Inflation-Indexed bonds fall into a grey area as do some other curves.1.80% to 8. /> Resulting units are in base currency per %. Thus non-risk-free curves are all the rest. This field should be made optional and default to zero if left blank. Compute P2 = <dvbpDeltaPV> for <equityShiftInPercent>= 0. mma/ Set <greekSensitivity> = (P2 + P1) / (2)2. a specified shift of –25. The definition of a risk-free curve is any curve that has been specified as the default for a currency. a specified shift of 270 would raise a non-risk-free interest rates of 5. This particular tag will eventually be superceeded by more precise CreditGrades analytics but is robust enough for general use. For example. For example. Stress Test PV Delta Change in PV due to a named Stress Scenario. <inter Compute P2 = <dvbpDeltaPV> for <shiftInBasisPoints>= 2. estDel Set <greekSensitivity> = (P2 – P1) / 2.1. This field can be any real number. should be optional. and default to zero if left blank. <shiftInBasisPoints> this field already exists and allows users to specifiy a uniform parallel shift to all interest rate curves.RiskMetrics RiskManager 3. <equit Compute P1 = <dvbpDeltaPV> for <equityShiftInPercent>= –0. ta/> Resulting units are in base currency per bp. <inter Compute P1 = <dvbpDeltaPV> for <shiftInBasisPoints>= –1. > Resulting units are in base currency per bp squared.

1.2) . Compute P1 = <dvbpDeltaPV> for <volatilityShiftInBasisPoints>= –1. <curre Compute P1 = <dvbpDeltaPV> for <fxShiftInPercent>= –0. a/> <spre Compute P2 = <dvbpDeltaPV> for <spreadShiftInBasisPoints>= 2.1. In particular. Present value after all yield curves parallel-shifted by the number of basis points specified in the report layout manager. /> Resulting units are in base currency per basis point. > Compute P2 = <dvbpDeltaPV> for <volatilityShiftInBasisPoints>= 1. it is the value of the position given a valuation spec (or risk settings) with analysis date set to tomorrow.1. ma/> Resulting units are in base currency per % squared.1).2. <spre Compute P1 = <dvbpDeltaPV> for <spreadShiftInBasisPoints>= –1. modity Compute P1 = <dvbpDeltaPV> for <commodityShiftInPercent>= –0.1).Getting Started with RiskManager <com Compute P2 = <dvbpDeltaPV> for <commodityShiftInPercent>= 0. 13 . ncyGa 2 mma/ Set <greekSensitivity> = (P2 + P1) / (0. Compute P2 = <dvbpDeltaPV> for <fxShiftInPercent>= 0. modity Compute P1 = <dvbpDeltaPV> for <commodityShiftInPercent>= –0. Rather. Compute P2 = <futureValue> for <horizon>=1D and <valueTodaysFlows/> Compute P1 = <presentValue> Set <greekSensitivity> = P2 – P1. Compute P2 = <dvbpDeltaPV> for <fxShiftInPercent>= 0. adGa Compute P1 = <dvbpDeltaPV> for <spreadShiftInBasisPoints>= –2. Resulting units are in base currency per calendar day. Gam Set <greekSensitivity> = (P2 + P1) / (0.2. the pricing date must be unchanged. adDelt Set <greekSensitivity> = (P2 – P1) / 2. > Resulting units are in base currency per bp squared. Delta/ Set <greekSensitivity> = (P2 – P1) / (2 * 0. Resulting units are in base currency per % squared. <curre Compute P1 = <dvbpDeltaPV> for <fxShiftInPercent>= –0. ncyDe Set <greekSensitivity> = (P2 – P1) / (2 * 0.2. <theta /> PVBP Delta PVBP Change in present value when all yield curves are parallel-shifted by the number of basis points specified in the report layout manager.2. <com Compute P2 = <dvbpDeltaPV> for <commodityShiftInPercent>= 0. > Resulting units are in base currency per %. <vega Set <greekSensitivity> = (P2 – P1) / 2.1. Resulting units are in base currency per bp. lta/> Resulting units are in base currency per %. Compute P2 = <dvbpDeltaPV> for <spreadShiftInBasisPoints>= 1. The “future value” described here is not the future value statistic provided by RiskServer. mma/ Set <greekSensitivity> = (P2 + P1) / (2)2. but nothing else changed.2)2.

7 RMClient Batch Application Getting Started Demo Map Importing Positions Reports Customizable Table Report Sell Side .Fixed Income Buy Side .Fixed Income Report Demo Importing Positions Demo 14 .Mixed Asset Types Multiple Risk Setting Report Credit Exposure Portfolio Volatility & Correlation Simulation Returns Market Group Data Report Time Series Volatility & Correlation Assumptions.Equity Fund of Funds . Setup and Preparation Usability Risk Settings Horizon Groups 10yr Equivalents Reference Portfolio Stress Tests and Scenario Analysis Setting User Preferences Demo RiskSettings Demo Horizon Group Demo 10yr Equivalents Reference Portfolio Simulation Return Report Demo Sell Side .RiskMetrics RiskManager 3.Fixed Income Buy Side .

You have the option of tagging with text. Sorting. date and relative date types. The user has the following recycle bin operations: • • • • • Empty the recycle bin Delete multiple Restore multiple Restore all Refresh recycle bin In addition. Tags Most objects can now be tagged through their respective editors. a user preference controls the expiration of recycled items. Because the recycle bin can grow quite large if ignored. There are three expiration settings: • • Immediate . any individual item can be restored or deleted from the recycle bin via a pull-down menu obtained by clicking on an object in the list. messages. Bucket Dividers 15 . we now have view managers and filter groups for all objects as well. numeric. task sequences. Position Editor The position editor is now based on the same technology as the report editor. A list page containing all recycle bin items is shown. View Managers and Filter Groups Formerly only available for positions.do not send anything to the recycle bin N days – auto-delete anything older than N days The maximum number of days a user can select is configurable by the ASP system administrator. filter groups. New Look The RiskManager interface has had a makeover and now sports a crisp new look and feel.7 Recycle Bin Most deleted items can now automatically go to a recycle bin instead of being immediately deleted (notable exceptions include deleted users.Release Notes New User Features in RiskManager3. giving us much more flexibility and stability. RMFiles. searching and customizable columns are available as with all other list pages. The recycle bin is accessed via the Home pull-down menu. indexes and processed indexes).

which may be allow (IA) or deny (ID). Admin Actions Administrative functions are broken down into individual assignable actions (e. the default is to inherit access rights. New Administrative Features in RiskManager 3.g.. groups can be assigned sets of actions. Members of a group (including other groups) will inherit the group’s actions except for those actions explicitly denied for a particular user.A) in (ED. As in previous version of RiskManager.7 RMClient Batch Application We have a new application object accessible under stored reports called bucket dividers. 16 . Clients that do not require this level of granularity for administrative permissions will not notice any difference. In addition. For each admin action.A) in (EA. IA) then User is granted access Else if rights(U. changes have been made to the domain settings interface for easier changing of identical settings across multiple domains. Encryption and Compression When creating a new domain you have the option to have all application objects encrypted and/or compressed. The determination of IA and ID depends upon group membership as follows. any member of admin has full access to all admin actions. Editors Multiple editor windows can now be open at the same time. In the absence of an explicit setting. You can also refresh market data. ID) then User is denied access EA and ED are always explicit settings for a user. activate/deactivate users).RiskMetrics RiskManager 3.7 AuthDB Account Changes We now have the capability to “import” a domain from another AuthDB. Also. Rules for access Given an action A and a user U: If rights(U. there are three possible settings for a group or user: • Explicit Allow (EA) • Explicit Deny (ED) • Inherit. switch-to. Now a user can have access to some admin actions and yet still be blocked from accessing others. Performance Improvements List pages load faster due to database performance improvements. create/edit users. depending on group membership The admin account comes preassigned with all admin actions set to EA (superuser). It is used to define arbitrary ranges.

which can be used to determine the default behavior in the absence of any explicit setting. There are two actions. Each role is flagged as administrative or nonadministrative.ID). for example). and Group3. but it is patterned after the Windows security model. through inheritance we find Group2 has an explicit deny.EA).g.Release Notes Given the set of all groups G of which U is a member.ED). Group2. Group3 is not a member of any group and is denied access by default.. edit position.EA). This may look a bit strange. A1 and A2 (like switch-to and create user. Even though Group2 has an explicit allow for action 2. User4 is a member of Admin and thus inherits allowed access rights as well. and is thus denied access to both actions. and a set of explicit inherited settings R found in G (which will be 0 or more occurrences of EA or ED): If R is empty then User is denied access (no explicit setting) Else if R contains ED then User is denied access (any ED in group membership results in deny) Else User is granted access Note that these rules are for administrative actions. then empty R would mean a user is granted access. Group1 and Admin). Four groups are shown: Admin. However. 17 . If we were to use this scheme in the future for nonadministrativeactions (e. Since User2 has no explicit setting for action 2 the explicit deny overrides all other settings (IA.ID). User3 is a member of Group3 and inherits the same privileges (IA. has no explicit settings.ID). Admin is explicitly assigned allow access to both actions (EA. Group3 does have an explicit allow for action 1 (EA. Group2 has an explicit allow for action 2. Group1 is a member of Admin and inherits those rights. User5 is not a member of any group. Group2 is a member of Group1 (and thus. an explicit setting overrides inheritance (IA. Also. Even though inheritance says to deny access to action 2. create report). However. Admin actions are currently grouped into five roles. Admin). Group1 has an explicit deny for action 2 (IA. The following diagram helps illustrates the scheme. User2 is a member of Group2 (and thus. Group1.

g. abcdef) Require numbers: (e.g.g.g. User6 has an explicit allow setting for action 2 which overrides the inherited setting from Group1 (IA. Option To Not Explain Problem At least one client requested the ability to not tell a user why their password is invalid.g.cd$) Require mixed case: (e. the application can now automatically generate a password according to the password security settings and email it directly to the new user.e. Generate Random Password Depending on the security setting (Automatically Generate Passwords).EA). aaa111) Require letters: (e. This is now a security setting (Hide Password Errors). while User1 inherits Group1’s limited access (IA. user1abc when username is user1) Change Password OnNext Login This option forces a user to change their password the first time they login.ID). including: • • • • • Create account Edit account Delete account Create group account Edit group account 18 . Prohibit inclusion of user ID (i. abCdEf) Prohibit leading and trailing spaces. Passwords Password Security Numerous options are now available in security settings for enhanced password security. This way the person creating the account never sees the password. including: • • • • • • • Maximum number of consecutive identical characters: (e.7 RMClient Batch Application Lastly. Session Timeout This is now a security setting. ab1c23) Require special characters: (e. ab. Nightly Tasks There is now a list of nightly tasks including: • • Determine if any user accounts expired today Clean recycle bin (see recycle bin below) Audit Logging Numerous actions are now logged. Account Creation Account creation is now available via an application programming interface (API).RiskMetrics RiskManager 3.

Release Notes • • • • • • • • • • • • • • • • • Delete group account Reset password Remove from group Add to group Disable account Enable account Edit security settings Account login Account logout Edit password Edit administrative permission Batch login Switch to Failed login Create domain Edit domain Delete domain 19 .

This instrument will be modeled as the combination of a standard cap (at the higher strike) plus a digital interest rate option (at the higher strike in comparison with the lower strike). This approach yields more robust risk analytics and allows the model to synchronize the decision tree with bond features such as call dates and put dates.Blended Discount Rates The Convertible Bond model has been enhanced to discount cash flows by a "blended rate" based on risk-free and "implied" risky rates. This led to over-calculation for some bonds. In contrast to our current European Swaption model. this instrument is the same as a digital cap. The blended rates will be computed internally as a function of how far a bond is in-the-money. 20 . This feature is similar to the existing soft call feature which prevents the issuer of the bond from calling (or forcing conversion) unless the underlying stock is above a certain percentage of the conversion price. Since most call schedules are American that will be left as the default. up until the maturity of the underlying swap. which allows exercising only at the start of the underlying swap.e. This instrument will pay off a fixed amount based on whether a given FX rate is above the strike price at expiry.7. Users should expect to see changes to their current valuation and risk analyses for existing Convertible Bond positions based on these improvements as well as those listed below. bonds can be called or put at any date on or after that indicated). Digital Interest Rate Options A new instrument has been added providing for OTC Interest Rate Digital Option functionality.European-style Call and Put Schedule In the previous model all call and put schedules were considered to exercise American-style (i. Previously the number of nodes had been fixed for all bonds. This upgrade provides a more flexible model in which the number of nodes and their positions are based on the parameters of the bond. Convertible Bonds . Convertible Bonds . Functionally. Convertible Bonds . and under-calculation for others. It will pay off a fixed amount based on whether a given rate is above the strike price at expiry.1 Analytical Features Convertible Bond Model Enhancements The Convertible Bond model has been upgraded to allow a more flexible tree structure. this update will permit exercising at any intermediate coupon date.Floating Rate Coupons *** The Convertible Bond model will be enhanced to allow for floating coupons based off of a yield curve similar to our current FRN model. This instrument acts like a standard cap at the lower strike but resets to a new cap at a higher strike if the final rate is above that higher strike. This update should yield better pricing and sensitivities and better follows industry-standard practices. Bermudan Swaptions The Swaption model has been extended to provide for Bermudan Exercising. This update allows for European-style calls and puts (i. Since almost all put schedules for Convertible Bonds are European that will be set as the new default. This instrument will be modeled as a combination of two standard caps (one at each strike) minus a digital interest rate option (at the higher strike in comparison with the lower strike). Knock-In Caps and Floors A new instrument has been added providing for OTC Knock-In Caps and Floors. This instrument acts like a standard cap but payoff only occurs if the final rate is above a second (higher) strike price. Digital F/X Options A new instrument has been added providing for OTC F/X Digital Option functionality.e. bonds can be called or put only on the exact dates specified). Convertible Bonds . In either case users can override these defaults. Double-Strike Caps and Floors A new instrument has been added providing for OTC Double-Strike Caps and Floors.Contingent Conversion The convertible bond model has been extended for cases in which the owner of the bond cannot convert to the underlying stock unless the underlying stock is above a certain percentage of the conversion price.7 RMClient Batch Application RiskManager 3.RiskMetrics RiskManager 3.

This update will allow for European-style calls and puts (i. etc. multiple scenarios surrounding the indicated confidence are averaged together. F/X Risk Attribution Risk Attribution. bonds can be called or put only on the exact dates specified). Currently the models can only cap short-term rates that are synchronous with the coupon frequency. but not as a separate component of RiskManager's Risk Attribution report. has been updated to explicitly compute components of risk due to F/X moves. Longer look-back periods or lower confidence levels should be used in these cases.e. This update will provide for more general CMS functionality similar to our FRN model. With this upgrade RiskManager will allow for simulation-based Incremental VaR as well. The primary difference is a flattening of the payout function near the issue price putting a small damper on upside potential. Standard Bonds . and sub-components of P/L vectors show significant changes from one scenario to the next. In order to avoid the instabilities associated with such a computation. or Historical methodologies. bonds can be called or put at any date on or after that indicated). For example. Thus the primary volatility risk is not to general levels but rather to call/put skew.) as it contributes to the total VaR. Floor. MonteCarlo. Though this method is applicable for both the Monte Carlo and Historical methodologies. This should provide for much more robust calibration to user-provided prices.g. The enhanced risk attribution will be particularly useful for Asset Managers benchmarked against Global Equity Indices. This is best thought of as the purchase of a call option and the sale of a put option. one always receives shares at maturity). and Collars The Cap. Simulation-based Incremental VaR VaR and Marginal VaR have always been available using Parametric. In the past this had been done for all standard VaR and sensitivity statistics. 21 . The calculation is performed by inspecting the individual scenarios for each position (or portfolio. Mandatory Convertible Bonds Enhancements Mandatory Convertible Bonds are quite stable to general volatility and spread moves since their payout function is somewhat similar to that of an equities futures (e. and Collar models have been extended to provide for caps and floors on constant-maturity rates. The Mandatory Convertible Bond model has therefore been modified to calibrate prices based on call/put skew rather than spread. Incremental VaR has only been available using the Parametric methodology due to questions about the stability and interpretation of Simulation-based Incremental VaR.European-style Call and Put Schedules *** In the current model all call and put schedules are considered to exercise American-style (i. choosing a 99% confidence level over a 250-day look-back period only yields two tail observations. care must be taken to ensure a large enough sample of scenarios in the tail when performing Historical simulations. American-style will remain as the default setting. Floors.e.Release Notes Constant Maturity Swap (CMS) Caps. a separate analysis and report within RiskManager. However. such as the 10-year T-Bond rate. This provides for a more robust estimation when the correlation of risk factors are very low.

If given both. This update will allow the calibration of asset volatility according to a given Credit Default Swap price in addition to fair spread. 22 .2 Analytics Features Calibration of Credit Default Swaps according to Market Price RiskManager currently allows the calibration of asset volatility according to a given fair spread.RiskMetrics RiskManager 3. Vega Risk for Callable Bonds and Bermudan Swaptions Vega risk will be available for the Callable Bond and Bermudan Swaption instrument types. Formerly. As a result. if an instrument has a paydown schedule list that does not correspond exactly with the interest payment dates. principal payment dates and interest payment dates are now independently determined.7.7 RMClient Batch Application RiskManager 3.7. RiskManager assumed specification of a full paydown schedule list including all coupon payments and no extra payments. precedence will be given to the fair spread.2 and prior versions. present value will differ between RiskManager 3. Improved Cash Flow modeling for Amortizing Bonds and Swaps With this version of RiskManager.

one always receives shares at maturity).3 Analytics Features Improved Cash Flow modeling for Amortizing Bonds and Swaps The modeling of cash flows for Amortizing instrument has been updated in this version of RiskManager. Thus the primary volatility risk is not to general levels but rather to call/put skew. This update will allow the calibration of asset volatility according to a given Credit Default Swap price in addition to fair spread. Mandatory Convertible Bonds are quite stable to general volatility and spread moves since their payout function is somewhat similar to that of an equities futures (e. present value will differ between this version and prior versions. In either case users can override these defaults. if an instrument has a pay down schedule list that does not correspond exactly with the interest payment dates. As a result. Constant Maturity Swap (CMS) Caps.Release Notes RiskManager 3. Floor. Convertible Bonds . If given both.7. Floors. RiskManager currently allows the calibration of asset volatility according to a given fair spread. Since almost all put schedules for Convertible Bonds are European that will be set as the new default. This should provide for much more robust calibration to user-provided prices. bonds can be called or put only on the exact dates specified). Formerly. and Collar models have been extended to provide for caps and floors on constant-maturity rates. In the new version. and Collars The Cap.e. Convertible Bond Option (ASCOT) A new instrument type has been added to model Convertible Bond Options. principal payment dates and interest payment dates are now independently determined. This update will provide for more general CMS functionality similar to our FRN model. The Mandatory Convertible Bond model has therefore been modified to calibrate prices based on call/put skew rather than spread. RiskManager assumed specification of a full pay down schedule list including all coupon payments and no extra payments. This is best thought of as the purchase of a call option and the sale of a put option.e.European-style Call and Put Schedule The Convertible Bond model has been enhanced to allow specification of European-style Call and Put Schedules. Calibration of Credit Default Swaps according to Market Price The Credit Default Swap model has been enhanced to allow calibration according to Market Price in addition to fair spread.g. In the previous model all call and put schedules were considered to exercise American-style (i. precedence will be given to the fair spread. 23 . Mandatory Convertible Bonds Enhancements The Mandatory Convertible Bond model has been modified to calibrate prices based on call/put skew rather than spread. This new instrument type is intended to model the Convertible Bond Option portion of an ASCOT (Asset Swapped Convertible Option Transactions). such as the 10-year T-Bond rate. Currently the models can only cap short-term rates that are synchronous with the coupon frequency. bonds can be called or put at any date on or after that indicated). Since most call schedules are American that will be left as the default. This update allows for European-style calls and puts (i. The primary difference is a flattening of the payout function near the issue price putting a small damper on upside potential.

We calculate delta and gamma for equities.Floating Coupons The convertible bond model has been extended to allow for floating coupons based off of a yield curve similar to the current FRN model. In addition. we have added the ability to create a user defined stress test which incorporates much of the new and existing Generalized PVBP functionality. Dollar delta can be described as the delta hedge of the position expressed in dollars. we've added to the items that can be tweaked as well as the ways to tweak them. Generalized PVBP Several enhancements have been made to the functionality available within the Generalized PVBP statistic. equity prices. commodities. Vega Risk for Callable Bonds and Bermudan Swaptions Vega is now available for the Callable Bond and Bermudan Swaption instrument types when drilling down by risk type.7 RMClient Batch Application Convertible Bonds . dollar gamma can be described as the change in the delta hedge (or dollar delta) when the underlying moves by a certain amount. we incorporate a third parameter that allows the user to stress the underlying before calculating delta and gamma. In addition.e. the user can obtain the values that delta and gamma would take if the underlying (i. Details on each can be found below. interest rates. Stress Spreads by a Percentage 24 . Forward Starting Swaption The swaption model has been enhanced to allow the swap to start after the option expiration date for a European style option. In other words. Stress I-Rates and Volatilities by a Percentage The Generalized PVBP statistic has been enhanced to allow the stressing of volatilities and interest rates by a percentage of their value in addition to the existing stress by basis points. The Crude Oil Implied Volatility Curve is available for use with the new model when drilling down by risk type. Specifically. currencies. or implied volatilities) moved by a certain amount. Convertible bonds with both fixed and floating coupons is an enhancement that is noted for future release. Vega Risk on Commodity Options Vega is now available for Commodity Options. volatilities. currencies. The implementation will allow the user to choose a one-sided or two-sided shift in underlying as well as allowing the user to specify the amount of the shift. Note that now a convertible bond can now be modeled with all fixed coupons or all floating coupons. spreads. Dollar Delta and Dollar Gamma New statistics have been added to RiskManager called Dollar Delta and Dollar Gamma.. Similarly. In other words. it indicates how much of the underlying one needs to buy/sell in order to delta hedge a position or group of positions.RiskMetrics RiskManager 3. commodity prices. interest rates and spreads.

Release Notes

The Generalized PVBP statistic has been enhanced to allow the stressing of spreads by a percentage of their value. Presently the only option is to stress by an absolute value (in basis) points. The stressed spread will be a constant average spread over the term of the curve, sometimes referred to as the Option Adjusted Spread. Note that spreads have been separated from the request above since spreads are not a risk factor. To isolate the "spread" and be able to stress it by a percentage, RiskManager needs to identify the Risk-Free component of the curve in order to extract the spread. To do so, a table will be maintained to identify a risk-free curve for each currency. Stress Time The Generalized PVBP statistic has been enhanced to allow the stressing of time for option type instruments. This enhancement will allow reporting of the absolute present value at a future date or the delta of present value at a future date to today's present value. A date or number of days can be input to determine the future date. For positions that expire prior to the future date, the value of the statistic will match a position that expires at the future date. Caps will not be supported initially. Stressing time for convertible bonds and vanilla bonds will work the same as stressing time for options using the clean price of the bond at both present and future date. Bonds with schedules such as amortization and coupon changes will not be supported in this release. Stress Risk Factors by Number of Std Deviations The Generalized PVBP statistic has been enhanced to allow the stressing of risk factors by a number of standard deviations. This feature will allow stressing of underlying Equity, Currency, and Commodity risk factors based on number of standard deviations in addition to existing percentage and number of basis points. The standard deviation of the time series will be determined based on the risk setting definition (look-back period, decay factor). Stress by Tags The Generalized PVBP statistic has been enhanced to allow the user to apply one stress to one set of positions within the portfolio while applying a second stress to a second set of positions within the same column in a report. For example, move Volatility for positions tagged with Industry=Technology down 10% and move Equities up by 5% for positions tagged with Industry=Bank. This can be implemented either in the Generalized PVBP statistic definition within the report or the creation and use of a user defined stress test object.

25

RiskMetrics RiskManager 3.7 RMClient Batch Application

RM 3.6 Release Features
* Indicates feature to be released as sub-point release, after the initial release date of Jan 25, 2003. Analytics – Write ups and notes are available, click on hyperlinks below. 1. 2. 3. 4. 5. 6. Issuer Specific Risk and companion working paper: Estimating issuer-specific risk for corporate bonds & A unified approach to credit risk for corporate bonds. RiskServer generated Historical Equity Volatility series for Vega Risk. Generalized PVBP -- Allows specifying market moves in one or more market types. Previously this stat allowed specifying a move in basis points for interest rates alone. Generalized Greeks – delta, gamma, theta, vega. *Vega Risk for commodities – dependent on options on commodity future vol data. New or Extended Asset types a. Commodity Swaps b. Equity Swaps c. Mandatory Convertibles d. Swaps with Accrued Interest e. Spread options f. *Credit default swaps g. *Total return swaps

RiskServer – non Analytics 1. 2. 3. Position Info stats (next coupon, years to maturity, spread, etc.) Position Tag ‘stats’ – user defined custom tags available as position level report content. Support for <userData> section in RML queries – for RiskServer only clients.

RiskServer – ASP 1. Performance statistics for each query type

RiskManager – ASP 1. Domains a. Separate DB for each domain b. Market Data partitioned by domain (allows dmx permissioning per domain and domain specific market data). c. Risk Services resources allocated per domain d. Separate Domain admin app. Market Cache Service (removes market meta data cache from Application Server memory space. Report Service – removes from Application Server memory space and allows to be distributed.

2. 3.

RiskManager – General functionality 1. Report editor rewrite (much faster) 2. Sortable columns in list pages

26

Release Notes

RM 3.5 Release Notes
RiskManager: Risk Attribution Report: Includes the ability to filter top n or bottom n of a given statistic column at a given level and below. New charting: New Market data line charts Pie charts New Interactive Histogram - particularly useful for portfolio returns report. Market Data: Export Market List Searches (Tab Delimited) Auditing and Logging: Separate Error and Application Audit Logs Login success or failure Logout Report Group begin/end Report begin/end Batch start/end Notification: Allow Notification of task begun as well as task ended. Equity Identifiers: Support for entering alternative identifiers for equities in position creation interface. Import: Allow overwrite existing for application objects other than positions. Retains links in composite objects such as report and indexes. Session Management: Keep alive for long running processes such as report generation and imports Session timeout warning Credit Exposure Report: Add Present Value as a column. Security: Configurable Password lifetime Configurable Account lifetime Login Lockout after configurable number of failed logins. Administration: Enhanced System Status: Connection status to analysis and reference risk servers Datatrans connection status RMDB database availability and stats Current loaded data range (i.e. the Latest DMX data set date) ASP: User Migration from RMDB to RMDB Index Builder: Automatically reprocess index when edited. Market Data Service: Processing DMX Events - able to handle changes of DMX identifiers as well as record corporate actions, and changes in other meta data. RiskServer Service: Handle compressed queries. RiskServer Analytics: General Features: Quadratic Approximation for Callable and Convertible Bond Support for alternate DMX supplied identifiers for equities (ex. ISINs, Ticker, Cusip, etc.) Stat value as a % of Stat Total Return Horizon in Valuation Spec - sample returns at frequencies other than 1D. UK Inflation Linked Gilts

27

RiskMetrics RiskManager 3.7 RMClient Batch Application

Risk Attribution Statistics: Beta Statistic Configuration: Add configuration setting to allow or disallow dump of XML input for diagnostic purposes . Default is to allow dump of XML input. All analyses: Correct bug in handling of return horizon (not honored in historical analyses and other places). Credit exposure analyses: More efficient use of memory. Take into account the volatility of the risk factor when calculating the drift. Instrument tags: Make hierarchical tags non-case-sensitive. =============================================== All instruments: Add notional tag. Correct bug in secant calibration in RM3.4.1.72 and before, where calibration could "exit early" without correctly setting variables, if the given value is so far out of range that calibration was impossible. This correction has caused numerous questions with respect to FRNs where the price is far too high (so this explanation is repeated for FRNs). The problem can be demonstrated by getting position diagnostics and showing that the given value is out of range. With an older engine, the calibrated field may be wrong in this case. All instruments with volatility series: Add a check that the volatility calculated from vol series has to be positive. Though it may potentially affect all options which are using vol series, the happenings should be rare. Bond future option: Use secant method instead of bisection for calibrating yield-to-maturity for bonds; slight effect on values, but faster. Collar: Correct a bug in which the calibrated or calculated volatility from vol surface is used as user specified volatility in collars (volatility of caplets "bled over" into floorlets). Cap/Collar/Floor: Add yield-based pricing model. Use secant method instead of bisection for calibrating yield-to-maturity for bonds; slight effect on values, but faster. Callable bond: Add quadratic approximation, on-demand per instrument or according to ini file setting. Correct bug where time series that affect price were not always reported so parametric analyses were wrong in some cases. Speed up processing even without quadratic approximation through better organization of computations. Convertible bond: Add quadratic approximation, on-demand per instrument or according to ini file setting. Correct bug where time series that affect price were not always reported so parametric analyses were wrong in some cases. Correct order of precedence of market price and volatility in convertible bond (volatility should supercede market price). Removed Convertible Bond code that tested whether rate to grow tree was negative. It is possible for rate to go negative on historical simulation with (what else?) JPY. The variable which was being tested is actually never used, and it appears to do no harm to let the value go slightly negative. Equity: Notional in own or base currency computed using specified equity price, if any, otherwise price from database.

28

Release Notes

Equity option: Solve for delta and volatility simultaneously where volatility series is specified. FRN: Correct bug in secant calibration in RM3.4.1.72 and before, where calibration could "exit early" without correctly setting variables, if the given marketPrice is so far out of range that calibration was impossible. This correction has caused numerous questions with respect to FRNs where the price is far too high. The problem can be demonstrated by getting position diagnostics and showing that the given value is out of range. With an older engine, the spread may be wrong in this case. Change default discount curve for FRNs from currency default curve to reference curve. Allow 0 accrued interest. Option on equity future: Solve for delta and volatility simultaneously where volatility series is specified. FX option: Solve for delta and volatility simultaneously where volatility series is specified. Swaption: Use secant method instead of bisection for calibrating yield-to-maturity for bonds; slight effect on values, but faster. New instrument types: UK Index-linked Gilt. =============================================== Market data loading: More efficient use of memory Equity data in generic format, including alternate identifiers. Fields that expect equity names can now specify alternate names using exchange and identifier type. Better error handling: error messages appear in marketDataErrors.xml and data loading continues even in the face of errors. New time series types: RPI Index Forward rates: Correct problem with backfilling forward rates: if one time series is backfilled from time A and the other from time B, with A > B, then for some part of the time period, the forward rate was computed with one real value and one backfilled value; in time series with dramatic changes over time, this could produce negative forward rates which produced errors. Change is to compute the forward rate normally starting at the later of the earliest dates of the time series, and backfill from that date. The change allows some analyses to run that otherwise wouldn't, but causes small differences in cases that ran despite differences in backfilling, where the backfilled time series was not wildly different from the non-backfilled time series. =============================================== All statistics: Allow output as percent of total stat in addition to output as percent of total PV or cell PV. Allow output as basis points wherever output as percent is allowed. New statistics: Risk attribution (incremental or standalone). Risk contribution. Beta.

RiskServer 3.4 patches 3.4.1.86 20020415 lw Corrected a bug in Historical Stress testing where interest rates moves were treated relative to discrete rates but the moves were taken relative to continuous rates. The bug could be seen

29

RiskMetrics RiskManager 3.7 RMClient Batch Application

by viewing simulation returns for historical sim on portfolio and checking against a one day Historical Stress test within the lookback period.. The numbers for the date in question should have tied out. They did not. 20020417 lw Corrected bug in Secant Calibration in RM3.4.1.72 and before. This affects ABSOLUTELY ANY INSTRUMENT OF ANY KIND WHATSOEVER which may be calibrated. In the secant calibration if the market price were so far out of range that we couldn't calibrate to it, we would return early rather than continuing to calibrate when we know we can't get the right answer. The trouble is that the spread wasn't necessarily set correctly on the early exit. The base value was wrong because it was calculated with the wrong spread (the last one used before we exited early), but the simulated values were right because they were calculated with the right spread. So the simulated returns were wrong. The case where this would occur is when the given market price is so high that even with the largest negative spread permitted (default would be -2000 BP), we still can't reach the right answer. In this case this is true of all the positions (as they are really the same position as far as I can tell). With a negative spread of -2000 BP, the market price is still only 98.9. The problem here may be that the market price was specified as a dirty price rather than a clean price, or perhaps the accrued interest of 6.222904 on a position with a current rate of 4.39 is in error, or maybe these positions are supposed to have a reset spread that is missing. Whatever the problem is, you will get normal simulated returns even with RM3.4.1.66 on these positions if you change the market value to, say, 97.8 instead of 100. The secant calibration error will never occur if the market price is not specified, or the market price is specified but is not too high. Even if the market price were too low, you wouldn't see the error. I think you can see the position diagnostics for a position in RiskManager, and that would show you the computed spread and the market price it came up with. If that doesn't match your market price, well, there's a problem with the market price or the accrued interest or both. 20020424 lw Added quadratic approximation to callables/convertibles. Makes difference of up to about 15% on VaR. This can be avoided by turning quadratic approximation off in the ini file. This is turned off by default in RM 3.4.1.86/87. Should not be turned on until release of 3.5. 20020429 lw Change default discount curve for FRNs from currency default curve to reference curve. 20020503 lw Corrected bug in Convertible Bonds where time series that affect price were not all reported (under some conditions), so Parametric analyses of Convertible Bonds were wrong in some cases. 20020508 lw Backfill forward rates: if one time series is backfilled from time A and the other from time B, with A > B, then for some part of the time period, the forward rate was computed with one real value and one backfilled value; in time series with dramatic changes over time, this could produce negative forward rates which produced errors. Change is to compute the forward rate normally starting at the later of the earliest dates of the time series, and backfill from that date. The change allows some analyses to run that otherwise wouldn't, but causes small differences in cases that ran despite differences in backfilling, where the backfilled time series was not wildly different from the non-backfilled time series. 20020508 lw Allow 0 accrued interest on FRNs. 20020513 lw Corrected bug that caused error when proxy series for equity had less history than the proxied series. 20020605 lw Corrected bug in Callable/Convertible Bonds where time series that affect price were still not all reported (under some conditions), so Parametric analyses of Convertible Bonds were wrong in some cases. DataTrans 3.4 Patches 3.4.1.83 Blank Header and Footer Lines - Fixed problem with blank lines in header and footer sections of the file that contain no data, but may contain white space characters such as tabs or spaces. These lines are now ignored like any actually blank line would be. Update RM3D - The file containing the invalid positions in the RiskManager interface did not contain line separators for RM2.3 version files. These files could not be loaded into Excel and would appear to be a

30

Release Notes

single line of text. This fix adds the line separators to RM2.3 files. Other file formats, like RM3D, do not have this problem. Dynamic Configuration of Translators - Made the installation of translation packages easier, so that the DataTrans configuration does not need to be updated when a new translator is installed. The old way of configuring translators still works, but now any .XML files found in the DT_????/conf/service directory can be used to configure DataTrans with additional translators. These configuration files will take precedence over any commands in the DataTransService_cfg.xml file. To take advantage of this, you will need to download the new translator packages from the Integration web site. Any older translation packages you may have downloaded will still work, but you will need to manually update the DataTransService_cfg.xml file for them to be loaded. Corrected Interest Rate Futures - Moved VOLATILITY_SERIES field from "interestRateFuture" position to "interestRateFutureOption" where it should have been. This could potentially break someones file that included that field in an "interestRateFuture", but it was broken anyway and they would not have known it. 3.4.1.73 Accrued Interest for Bonds - For RM 2.3, removed rules governing the ACCRUED_INTEREST field in bonds and convertible bonds. The contents of the field are now simply copied; if the field is empty, an <accruedInterest> tag is not added to the resulting RML instrument. 3.4.1.68 Case Sensitive Field Groups - Field Groups within RM 2.3 files are no longer case-sensitive. For instance, "TAG", "tag", and "Tag" are all synonymous. 3.4.1.67 Amortizing Bonds and RM3D - RM3D translator updated to make the PAY_DOWN_SCHEDULE_LIST field optional for the amortizingBond position type. Performance Enhancement - Fixes problem with translation results being queued up until the entire job is finished. With the required patch to RiskManager, translation results will now be posted to the database as they are available from DataTrans. This should result in a significant speed improvement when importing positions into RiskManager. RiskManager 3.4 Patches: 3.4.1.38 MarketData Viewer Error. A system error errors in the MarketData viewer if there is no commodity data in the local market database. 3.4.1.37 Duplicate Positions Imported. Duplicate positions are sometimes imported as a result of a threading problem on import. The threads have been synchronized to correct the problem. 3.4.1.36 Stack Trace when viewing a Super Group whose Position Group has been deleted. A stack trace occurred when viewing positions from the row menu on the Position Group List of a Super Group whose Position Group had been deleted. The Position Super Group was not being validated from the Position Group List "View by" feature like it was on the Position View Manager. In addition, after validating, a new sql exception occurred, which has also been fixed. Display RiskSetting decay default value / bug fix for "None". Case I: The description label displayed for the default display now appears as the following (where it used to not display "0.94"): RiskMetrics default (0.94). Case II: The RiskSetting list page column called "Decay Factor" displayed the value as "00.94" rather than "0.94." This has been fixed to show "0.94." Case III: In addition, there was a non-critical bug when editing a RiskSetting. If the decay factor had been set to "None" (which is 1.00), then editing the RiskSetting showed the decay factor as "user defined" 1.00. I changed the comparison in the edit action class from a String comparison to a double comparison and now when the user edits a Risk Setting, "none" is correctly selected for the value of 1.00. Scheduled batch job fails to run. After running a sequence immediately, the scheduler removes the sequence job from the schedule.

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RiskMetrics RiskManager 3.7 RMClient Batch Application

Errors in Credit Exposures Limits. In rare instances, extended credit exposure reports registered erroneous values for user-specified limits. More precisely, due to faulty mapping, rows in report tables were sometimes assigned limits that actually belonged to their descendants in hypothetical netting hierarchies. User does not have private/shared option on some imports. Permission box was present but invisible on several import windows due to client-side javascript processing that rendered those rows invisible. This has been corrected so that all import windows have the permission box. 3.4.1.33 Corrected number alignment for user-defined stress test editor. The current level and new level columns were "left" aligned, making it difficult to read the numbers. Those columns were changed so that they are right aligned and the decimal places now line up. Corrected Localized number formatting for Market Data \ Risk Setting lists. There was no number formatting per localization for the current level on the new Market Data List nor for the decay factor on RiskSettings. The number of decimals for number columns on list pages is now configurable. For example, the Position List page shows no decimals, Risk Settings show 2 decimals places for the decay factor, and the Market Data List shows 6 decimal places for the current level. The same decimal pattern is also applied in the search mechanism so that the results will return a partial pattern match for numbers. Corrected instances variables that were not allowed in action classes. Instance variables are not allowed in action classes since the instance is shared across all users. Incorrect Batch Schedule editing. Changed the Calendar instance to a GregorianCalendar in the Batch Sequence code because the Calendar object itself ignores the DST change. Indexes and Processed Indexes produced zombie entries in application objects table (SQL script). Triggers now correctly delete the application object table entries for deleted Indexes and Processed Indexes. This would not be visible to users. Processed Indexes given wrong application object id (SQL script). Stored procedure now assigns correct application object id. This id was not referenced, so the problem would not be visible to users. Some queries producing deadlock in SQL Server. Code added to detect SQL Server deadlock and attempt to retry query when deadlocked and terminated. Corrected Stored Reports Problem with Batch Jobs. Fixes problem in stored reports in which population from database occasionally results in lost reports because of java.sql.Timestamp comparison problem. Reports persist in database but are not loaded into memory. This fix prevents loss and will recover reports that were stored but did not show up in the list due to this problem.

32

Release Notes

RiskManager 3.4 – New Features, March, 2002 Section Location
Admin Sub Menu: Active Sessions Admin Main Menu Admin Sub Menu: Account Policies

Feature

Active sessions row menu offers more options: edit, reset passw reset user (refreshes user lists from database and clears batch locks) User Hierarchy Manager: New tree representation for user hierarchy New Client information available to administrator

Admin

Batch Job
Editors Export File System Home Page

Batch Job Row Menu Editor Windows Main Menus per Section Import Main Menu Home Main Menu Home Top Link Import Main Menu: Completion Window

Run Batch Job immediately and Export Batch Job options New windows open at the top of the screen Export for Horizon Groups, Indexes, Market Groups, Position Groups, Processed Indexes, Risk Settings, and User Filters Prompt user before deleting file from the File system

New site map with improved access to all RiskManager function Market Dates moved into view (more easily visible) Improved import log file, displays line numbers Link to download position errors/import log file after import New import for Horizon Groups, Indexes, Market Groups, Posit Groups, Processed Indexes, Risk Settings, and User Filters

Import

Import Main Menu Position Sub Menu : Index Builder Pops Up On Completion Bottom Row of List Pages

Index Builder

New Index Builder: Manipulate multiple position sets consisting position groups or other indexes to create a custom weighted benchmark. Informs user of the number of objects deleted/duplicated Searching by all columns rather than just the ”name” column Change lines per page from the list page

List Pages Market Data List

Market Data Top Link Market Data Main Menu Position Main Menu Position Top Link : Position List Page Position Main Menu : Position View Manager Position Main Menu :

New Market Data List displays long name with Security ID Advanced search allows drilldown on market, data set, and time series tags

Market Viewer

New market type - Volatility (see also market groups, stress tes Choose raw results vs. base currency results Change base currency display Import / Export Positions in RM3D format

Positions

New Position column called “Position ID” New position trees use XML/XSL technology for paging of long lists for complete scalability Engine dimension reserved tags are distinguished from custom

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RiskMetrics RiskManager 3.7 RMClient Batch Application

Position View Manager

Position Groups

Position Sub Menu : Position Group Main Menu : New Position Group Editor

New Position Group Editor – allows creation of groups of positio groups called Super Groups Allows complement of an entire group Filtering by Engine tags, which include position type, currency, yieldCurveFamily, longShort, and maturityDate () maturityDate can be specified by multiple ranges of years to ma Allows union of tags or groups in addition to intersection Allow exclusion of specified tags New blue folder icons indicate specified filters that define a grou

Preferences Top Link : Page Setup Tab Preferences Top Link : Report Setup Tab Preferences Top Link : Defaults Tab Preferences Top Link : User Profile Tab

Choose favorite login page Jump to favorite page immediately Choose display of main menus on top links versus main pages Choose button display as text, images, or form elements Edit Report Setup options Choose to hide legacy reports from the “Create a new report” window (Original Credit Exposure and Single Statistic Reports) Set a default permission item (shared or private) that will be util in newly created objects User Profile is now the default tab

Preferences

Processed Indexes

Position Sub Menu : Processed Indexes Report Main Menu : Create a Report Report Top Link : Row Menu, Generate Report Report Sub Menu : Stored Report List Stress Test Main Menu: User Defined Stress Test Top Banner Position Sub Menu : User Filter List

Processed Index List – Allows user to process an index multiple times to achieve a snapshot in time of the rebalanced positions Allows user to set as “active” a single processed index per inde will represent the index in a report.

Reports Stored Reports

Engine dimensions distinguished from user defined tags in dimension fields by blue font color New report names, tool tip descriptions for report types "Information on Statistics" is displayed after running report, inclu number of invalid or expired positions Stored Reports are sorted by date Searching functionality added to user defined stress test Fill Down link is now always visible on user defined stress test Change base currency display Site Map link for more convenient access Top link menu system for improved navigation User Filter List allows filtering of positions according to owner

Stress Test Top Banner User Filters

34

Release Notes

RM3.4 Changes to Swaption Asset Type
This note describes the changes made to the asset type Swaption in RM3.4. 1. 2. 3. 4. 5. A new yield-based pricing approach is offered, with the existing price-based formula still available for backward compatibility. For positions that have a specified underlying swap rate, a bug has been fixed. The start dates for both fixed and float legs, and the first coupon date for float leg, have been dropped. Existing positions with such dates specified are still acceptable but those dates are ignored. The first coupon date for the fixed leg, if specified, now has to be later than the option expiration date. This constraint was not in previous versions. The option expiration date is now taken as the start date for both legs. For positions which have no specified start dates for the legs (fixed or float), the first coupon amounts calculated will be different when the option expiration date is not on a regular coupon payment date. This in turn will alter the inputs to the internal option model (strike price, underlying price, etc.). Consequently, for such positions the PV and VAR results will be different. We now only handle European type Swaptions. Any existing American type Swaptions are still be acceptable but are treated as European type now, i.e. with the American type ignored.

6.

35

RiskMetrics RiskManager 3.7 RMClient Batch Application

RM3.3 Release Features
Mortgages Market Risk for Mortgages is now supported by RiskManager and DataMetrics (US Agency: Fannie Mae, Ginnie Mae, and Freddie Mac Pass-Throughs Conventional FRM, Balloons, I/Os, P/Os).

Credit Exposure and Limits Upgrade This extensive upgrade to the credit exposure model now allows users to dynamically define a netting agreement hierarchy, define and apply different sets of exposure limits, view credit exposure statistics as percentages, with/without exposure-level and horizon detail. Multiple Position/Benchmark Pairs With this powerful new feature, clients can select as many different portfolios and benchmarks as they want and run them in a single report. This is especially helpful for fundof-funds, or Asset Managers which want to assess different portfolios/strategies. Delta Equivalents Clients can analyze their portfolio's sensitivity to all underlying risk factors (time series). Simulation Returns Analysis Analyze historical or Monte Carlo simulation return vectors by any drill-down dimension. Result can be viewed and exported. This powerful report allows users to compare returns of positions, or any drill-down dimension. Historical returns are presented date-wise. Monte Carlo returns are presented by simulation trial number. This report exposes the returns that are fed into the RiskManager VaR statistics. Market Data Upgrade Several new features were added to give clients better visibility into their market data. a) Time series history report - using the same powerful reporting mechanism used through RM3, user-selected time series may be viewed or graphed. View and export prices of time series listed date-wise. b) Correlation/Volatility report - shows the vols & correlations for a user-selected set of time series. c) Exportable market data reports (XML/PDF/tab-delimited). This powerful report is built on a concept of Market Data Groups. Users can select any of the time series in their Market Database, build a collection of these time series, and generate historical data reports. Position Import Enhancements With these enhancements, RiskManager now has its most powerful and flexible support for the import of client positions. a) Powerful Delete features at Import time: Delete by Position Group/Tag Value, or use a new concept called "Auto Delete", whereby the user picks a tag dimension and RM3.3 removes old positions with tag values matching those being imported. Very useful for large institutions that manage many different portfolios. b) During import, the user can apply position tags in an ad hoc fashion. Miscellaneous

36

37 . Logging . full migration for legacy RM3. for both Batch and Interactive.better. Administration of users and groups is easier to maintain. Users may control column width and the number of columns to display in a single viewable frame by using the expanded functions in "report setup". more detailed logging of errors.x users Powerful position handling: group operations (duplicate/delete/tag) Report export to file (XML/PDF/tab-delimited). Supports better troubleshooting.Release Notes a) b) c) d) e) f) g) h) As always. Notification of most recent market data update (on login and main page) More convenient/powerful position tagging mechanism.

.

RISKMANAGER Product Summary and Architecture RM3 Architecture Diagram Click for definitions Desktop browser Market Data (RMG/client) 39 .

Unix). RiskMetrics can also host RiskManager for clients on an ASP basis (described fully under separate cover). Access to RiskManager for end-users is via Internet Explorer 5. All RiskServer calculations are based on historical time series of prices.com. Clients must license this software directly from Microsoft. If licensed as such. automatically terminate at a pre-defined expiration date. 40 . User positions. add positions.7 RMClient Batch Application RiskManager Product Summary Summary Description: RiskMetrics Group's RiskManager™ ("RiskManager") is an interactive risk application designed to compute and report on various types of Value-at-Risk statistics for a portfolio of financial instruments. RiskManager requires at least one copy of RiskServer to be running on a Workstation in order to operate. RiskManager uses RiskServer for all of its analytics by automatically creating XML requests for RiskServer based on the types of positions and reports specified by the end-user. RiskServer can be called directly by an end-user choosing to bypass the RiskManager interface.RiskMetrics RiskManager 3. RiskManager End-User and RiskServer Workstation Licensing: Each end-user of RiskManager requires their own unique User Name and Password to log onto the system. that are stored in a SQL database. Access to RiskServer is via any standard TCP/IP socket connection and can be from any platform as well (e. RiskServer runs as a service on one or more TCP/IP ports. Multiple copies of RiskServer running on multiple Workstations can be run in tandem with the use of a RiskServer's Director Service. maintenance. RiskManager also parses XML results returned by RiskServer and displays them as standard or customizable formatted reports. RiskServer is a server-based engine that accepts XML queries containing lists of financial positions and a description of desired risk analyses.g. and deletion of all User Names. Concurrent use by more than one end-user logging on with the same User Name at the same time is not allowed. RiskManager and RiskServer licenses are time-dependent. design reports and run risk analyses. RiskServer can be accessed directly by sending an XML query directly to a port on which RiskServer is running. The application is written in Java and utilized a JSP (Java Server Pages) framework to serve web pages to endusers via their web browser. rates. and volatilities. Users access the application itself by pointing their Internet Explorer browser to the address of a Workstation running RiskManager.0 or SQL Server 2000 (strongly preferred) only as their backend database.riskmetrics. RiskManager and RiskServer are designed to use Microsoft SQL Server 7. The specific dialog of XML used to communicate with RiskServer is called RML for which there is a fully published schema available on-line at www. They are activated upon installation and RiskManager and RiskServer require Microsoft SQL Server 7. Multiple copies of RiskServer can be run on one Workstation at the same time under a single Workstation's license.5 or higher and can be from any platform. multiple RiskServers running on multiple Workstations enhance performance when more then one enduser operates RiskManager at the same time. The application is completely interactive and allows each user to explore portfolios. RiskMetrics Group's RiskServer™ ("RiskServer") is the analytics engine that underlies RiskManager. Multiple end-users can log onto RiskManager at the same time provided that they each have a unique User Name. End-users with administration privileges have complete control over the creation. RiskManager and RiskServer both include facilities to download DataMetrics data via the Internet (given appropriate proxy/firewall configuration) into a client's local SQL database. RiskServer is licensed on a per-Workstation basis. Users may load their own data in addition to using time series provided by RiskMetrics Group through its DataMetrics service.0 or SQL Server 2000. If licensed as such. The entire RiskManager/RiskServer System can be installed locally at a client's site. RiskManager is licensed by defining the maximum number of unique User Names that can be created in the system. reports and other settings are stored in a client's local SQL database. Platform and Architecture: RiskManager is a multi-tiered client-server application with a web-based front end. yields. RiskServer returns results via XML immediately after processing. RiskManager and RiskServer are designed to be run on Windows NT or Windows 2000 platforms ("Workstations") only.

RML Schema: Complete on-line reference for RiskServer XML Queries and Results. More then one copy of RiskServer can be run at the same time to serve multiple end-users simultaneously. and user-data. Java Applets are not used by the application. On-line Help: Complete Help and Tutorial System. RMX Service: Allows automatic upload of RiskServer XML Queries. RiskManager: This is the entire set of Java Server Pages that comprise the application itself. Internet Explorer 5. Adobe Acrobat Reader: For end-user viewing and printing of PDF-based reports within RiskManager (free download from Adobe). Positions. RiskServer: The underlying analytics engine.RISKMANAGER System Components Primary Components of the System: Jakarta Tomcat: This is the component that processes the Java Server Pages that make up RiskManager and serves the resulting Dynamic HTML output to end-users via their browser. and Director Services. Required Components not included in the System: Microsoft SQL 7/2000: Stores all Market Data.5+: For end-user access to the RiskManager interface. settings. Director Service: Allows routing of XML requests to multiple copies of RiskServer running on one or more PC Workstations. Also controls importing of client's own Market Data (if applicable) into the same database. Central Control Service: Allows configuration and monitoring of RiskServers. Market Service: Controls the downloading of Market Data from DataMetrics via the Internet into the local SQL database. 41 . Written in C++ with a Java wrapper for TCP/IP socket connectivity. JavaScript is used within the HTML output to provide dynamic interaction. Jakarta Tomcat is produced by the Apache Software Foundation. Market Services. Abode SVG Plug-in: For end-user viewing of SVG graphs within RiskManager (free download from Adobe).

Equity Option. edit. RiskServer Analytics Functionality (standard and optional): Standard Position Types: Amortizing Bond. running analyses. Interest Rate Future. by heading: Positions: Allows end-users to import. Money Market. Commodity Option. or any other arbitrary tag. Also allows end-users to define a complete position hierarchy based on manager. Cash. Swap. create. Option and Commodity Future. Equity Average Rate Option. RMClient: End-user application that allows remote automation of various RiskManager functions such as uploading and importing portfolios. Risk Methodologies: Monte Carlo Simulation. Equity. Commodity Single Barrier Option. base currency. Bond Option. Floating Rate Note. Option on Equity Future. export. and downloading finished reports. Equity Double Barrier Option. Swaption.7 RMClient Batch Application System Functions General RiskManager Functionality. Commodity Average Rate Option. End-users can drilldown to any level of detail from total portfolio to subposition. Commodity. export. Cashflow Stream. Market Data: Allows viewing and graphing of underlying historical time series. Equity Future. FX Double Barrier Option. Overnight Indexed Swap. Inflation Indexed Bond. Risk Statistics 42 . Commodity Double Barrier Option. and number of simulations. and analyses by other end-users. strategy. Commodity Future. running reports. FX Average Rate Option. FX Forward. Convertible Bond. Historical Simulation. and exporting results. Amortizing Swap. reports. desk. Option on Interest Rate Future. Bond Future. Collar. Optional Position Types: US Agency Mortgage-Backed Securities (models pre-payment risk).decay factors. FX Single Barrier Option. Other RiskManager Functionality: Batch Mode: Allows scheduling of importing positions. Floor. edit. Option on Bond Future. downloading Market Data. Forward Rate Agreement. Bond. FX Option. Security: Allows end-users to control the access and sharing of positions. and delete stress tests and scenarios for use in subsequent analyses. Reports: Allows end-users to design and run risk analyses based on customizable reporting templates. Cap. region. base currency. Stress Testing: Allows end-users to import. and delete positions and portfolios. Preferences: End-user settings such as passwords. Parametric Risk Settings: User-defined lookback windows. Equity Single Barrier Option. create.RiskMetrics RiskManager 3.

PVBP (Present Value of 1 or more basis points). Simulated Returns. Incremental VaR. as a percentage of market value. Risk Factors: Interest Rates (included effects of spreads). Volatilties. Stress Test PV Delta. or relative to a custom-defined benchmark. 43 . User-Defined. Expected Shortfall. Optional Statistics: Base Credit Exposure. Commodities. PV (Present Value). VaR. PVBP Delta.RISKMANAGER Delta Equivalents. Statistics may be run in absolute currency. Predictive Scenario Generation. Stress Test PV. Duration. Position Count. Other Statistics: Volatilities and Correlations. Currencies. Expected Credit Exposure. Maximum Credit Exposure (supports flexible netting agreement rules and limits management). Marginal VaR. Stress Testing: Historical Point-to-Point. Equities.

Scalable Laptops to Enterprise servers Unlimited number of users and/or servers 44 .7 RMClient Batch Application RM3 Key Features I Web-based application Zero-deployment (for IE5 browsers) ASP-capable Reduced tech support burden (installations. Digital Signatures. demo’s.RiskMetrics RiskManager 3. data. view many Secure Multi-level Security model SSL (Secure Socket Layer) – Encryption. updates) Allows IMMEDIATE client use Multi-user Multiple users can access same positions and reports Expose functionality according to user/user type Process once.

–Unlimited sets of Risk Assumptions used by reports. 45 . -Overnight Index Swaps.multiple risk settings.RISKMANAGER RM3 Key Features II –Data-on-demand caching –Dynamic web-based Reports. –Unlimited Drill-Down dimensions. –Presentation Quality PDF Report output. –Single and Double Barrier Options. –Unlimited Aggregation Levels. -Full Option coverage: on physicals. –Extensive Suite of Customizable Reports. -Vega Risk on all options. -Inflation Protected Securities. –Credit Exposure Module (available at extra cost). -Emailable Dynamic HTML Report output -Excel-ready text delimited report output. –Mortgage Backed Securities (available at extra cost). Volatility Smile data ready (data available at extra cost). –Unlimited Columns of mixed statistics. futures. –Amortizing Bonds and Swaps. –Multiple Date Calculations in single report . exotics.

riskmetrics. The Browser is the user interface to the application.RiskMetrics RiskManager 3. or whether you are using the RiskManager 3 ASP Service from RiskMetrics Group (via the web site rm3. You also need to make sure that the local network connection to the internet doesn’t use web page caching via a Proxy Server. or the ASP Service. You need to make sure you have the appropriate version of Internet Explorer.com). This is straight forward.7 RMClient Batch Application Setting up RiskManager3 PC Clients RM3 Client PC Configuration You can use a Microsoft Internet Explorer Browser to access the server hosting RiskManager 3. You will then be ready to use your own installation of RiskManager 3.0. you will need to set up each client PC to work as an effective client for RiskManager 3. Whether you are using an installation of RiskManager 3 and Risk Services on your own company network (your own LAN). and that two free “plug-in” modules for Internet Explorer are installed. 46 .

and run it to load the Web Browser plug-in required by RiskManager 3. It is unlikely that your PC has this installed. and run it to load Acrobat Reader and the Acrobat Web Browser plug-in required by RiskManager 3. 2. This is required for all graphing features in RiskManager 3 Reports and the Market Data Viewer. The URL for Acrobat Reader is: http://www. The URL for download of the SVG installer is: http://www. Netscape Navigator is not supported on RiskManager3 or any other Internet browser other than Microsoft Internet Explorer. the front page (login screen) of RiskManager3 ASP site has a web link icon at the bottom of the screen which will take you directly to this page.html Alternatively.com/products/acrobat/readstep. You will need to be using Microsoft Internet Explorer version 5. You will need the free Adobe Acrobat Reader Internet Explorer plug-in.html Alternatively. you should not need to install the browser plug-in. If you need to upgrade your Internet Explorer version. You download the installer for the SVG Plug-in.com/svg/viewer/install/main. and select “About Internet Explorer”. You will also need the free Adobe SVG (Scalable Vector Graphics) Plug-in for Internet Explorer.0” or greater. To check the version you have installed on your PC. Note that if you already have the Acrobat Reader installed on the PC. Please check with your local desktop support. On the information panel that appears the version number will be shown. 3. It can be downloaded for free from the Adobe Web site.adobe. This is required for the generation of reports. then please do so now.RISKMANAGER Internet Explorer Version and Plug-ins The configuration required for a PC that will be a client of RiskManager 3 is very simple. the front page (login screen) of RiskManager 3 has a web link icon at the bottom of the screen which will take you directly to this page. go to the “Help” Menu on Internet Explorer. 47 . You download the installer for Acrobat Reader. The requirements are as follows: 1. You should be looking for the version number to be “5.adobe.0.

Your Internet Explorer can be set to “cache”web pages. The application is working correctly. These kinds of behaviors make RiskManager3 unusable if interaction is routed through a Proxy Server. Note that you may not be able to complete these steps if your local IT policies have restricted your access to the specific configuration options discussed below. When the screen reloads. If a Proxy Server does cache pages from the RiskManager 3 Application Server. because using cached versions of RiskManager 3 pages will mean that dynamic updates of the pages based on user interaction may not be passed to the users browser. 48 . this is set up directly on Internet Explorer. The user may then select “Interest Rate Curve”. where user interaction is via dynamically updated web pages. a user may click on the market type drop down box. For this reason it is important that interactions with RiskManager3 are not routed below. Market Data Viewer Errors: When using the market data viewer. You will be forced to go back to the login page of the application. RiskManager 3 is a Web Application. and not the updated page from the Application Server which now says “Interest Rate Curve”. the following problems will typically be experienced by users: 1. These instructions apply to both users of an internally hosted (locally installed) RiskManager3 and users of the RiskManager3 ASP Service. Caching of web pages can have a serious effect of the performance and usability of the RiskManager Application. rather than go out to the actual web page and refresh the contents. This is true for both for users of the external RiskManager 3 ASP and for users of internally installed RiskManager 3 systems if internal web pages are also cached by the Proxy Servers. but the Proxy Server has forced the browser to reload the original page. which by default is set to “Equity”. that is use a version of a web page stored on disk or in memory. and login again. In this case you will have to contact your local IT Support. cached version of the screen they are using. while in some cases a separate computer called a “Proxy Server” can be used to provide company wide web page caching and internet security.RiskMetrics RiskManager 3. Error 500 Messages: When using RiskManager3. 2. On some company networks. you might be presented with an error screen stating that “Error 500” has occurred. They may just see an unchanging.7 RMClient Batch Application PC Client Browser Settings The next step in configuring a PC to be a client of RiskManager 3 is to avoid problems with web page caching. but please contact your local IT Support for information on this. Typically an error log will be produced by the Application Server detailing exactly where in the Java code the error occurred. served by the Tomcat Application Server running the RiskManager 3 Java code. the user still sees “Equity”.

If you are using a Proxy Server. The first step is to establishing if a Proxy Server is configured with your Internet Explorer browser.Step by Step 1. then you are definitely using a Proxy Server.RISKMANAGER Browser Configuration Settings . then you may well be configured to use a Proxy Server with your Internet Explorer. The Proxy Settings Panel shown below will appear (IP addresses are an example!): • 2. On the Internet Explorer: Select the "Tools" Menu Select “Internet Options” Select the "Connections" Tab Sheet Click the "LAN Settings" Button You will then be presented with the panel shown below: • • • • • • If either the “Automatically detect settings” or “Use automatic configuration script” is selected. then you now need to tell Internet Explorer that for the specific web site or internal IP address being used by RiskManager 3 the Proxy Server should not be used. In this case. • • 49 . If the “Use a Proxy Server” item is selected. To do this: Click on the "Advanced" Button on the “LAN Settings Panel” (if it is disabled you will need to speak to your local IT support). please contact your local IT Support to request changes to the Proxy Server configuration.

10. On restarting Internet Explorer.riskmetrics. then the entry in the exceptions panel should be: ABC1.10.10. 50 . if RiskManager3 is running of the server “ABC1”.7 RMClient Batch Application • In the Proxy Settings Panel at the bottom there is a panel where you can list IP addresses and hostnames that should not be cached by the Proxy Server. with IP address “10.10. For users of the RiskManager3 ASP.10. the machine name or URL specified should not be routed through the Proxy Server. For example.11.RiskMetrics RiskManager 3.1 • Press OK to accept the changes.209. you should enter the machine (DNS) name of the machine hosting RiskManager3.enter the values shown below (and illustrated in the figure above): rm3.18. and close Internet Explorer.com.1”. For users of an internally installed (locally hosted) RiskManager3. and the IP address of that machine.82 remembering to use semi-colons as the separator.

If you don't see the icon in the tray. Administrative Tools. you can start the monitor from the start button. Scroll down the list of services running on the PC. then you should see the following icon displayed in the tray: This shows that the “Risk Service Monitor” has been installed and is running. Control Panels. Risk Services Monitor If your desktop is set up to display icons on the Task Bar.RISKMANAGER Starting RM3 Risk Services Must Be Running RiskServer Risk Services We can check to see if the Core Risk Service has been installed and is running. open the “Services Manager” tool on the PC (Start Menu. Scroll down the list of services running on the PC. You are looking for an entry called “RMG RiskServer”. To check that RiskManager 3 is running. then it should have started automatically after installation. 51 . To do this. Settings. open the Services Manager on the PC (Start Menu>Settings->Control Panel->Administrative Tools->Services). Services). It should also start automatically after the PC is rebooted. Select Start>Programs->RiskMetrics Group->RiskServer->RiskService Monitor shown below: ^ RiskManager 3 as an NT Service If you selected the option to “Install RiskManager as an NT Service”. You are looking for an entry called “RMG RiskManager” (NOT RiskMetrics RiskServer – this is the Core Risk Service).

select: Start->Programs->RiskMetrics Group->Start RiskManager. What is happening is that first the Tomcat Application Server is started. in this tool you can right click on “RMG RiskManager”. you will have to start it manually. Once this process is complete. then RiskManager 3 Web Application Server is running. Starting the RiskManager3 WebServer Manually If RiskManager 3. To stop RiskManager 3. This action starts the Jakarta Tomcat WebServer.0 was not installed as an NT Service. and select the “Stop” option from the pop up menu.RiskMetrics RiskManager 3. From the start button. 52 . you should see the message “System Ready” in the console window. the WebServer will automatically start as a Risk Service.7 RMClient Batch Application If the process status is “Started”. A MS-DOS Command window should start. and various initialization messages will start to appear in the window. and then it loads the RiskManager 3 Java code. The Apache Tomcat WebServer can be accessed by browsing to http://localhost:8080 Note: If you installed RiskManager 3 as an NT Service.

RISKMANAGER To stop RiskManager 3. 53 . select the “Stop RiskManager” option from the start button under the RiskManager Section.

7 RMClient Batch Application Starting the RM3 Application Starting RiskManager 3 Web Application With RiskManager WebServer started. type the following: http://localhost:8080/RM30 . select “RiskManager 3 Web Link”: This action opens an existing browser session or starts a new browser session and inserts localhost url into the browser navigation line. Alternatively. we can now access the RiskManager 3 application using a browser. in a browser. 54 .RiskMetrics RiskManager 3. From the RiskManager Start Menu.

we are browsing to the RiskMetrics RM3 evaluation site. Enter the RM3 web application host IP address or hostname followed by port 8080 and the directory RM30 into the url navigation.0. 55 .1:8080/RM30 We could have substituted a hostname such as http://rm3.com instead of an IP address.RISKMANAGER Browsing to the RM3 Web Application Host RM3 installations where the web application is not installed on the user's computer Open a browser window.riskmetrics. In the url shown below. http://127.0.

The username and password will be established by your administrator.7 RMClient Batch Application Logging into RiskManager3 The RiskManager Home Page allows the user to log in. 56 . your Risk Administrator can reset the password.RiskMetrics RiskManager 3. RiskManager's Market database dates are shown on the front page. If you forget your password.

RISKMANAGER RiskManager Home Page Once you log into RiskManager. you are located in the "Home Page". Your login id will be shown. A link to the Help system is the Help? link on the right as well. The Help system is not installed on your user PC. 57 . Navigation to the message notification is the "envelope" on the far right. The Help Resources opens a new window and browses to RiskMetrics website location.

7 RMClient Batch Application Home Application Site Map Home Stress Test Contact Information Reports Historical Stress Test Links Create a new report User Defined Stress Test Messages Delete reports Positions Delete stress tests Site Map Duplicate reports Create a new position Duplicate stress tests Import Generate reports Delete positions Export stress tests File System Report Setup Duplicate positions Import Stress Tests Horizon Groups Work with. Report Setup Risk Settings Limit Sets Index Builder Page Setup Import Stress Tests Market Groups Position Groups User Profile User Filters Risk Settings Processed Indexes Defaults Stored Reports Help User Filters Help RML Positions Guide 58 .RiskMetrics RiskManager 3.. Export positions Market Data Limit Sets Batch Jobs Import Positions Market Data Market Groups File System Position View Manager Preferences Import Positions Horizon RML Positions Guide Instructions Position Groups Groups Work with....

.RISKMANAGER Administration Specific Site Map Admin User List Create a new user Send Messages User Groups User Hierarchy Work with. Active Sessions Batch Sequences Download Preferences Session Timeout System Information Tag Cleanup 59 ..

powers the all new RiskManager3.RiskMetrics RiskManager 3. More than ever.com/clients/riskserver RiskServer.7 RMClient Batch Application RiskMetrics Contact Information Contact Information: Questions? Comments? Problems? We would love to hear from you! You can contact us about RiskManager through the following ways: E-mail: Phone: Online: riskmanager. Built from the ground up with an incredibly flexible architecture.Friday. RiskServer can handle even the most demanding of processing tasks.com/research Research at RiskMetrics is responsible for the development and implementation of practical risk management methodologies. EST London +44 (0) 207-822-7156 8:30am .com The RiskMetrics Group http://www. brokerage houses. risk management is at the heart of many critical decisions. RiskMetrics RiskServer http://www.000 banks. the most powerful and sophisticated risk management engine in the world.com RiskMetrics is the world’s leading provider of risk measurement expertise. asset managers. RiskMetrics products are a core component of the risk management process at over 5. RiskMetrics Education http://www.riskmetrics. 60 . GMT http://www. the RiskMetrics Group recently launched an educational initiative to teach financial practitioners about the fundamentals of risk management.riskmetrics. hedge funds.com/products/education The management of risk has emerged as the key challenge for every participant in the financial markets.riskmetrics. corporations and more than half of the world’s central banks.riskmetrics.Friday.riskmetrics.com New York 1-212-981-7471 8:30am-6pm Monday .support@riskmetrics. insurance companies. As a result. Research continues to enhance these methodologies. enhancements were published periodically in the Monitors and now in the new RiskMetrics Journal. RiskMetrics Research http://www.6pm Monday .

insurance companies. RiskMetrics Research Research at RiskMetrics is responsible for the development and implementation of practical risk management methodologies. RML Position Import Specifications Guide The RML Position Import Specification Guide provides complete tag definitions. brokerage houses. 61 . hedge funds. RiskMetrics RiskServer RiskServer. risk management is at the heart of many critical decisions. powers the all new RiskManager. and keyword searching.RISKMANAGER Links The RiskMetrics Group RiskMetrics is the world's leading provider of risk measurement expertise. To view the reports. RiskServer can handle even the most demanding of processing tasks. RiskManager3 Resources RiskManager Resources offers extensive product support from within the framework of a comprehensive table of contents. As a result. asset managers. RiskMetrics products are a core component of the risk management process at over 5. More than ever. Research continues to enhance these methodologies. subject index. RiskMetrics Education The management of risk has emerged as the key challenge for every participant in the financial markets. you will need to install the SVG Reader and Acrobat Reader. field decriptions. the RiskMetrics Group recently launched an educational initiative to teach financial practitioners about the fundamentals of risk management. the most powerful and sophisticated risk management engine in the world. and examples of RiskManager's RML position tags.000 banks. enhancements were published periodically in the Monitors and now in the new RiskMetrics Journal. Built from the ground up with an incredibly flexible architecture. corporations and more than half of the world's central banks.

62 .RiskMetrics RiskManager 3.7 RMClient Batch Application Messages Left clicking the 'Envelope' in the upper right-hand corner will take you to the Message List Left click the message to view the contents.

Define group/user hierarchy. 10. Setting global session time-outs. Setting DataMetrics connection details. The shared objects may also be copied so that a user may modify a "private" copy for their own use. Other members of the users' group may share objects with the user as well. Administrators have special privileges that other users do not have. When a user is part of the administrator group. 63 . Scheduling and running batch sequences. 5. Create and delete users. 12. By using groups. Multiple groups are supported as well as the ability of a group owning another group. 8. 2. Ability to switch login into another account. a previously run report. Create and delete groups. Each individual user maintains their own private world of positions. a previously-run report. 1.RISKMANAGER Administration Administration and Security RiskManager3 supports multiple users. so is a report. Viewing system version details. 7. 6. Objects What are RiskManager3 objects? A position is an object to RiskManager3. Batch Jobs Administrator A special user login is an administrator. 8. Each of these objects may be private or shared. A group membership allows sharing of RiskManager3 objects such as positions. and a stress test. the Administrator can create a sharing structure for objects in RiskManager3. Cleaning up unused tags or tag values of all users. 2. Creating batch sequences of user's batch jobs. 7. reports. 6. they would have all the privileges as listed above on this page. 4. 3. 3. Groups A RiskManager3 group is a collection of users. The administrator is really a group that can be shared by any number of users. Assign or change group status of users. reports. A user may be a member of one or more groups. Viewing Session information of all users logged in. and stress scenarios. A special user may be a member of the administrator group. each possessing their own login and password. 4. These shared objects are "read-only" and used as-is. Positions Position Groups Reports Stress Scenarios Risk Settings Horizons Limits (Credit Exposure only) Market Groups Stored Reports Objects that are always private: 1. Special Administrator Privileges 1. 5. Users A user is an individual with permission to log into RiskManager3. 11. 9. 9. and stress scenarios unless they are part of a group and they specify various objects to be shared.

Administration screen .RiskMetrics RiskManager 3. Administration Screen (2nd image below). 64 . Left click Administrator .shows a list of all users.7 RMClient Batch Application Administrator Home Page Main control panel for an Administrator group user of RM3.on right (circled).

RISKMANAGER Creating Users Creating a New User Select create new user from the Administration Everyone Users task bar on the Administration screen Administrators can create the new user's name. password and group membership. For more information on Groups click on the related topics 65 .

The email address is used for notification of completed batch jobs. For more information on groups see the related topics: 66 .7 RMClient Batch Application Editing a User Profile Selecting "Administration" from the Administrator's home page brings you to the user list page. Left click a user name and select "Edit User" to edit the users' profile User names and display names can be assigned and changed by the administrator.RiskMetrics RiskManager 3. Group membership can be assigned.

RISKMANAGER Group assignment . Everyone in the group can share the positions and reports.The user can be assigned to a group. The administrator can annotate the user list show below with a description field. 67 .

Send Multiple Messages. 2. View User Hierarchy.7 RMClient Batch Application User Group Maintenance User Group Maintenance Starting on the Administration Page.RiskMetrics RiskManager 3. Left click the task bar and select User Group Maintenance from the Task bar menu. Create a new Group. 68 .User Groups Task Bar Menu items 1. The User Group Administration screen lists all groups in the RM3 system Administration . 3.

3. 69 . Add a description for the new group (circled). 2. Enter the name of the group and a display name. you are establishing a hierarchy for sharing objects. Choose from the current group list and select +Add (circled). Any users assigned to the group you are creating with this screen will also share objects with the groups you add below (circled). If groups are selected here. 4. Enter a password and email address notification.RISKMANAGER Create or Edit a Group From the Administration User Group menu task bar. select "Create New Group" Select existing group to edit User Group Editor Screen 1.

7 RMClient Batch Application 70 .RiskMetrics RiskManager 3.

RISKMANAGER Group Structure Example Using the groups created in "View User Hierarchy". 2. Admin\trading\Fixed Income Fred Jones and Joe Malone are not only members of trading. Joe Malone. 71 . Admin is root group Subgroups are assetmgt and trading The subgroup trading has a subordinated subgroup Fixed Income Note . but they are also members of the subgroup Fixed Income.Admin does not have to be the root group (click to expand topic). 3. and trader are users with this level of group membership. we can visualize the structure and user hierarchy: Example . futures. Example User Structure Admin\assetmgt User gwatson is a member of admin and assetmgt Admin\trading Fred Jones.Group Structure 1.

RiskMetrics RiskManager 3.see circled area below: 72 .7 RMClient Batch Application Send Multiple Messages Administrator Send Message to Multiple Users From the "View Session Information" screen. administrators may send messages to multiple users. The active users will appear in the left selection box (circled). Clicking "select all" and "+Add" will move these user names to the "Send To:" box -. Left click the task bar and select "Send multi-instant messages". Choose the users to be sent a message in the "Send Message" screen.

RISKMANAGER Message entry follow the procedure as done with single users. 73 .

User2 We have created a group called the Risk Group 74 .RiskMetrics RiskManager 3. 2. Administrators can "build" any structure they wish. Or. Security User Hierarchy Command Screen 1.7 RMClient Batch Application User Hierarchy Commands User Hierarchy Commands From the Administration Task bar. User1 3. from the Administration User Group Maintenance menu task bar. select "User Hierarchy Commands. Users and groups can be dragged about on the screen until the desired structure is found. select "User Hierarchy Commands". All users and groups are listed on the left in the master list The user hierarchy structure is on the left. Manager 2. we have created three users 1. Hierarchy Example In the screen shot below.

RISKMANAGER 75 .

76 . At this stage. Refresh the tree. we drag the Manager. Finally. You should now see the following hierarchy: 1. Create yet another Group Equity Funds which User2 manages.RiskMetrics RiskManager 3. Drag the groups Management. and User2 into the Risk Group. Drag User2 under Equity Funds. Equity Funds has a user User2 and a group Management with user manager. Fixed Income Funds. Next. Continuing our example of creating a group hierarchy (started in "View User Hierarchy"). Risk Group has two group members Fixed Income Funds and Equity Funds. Fixed Income Funds has a user User1 and a group Management with user manager. 3. Drag User1 under Fixed Income Funds. drag the group Management from the left under the Fixed Income Funds group and the Equity Funds Group. and Equity Funds into Risk Group. Create a new group called Management and assign manager to that group. each of these users share positions and reports equally. However. 2. Drag user Manager under the Management group. User1. we would like each user to see only his own portfolios and risk. Create another Group Fixed Income Funds which User1 manages.7 RMClient Batch Application Structuring a group Objective: We want the manager to see both user's portfolios and risk.

RISKMANAGER 77 .

7 RMClient Batch Application Work with .. 4.Find out what users are logged into the system. 6..Set and re-set the user time-out period. From the task bar select Administration Everyone Users->Work with .Work with . The user may choose to inspect: 1. System Information .any positions using a tag will keep those tags in the database.System software version (RiskMetrics software Engineering). 5. Note .Setup the DataMetrics download account information and fire-wall Session Time-out period . 3. 78 .Erase and flush unused tags. Download Preferences .Schedule user batch jobs and market data downloading. Active Sessions .. Administration . Tag Cleanup . 2.RiskMetrics RiskManager 3. Batch Sequences .

Termination will require confirmation as requested by a dialog box. Users that are logged in are displayed along with the following details: 1. Terminate the user's session. Time and date last accessed. Send the user an instant message. For addition information on instant messages. 2. User name Time and date logged in. Session duration time. 3. 79 . 4.RISKMANAGER Active Sessions Administrator Session Information From the Administrator screen. select "View Session Information" from the pull-down selection. Left clicking a user name will display two command functions: 1. see the following related topics: 2.

RiskMetrics RiskManager 3. 2. Allow a response. A dialog box will appear as shown below: 80 .Clicking on the hyperlink (circled) of users previously sent a message allows a private message to be sent. Users may need to communicate back to the Administrators to allow them time to clean up their work before shutdowns.7 RMClient Batch Application Administrator Send Message to Users Administrators may broadcast messages to users. Sending a private message to a user . Send Message function is from Session Information screen and left clicking a specific user and selecting the function send message. Messages can: 1. Disallow a response. 3. Start a chat session with a user.

RISKMANAGER Private messages are logged in the "Send Message" screen (shown above). 81 .

RiskMetrics RiskManager 3. Admin users can select: 1.checks all checkboxes for log off. 5. Logoff .selects all users for Log Off. 3.de-select checkboxes. Logoff All Users . 2. Select All . Hide Checkboxes . conformation is required (a dialog box will appear). Each user logged on the system will be listed. 82 . Choose "Logoff multiple users". 4.Logs off selected users. conformation is required (a dialog box will appear).to return to the active session information screen. select "View Session Information" and then left click the task bar. Select None .7 RMClient Batch Application Administrator Log Off Multiple Users From the Administration Screen.

All other users will get the following message when attempting to log in. Allow logins. A dialog box appears with two choices: 1. select "Allow / Disallow logins" from the task bar. 83 . 2. Disallows logins .only Admin group users will be able to log in.RISKMANAGER Administrator Allow / Disallow logins From the Administration Screen and then "View Session Information".

The administrator only needs to be involved to export the sequence for the user's use in the RMClient utility.7 RMClient Batch Application Batch Sequences Admin Batch Sequences Batch jobs will not run until they are scheduled.RiskMetrics RiskManager 3. Only users who are members of the Administration group can schedule batch sequences to run. Administrators Only . All users may run batch jobs remotely by using the RMClient utility. This utility gives users the ability to run batch jobs at any time without contacting the administrator. ‘Create a Batch Sequence’ A new window called ‘Batch Sequence Definition’ allows the user to select how and when the task is scheduled.Batch Sequences and Scheduling .from the admin users "Administration" Screen. sequences can be created and saved. On the ‘Batch Scheduler’ screen. 84 . should be selected to schedule a new job. left clicking task bar and selecting Batch Sequences.

The default selection is ‘Do not schedule now’. 3. The administrator can schedule one or more of these jobs to run. By clicking the Edit key the user will select: 1. immediate daily weekly monthly B The top middle box contains the Batch Job list The administrator will see all jobs that were created and the login ID of the creator. 2. 85 . 4.RISKMANAGER A The top left box requires the user to select a schedule time.

RiskMetrics RiskManager 3.e. 86 . to create nested task sequences).7 RMClient Batch Application C The top right box shows other task sequences available to the user which can be included in the sequence that is being created. (Note: Circular references are prohibited) Recommended: The administrator should prepare a sequence ‘Run Immediately’ to make sure the tasks complete as anticipated. (i.

Users can also import their own market data. See the topic Administration Download Preferences. and proxy server settings.RISKMANAGER Admin Batch Market Data Download Only Members of the Administration Group may download data from RiskMetrics DataMetrics Servers. This sets up the DataMetrics username. To download RiskMetrics data. The admin batch wizard screen is shown below. The DataMetrics download must first be configured. see the topic Batch Job Client Data Import. merely select the "yes" radio button for downloading DataMetrics market data. For more detail. 87 . password.

Firewall authentication details. This prevents multiple downloads of daily prices. From there. If you don't know the password contact RiskMetrics. 3. 88 . Administrations can run the central control client program on the computer where RiskMetrics RiskManager components are installed and left-click the market service. RiskMetrics DataMetrics account name. MarketServer machine and query port. The Market Server IP is the machine IP where the Market Service is running.7 RMClient Batch Application Download Preferences Administration Download Preferences Administrators are the only users able to download market data from RiskMetrics. The Download Preferences screen provides the access details of: 1. they select the Service Configuration Tab. The Market Server port is found in the Central Control Client Administration screen.RiskMetrics RiskManager 3. The query port (circled) is entered into the Download Preferences screen shown above. This username and password is issued by RiskMetrics and is the same as your RiskMetrics website username and password pair. 2.

RISKMANAGER 89 .

90 .. Reset the session time-out period in minutes.RiskMetrics RiskManager 3. RiskManager tracks the time of last access.Work with . Dormant sessions will be timed out and users must login again..7 RMClient Batch Application Session Timeout Administrator Session Timeout Select Administration .

. they will be listed as well (shown below). If software components of RiskManager are installed.. selecting "Work with . 91 . In particular. System Information" lists details of the user's computer. RiskMetrics Engineers will need to know much of this information on a diagnostic call.RISKMANAGER System Information Administration System Information From the Administration screen. they will need to know the version number of the installed software (circled).

Users should see then only see currently used tag dimension in their report layout managers and tag navigation. a report of the tag cleanup action will appear: 92 .7 RMClient Batch Application Tag Cleanup Administration Position Tag Cleanup From the Administration task bar. This process will retain tag names even if they are not referenced. • Choosing ok requires a yes to a confirm dialog. select Position Tag Cleanup. This function is for administrators only and serves as a means to remove unused tag names and (or) tag values. Remove Unused Values only .(Recommend for users adding tag values manually) Scans the position list for any unused tag values.(Recommended for complete cleanup) scans the current portfolio list for any unused tags and tag values.RiskMetrics RiskManager 3. RiskManager will remove any unreferenced tags or tag values from all positions. A clean-up tag selection dialog box will appear: • Remove Unused Tags and Values . Lastly.

RISKMANAGER 93 .

RiskMetrics RiskManager 3.7 RMClient Batch Application Positions Selecting Positions from the Home Page Moving the mouse over the word "Positions" on the home page describes the function. 94 . Clicking Positions takes you to the Position section of the application.

Users can limit this list down to a manageable size by creating a position view or creating a custom position group. In the example below. the page size was limited to 10 lines in the "user preferences". There are 47 pages of 10 line pages (470 total positions).RISKMANAGER Working With Positions Select "Working with Positions" which is underlined at the top of the "Positions" page. Users can also search the name field for specific positions. The default view is "All Positions". 95 .

RiskMetrics RiskManager 3.Commands Command List 1. Duplicate Multiple positions 4. Create a new position 2. RML Position Guide 9. Work with Position Groups Position View Actions is the navigation to all groups and tags.7 RMClient Batch Application Working with Positions . Refresh Positions 8. Import Positions 6. Delete Multiple positions 3. Export Positions 5. Position View Actions 7. 96 .

RISKMANAGER Position View Manager Position View Manager From the Position Screen.this powerful feature allows the user to replicate groups of positions and re-label the tags on-the-fly. If "All Positions" is selected. All user defined tags will be listed under "Tags" + sign. Select Position View Actions All user-defined Position Groups will be listed under the "Position Groups" + sign. 97 . Change Permissions Delete Positions Duplicate Positions . 1. To select a view or subset of all positions. 3. Only the select tag dimension or defined position group will then be shown in the Position Screen. 2. then every position in the database will be shown. Left click any expanded object to control change your view. left-click any item listed under "Position Groups" or "Tags".

5.7 RMClient Batch Application 4. Export Positions . See Position View Action and Control.allows the user to export positions out to the users local computer. 98 .RiskMetrics RiskManager 3. 6. Tag Positions View Positions You can keep both the position view navigation up at the same time as the position view.

RISKMANAGER Position View Action and Control Position view and a control panel View positions & resize the window. the left window will refresh with that set of positions. Like this: Position View Position View Control 99 . Select "Position View Actions" and resize the window to sit side-by-side with the position view. When you highlight the position group or tag dimension (in the window on the right).

7 RMClient Batch Application Import Positions Importing Positions From the Navigation tab. 100 .RiskMetrics RiskManager 3. Choose "Import Positions" from the function list. left click the pull-down menu and select Import Positions.

Private allows only the current user to view the positions Shared allows positions to be viewable by all members of the user’s group Choose the file format type: 1.3 compatible). A . Using the file browser. B . 3. 2.RISKMANAGER Browse to your position file. 2. You can import from either your local computer or from the user file system. Tab is a tab delimited flat text file (RM2. Choose an import action on existing positions in your positions database: 101 .Browse your RiskManager user file system.3 compatible). Choose a permission type for positions: 1. Choose notification . select the position file you wish to import. Comma is a comma delimited or csv flat text file (RM2.check the box if you would like to be sent a message or an email upon completion of the import process. Message and email notification preferences are set in Preferences\User Profile. XML is an RML formatted position file.Browse your local computer's file systems.

If a group or tag dimension is selected. This feature allows the user to selectively load positions while retaining others. then all positions in your database of the imported two will be deleted before the new positions are loaded. Press +Add after each entry to build the list. D . In addition.Expanding the selection allows the user to enter a list of Tag Dimensions and Values on-thefly. 102 . RiskManager will examine your imported positions an only delete the positions which match the Advisor values being loaded. Optional action on imported records (positions). The pull-down list are all the current tag dimensions in the system.Delete Group or Tag Dimension prior to import. If All Positions are selected. If the imported positions contained positions with two of ten possible advisors. E . we want to assign the imported positions the Advisor=Alan Greenspan. then all existing positions are flushed from the database prior to the import of positions. In the example below.RiskMetrics RiskManager 3.7 RMClient Batch Application C . then all position matches to that selection will be deleted prior to import. we want to import the positions and assign them to the Portfolio=Super Fund. Use the position view action navigation to choose the groups or dimensions.Auto Delete . This import method reduces the need to flush all positions. Let's say you choose the drill-down dimension Advisor.Smart delete a tag dimension.

.. Choose "Export Positions" from the function list. Choose the position group or tag dimension to export.selection From the Navigation bar. left click the underlined heading "Working with .RISKMANAGER Export Positions Exporting Positions . You may export all positions to a file by selecting "All Positions" under Position Groups: 103 . Positions".

If you want to export one tag dimension value across all positions. Example: Export all Amortizing swaps only. Under the tag dimension "Asset Type".7 RMClient Batch Application You can export a single tag value across all positions: By using the Position Viewer. If you have created positions groups.RiskMetrics RiskManager 3. you can select the tag value underneath the tag name. you can select the exact set of positions you wish to export. choose the tag value "Amortizing Swaps": 104 . you can select one of these.

RISKMANAGER 105 .

Browse your local network file system to place your position data file: 106 . you will see a familiar Windows dialog box confirming where you want to download the position set to your file system: Browse your file system to place the data in a directory: Your web application may be local or remote but you will download your position data to a file in the same fashion.7 RMClient Batch Application Exporting Positions .RiskMetrics RiskManager 3.saving RML on file system Select Export: Once you have chosen the position set to export and selected "Export".

It is an XML syntax with tag and content data. see the RiskMetrics website online interactive schema.RISKMANAGER Sample RML export: The RML output is the Risk Markup Language designed for Risk Systems by the RiskMetrics Group. 107 . For a complete description of RML.

7 RMClient Batch Application Editing Positions 108 .RiskMetrics RiskManager 3.

select the asset type from the drop-down menu: 109 . Select "Create New Position" Next.RISKMANAGER Create New Position Create New Position From the main position screen. pull down the menu from clicking "Working with Positions".

7 RMClient Batch Application Create Position Content Fill out the details of the position. Black Field Labels are required. Select save when done filling out the form. RiskManager will pre-fill the contents with an example. Light Field Labels are optional. 110 .RiskMetrics RiskManager 3.

111 . RiskManager will bring up a form of the contents. See "Create Position Content". Left clicking any position line will pull down a menu. Select Edit to open the contents of the selected position.RISKMANAGER Editing Position Details Select Position to Edit Moving your mouse over the position list will highlight various position lines.

RiskMetrics RiskManager 3.7 RMClient Batch Application Editing Detail Lists in Positions Custom Bucket List Every asset type has the RML subtag "custom bucket list". EXAMPLES OF ASSET SPECIFIC DETAIL LISTS Put and Call Schedules Some asset types have put and call schedules. Using the position editor. the FX Risk will be ignored in reports. we can view and edit all the custom tag dimensions for the specific position. If the box is checked. 112 . Ignore FX Risk checkbox Every position has a checkbox "Ignore FX Risk".

you can view all the tag values that are set for this position. Selecting Edit in the custom bucket list. Edit the + sign to expand the tag name and you will see all the tag values as shown below: 113 .RISKMANAGER Custom Bucket List Edit Editing the Custom Bucket List Expanding the custom bucket list we can view all the current tag dimensions: Editing the Custom Bucket list allows you to view all the tags associated with this position.

the position will be listed as "unspecified". It is a category name or text label that represents a collection of other drill-down dimensions or individual positions. Examples of Tag Names • • • • • • Region Business Unit Sector Strategy Portfolio Manager Fund What is a Tag Value? A tag value is one of many user defined dimension values.RiskMetrics RiskManager 3.7 RMClient Batch Application Tag Maintenance What is a Tag Dimension? What is a Tag Name? A tag name or drill down dimension is a user defined aggregation for risk. If a position does not have a tag value set within a report asking for a specific drill down dimension.for the Tag Name Strategy • • • • • • Pairs Relative Value Aggressive Small Cap Risk Arbitrage Interest Rate Arbitrage 114 . The position level is the smallest level of detail. Examples of Tag Values .

Geography. Another use of tags is for integration with another system. an account. etc.. and the example of a tagged bond in XML is below: Tagged Bond Example <positions> <bond> <positionName>Bond</positionName> <notional>-2000000</notional> <currency>USD</currency> <discountCurve>DEM Govt</discountCurve> <coupon>5</coupon> <couponFrequency><semiannual></semiannual></couponFrequency> <maturityDate>20100716</maturityDate> </bond> <groupCustomBucketList> <groupCustomBucket> <customDimensionName>Asset Type</customDimensionName> <customBucketValue>bond</customBucketValue> <positionNameList><positionName>Bond</positionName></positionNameList> </groupCustomBucket> <groupCustomBucket> <customDimensionName>Portfolio</customDimensionName> <customBucketValue>Treasuries</customBucketValue> <positionNameList><positionName>Bond</positionName></positionNameList> </groupCustomBucket> <groupCustomBucket> <customDimensionName>Country</customDimensionName> <customBucketValue>USA</customBucketValue> <positionNameList><positionName>Bond</positionName></positionNameList> </groupCustomBucket> <groupCustomBucket> <customDimensionName>Manager</customDimensionName> <customBucketValue>Brian</customBucketValue> <positionNameList><positionName>Bond</positionName></positionNameList> </groupCustomBucket> <groupCustomBucket> <customDimensionName>Account Number</customDimensionName> 115 . a collar. For example. for example an accounting or performance measurement system. they can be tagged with an ID. Portfolio. etc. The tags in table 1 have been applied to a bond. Trading Desk. Results for a security. but it is much more efficient to automate the process to take place during the automated loading of positions. The actual tagging can take place using the RM3 interface (editing by hand with the GUI). and are shown in Table 1. for the purposes of attribution and sorting. can be loaded into a database with data from other sources only if they have keys which will facilitate matching. This will allow the risk of the three to be grouped together on reports. Some examples might be Business Unit. etc. if three option positions have been taken in conjunction with each other. Strategy. It is necessary to anticipate the reporting needs and create useful labels at the security level. Table 1 Portfolio Manager Business Unit Country Trading Desk Treasuries Brian Fixed Income USA Government Bonds Account Number 3429981-C Asset Type bond Tagging can also be used to indicate paired transactions or to create a composite instrument from several sub-instruments or cashflows. in XML. in order to create a cap. an industry sector. a floor.RISKMANAGER Tag Example Tagging requires some advance planning.

7 RMClient Batch Application <customBucketValue>3429981-C</customBucketValue> <positionNameList><positionName>Bond</positionName></positionNameList> </groupCustomBucket> <groupCustomBucket> <customDimensionName>Trading Desk</customDimensionName> <customBucketValue>Government Bonds</customBucketValue> <positionNameList><positionName>Bond</positionName></positionNameList> </groupCustomBucket> <groupCustomBucket> <customDimensionName>Business Unit</customDimensionName> <customBucketValue>Fixed Income</customBucketValue> <positionNameList><positionName>Bond</positionName></positionNameList> </groupCustomBucket> </groupCustomBucketList> </positions> 116 .RiskMetrics RiskManager 3.

left-click the tag (will be highlighted) you wish to add another value. you can: • • Add a new Tag Name Add a new Tag Value To add a Tag Name. choose "Add Tag" from the choice.another possible value or member of the risk dimension (ie.RISKMANAGER Add Tag or Tag Value Tag Maintenance Edit all tag dimensions of your position from the Custom Bucket Definition. You can Add risk dimension names (tag names) or tag values • • Tag Name .risk dimension category name (ie. Within a position edit and editing the Custom Bucket Definition. A dialog box ill appear to allow you to key in the text of the tag value. Joe Jett) Expanding a tag name (+) plus sign will reveal all currently defined tag values To add a Tag Value. "trader name") Tag Value . 117 .

Enter the dates and prices of each call provision.7 RMClient Batch Application Call Schedules Edit Editing and Adding Call Schedules Expand the Call or Put Schedule Section of the Position Editor Empty call schedule list shown. The call schedule list will be shown after adding or editing. 118 .RiskMetrics RiskManager 3. Choose "Add" to edit call dates and prices. Use the drop-down calendar if desired.

RISKMANAGER 119 .

First.7 RMClient Batch Application Delete Position Deleting a Single Position In the Position screen.RiskMetrics RiskManager 3. left click the position line to delete and select "delete". The position line selected will be highlighted. Deletes must be confirmed by the user 120 . select a position to delete. mouse over the position. Next.

First. 121 . left click the position line to obtain position details and select "Run detailed report". mouse over the position. For more information on the report viewer. see "selecting reports from the home page". Position detail reports may be exported to excel sheets or pdf format. The position line selected will be highlighted. The Report Viewer will come up and the user can open up various levels of detail. Option positions will show "greek" sensitivities as shown below. 2. 1. Next. select a position to run a detail report.RISKMANAGER Run Position Detail Report Single Position Detail Report In the Position screen.

RiskMetrics RiskManager 3.7 RMClient Batch Application 122 .

RISKMANAGER Duplicate Multiple Positions Duplicate Multiple Positions Select "duplicate multiple positions" from the pull-down menu of the task bar. This function allows the user to duplicate one or all positions in a screen. "Duplicate all" makes a copy of all positions in the positions database for your user id. 123 .

RiskMetrics RiskManager 3.7 RMClient Batch Application Delete Multiple Positions Deleting Multiple Positions Select "delete multiple positions" from the pull-down menu of the task bar. Delete all deletes all positions in the positions database. Use delete all with care! 124 . This function allows the user to delete one or all positions in a screen.

RISKMANAGER Position Group Maintenance Position Group Maintenance Position Group Maintenance functions: 1. 125 . 3. 5. 2. 4. Creating a new position group Deleting multiple groups Tag Maintenance Selecting a Position View Refresh Position Groups Edit or delete a Position Group Mouse over the group name line item in the table and left click the highlighted choice to edit.

The position group editor will show all available tags you can select from.RiskMetrics RiskManager 3. 126 .7 RMClient Batch Application Creating a Position Group Select "Create Position Group" from the task bar of the Position Group Maintenance Screen.

For example. we will just choose one. Select the tag "Industry Sector Description" and choose the tag value "Financial". In this example. Choose the tag values The "Financial Sector" group now appears on the list 127 . Carve out what group of positions you want to run a risk analysis on. You can choose as many tags and tag values as you wish. we will create a new group of the Financial Sector under the Industry Sector Description tag.RISKMANAGER Create a new group which slices into your tag dimension structures.

Select All . Select None . Hide Checkboxes .Deletes position group if checked on this page only. You are now out of the delete multiple function. Delete All .Deletes all position groups in the database (all pages).7 RMClient Batch Application Deleting Multiple Position Groups Select "Delete Multiple Groups" from the Position Group Maintenance task bar. Delete Position Group Functions • • • • • Delete .Inserts checks in all boxes. This function completely flushes the position group list from the system. This function will allow the wholesale deletion of one or more position groups at a time. 128 .Unchecks all boxes.RiskMetrics RiskManager 3.Removes check boxes from screen.

RISKMANAGER 129 .

RiskMetrics RiskManager 3.7 RMClient Batch Application Index Builder 130 .

and choosing weights. 131 . Index building decisions revolve around positions. For example. filtering for specific criteria amongst your tags. 30% DEM Government Bonds. and 40% USD Corp Bonds can be automatically constructed and rebalanced within RiskManager. JP Morgan Global Bond Index Euro Zone only. an index such as 30% USD Government Bonds. 3.4 enables users to build custom benchmark portfolios (or indices) against which relative analysis such as tracking error of a portfolio may be computed. and UK Governments weighted and filtered to specific maturity sectors. 4. Japan.RISKMANAGER Index Builder Overview Index Builder Overview Index Builder functionality within RiskManager v3. 2. Germany. US. The only requirement is that positions should be loaded (and tagged) in the system. Examples of Indices that can be built: 1. S&P 500 ex Tobacco 50% Frank Russell 2000 and 50% S&P 500. The custom benchmark can be created by combining user-defined groups of positions (or from benchmarks defined in the system) and weightings.4 The index builder functionality in RiskManager v3.

This will take you to the Index Builder Screen.7 RMClient Batch Application Creating an Index To create an index you start in the Positions Screen and select work with Index Builder.RiskMetrics RiskManager 3. From within this screen choose to create an index and bring you to the main Index Editor to structure your index. 132 .

These are the main building blocks for your index. then 3 and 7 entries would have the same impact as 30 and 70 etc.RISKMANAGER Selecting the Index Components There are three windows within Index Editor: 1. Note 2: Weights .The Index Builder will always take Amounts as fixed amount contributing to the total Present. Use Filter allows you to filter all users or only your positions. Best to keep this to a present value of say 1 million. default engine dimensions. This screen lets you choose the components of the new index. This amount is not critical as reports have the ability to scale the index to your portofolio. These components can be user defined position groups. RiskSettings: The RiskSettings here is picked up from your Report RiskSettings and is used by the Index Builder to take the prices of individual components. For example if we had two entries and we wanted 30% to the first component and 70% to the second component. The fields are as follows: a. FX Hedge: If your portfolio is hedged against FX risk (but the hedge positions are not brought into RiskManager) then the FX hedge functionality may be used. Bottom Screen. b. 133 . Calculate As: Enter the value as Weight (for example 30 for 30%) or Amount (3. e. b. Note 1: Amounts . Amount: The index creator will weight the positions within your index to add to this Present Value amount. For example 0% means there is NO hedge and 100% means FULLY hedged. Permission: This is sharing protocol and if shared it is available to other users in your group. d. 3. 2. As you choose the index components. Upper Right Hand Corner Screen. it will appear here on the window. or pre-existing indices.000). Position View: this displays the names of the selected component b. f. Index Name: any arbitrary name that you wish to give. Upper Left Hand Corner Screen. Currency: This is the currency of the Amount above. a. a. c. If on the other hand the benchmark is revalued daily then RiskSettings of latest in database should be used. tags. For example if someone creates an end of month Index then the RiskSetting would reflect that analysis date.RiskManager adds all the weights and then calculates the percent allocated to each.

000 and we had three component where the first component has amount of 1. 134 . Date: Not currently used c. 300 to the second component and 700 to the third component.RiskMetrics RiskManager 3.000. the second component had weight of 3 and third component had weight of 7 then the present value would allocate 1.000 to the first component.RiskManager will first allocate Amounts and then use weights for the rest.7 RMClient Batch Application Note 3: Amounts and Weights . Remove button at left hand corner is used to remove any components that you do not want in the index. Currency: Not currently used b. For example if our Present Value was 2. a.

Re-using old positions for a later date will use current yield levels but still apply a parallel shift to match the old prices in the positions. 20% JPI Bond Index – Germany.RISKMANAGER Index Components and Weights The screen below shows and example that is created an index with PV $1. Previous closing prices are picked up automatically. This method is best for daily production processing. The best solution is to use a generalized Risk Setting that uses the previous day's closes. You must use a specific Risk Setting date for as-of calibration.000 consisting of : 40% Dow Jones Euro Stoxx Equities. In addition. apply a specific date in a Risk Setting to the index. This will cause RiskManager to match the market value (proceeds) of these bonds by applying a parallel shift in the yield curve. For hand imported or ad-hoc importing of positions. The prices and accrued interest for each bond are set in the bond positions for a specific date. 10% JPI Bond Index – Denmark. Further. Equity Note: Equity positions and indices will pick up the latest prices in the database since individual equity time series are supported. 10% JPI Bond Index – Belgium. In this case. Remember to save the index! 135 .000. all the positions are zero percent FX hedged. use the date in the index name to help identify the calibration date. positions with prices and accrued interest should use the previous night's bond prices. Fixed Income Note: be alert when re-using calibrated fixed income position sets. 20% JPI Bond Index – France This index is created with my default risk settings and this takes the latest yields in the example database.

You also have choice here to export the index query if you wan to see the index build. the custom index positions can be exported. To run this you need to click on the index name and process the index. 136 . select the custom index as the 'benchmark' and your managed account as the 'base positions'. The “No” processed indicates that all you have done is defined the index structure but RiskManager has not built it. In defining a report where an account's risk is measured against your custom index. Once you have the index built this will appear under your index tags within RiskManager and may be used to run analysis. In this case you could change the index parameters within XML and then re-import the index. Note that under Processed column there is “No”. Reports can reference processed indices or the exported and re-imported position sets.RiskMetrics RiskManager 3. Once an index is processed.7 RMClient Batch Application Processing an Index Saving your Index will take you back to the main Index Builder Screen and you should see your Index that you just built.

calibrated to prices of 20 Mar 2002. 137 . The index should reference the Risk Setting and fix the total investment to USD currency and 100 million PV. The total number in the PV amount can be anything since it is scaled to the investment account PV (for March 20th).RISKMANAGER Fixed Income Index Example FI Custom Index Example Objective 1. Create a position group that filters and carves out USD 7-10yr sector. Create a second position group that isolates the UK 7-10yr sector. 3. Fire up the index builder and select each group with a 0. 2002. 50% US 7-10yr sector 50% UK 7-10yr sector Scale the custom index to USD 100 million (base reporting currency).5 weighting. 3. 2. Use the JP Morgan Global Bond Index . 5. Index Building Exercise 1. Create a Risk Setting for March 20. 4. 4. Import the JP Morgan bond index of Mar 20th into RiskManager with a portfolio name. 2.

7 RMClient Batch Application JP Morgan Bond Index Import the 'COMP_GLOBAL. Select JPMorgan GBI import format. Browse to the csv file. Data-Trans will take care of reformatting the raw spreadsheet into the correct position format. 2.csv' file 1. 3.RiskMetrics RiskManager 3. Assign a tag to reference the whole index. You can carve out the pieces later. 138 .

7-10yrs 139 .'UST 7-10yr BenchMark' 1.US 2.RISKMANAGER US 7-10 YR Position Group Create a Position Group . Select the country . Select the Maturity Sector .

Carve these positions out of the JPM Global Bond Index portfolio.RiskMetrics RiskManager 3.7 RMClient Batch Application 3. Don't forget to click SAVE! 140 .

141 . Make sure the position group has the proper name (if you duplicated the us group).RISKMANAGER UK 7-10yr Position Group Create another position Group 'UK 7-10yr BenchMark' • • Repeat the steps as done with the US position Group except filter the UK country instead of US.

We can to calibrate the custom index with March 20th yield curves. we are specifying a specific date. In our example here. 142 .RiskMetrics RiskManager 3. we know exactly what prices and dates we are dealing with.7 RMClient Batch Application Create a RiskSetting for Mar 20 The Bond Index file contains bond prices for March 20. When we calibrate.

7.000. Open the +Subgroup folder on the right and expand the +Position Group folder. 2002 (for discussion of RiskSettings and Indices. 4. Set the Currency to USD Set the RiskSetting to Mar 20. Select the US 7-10yr Benchmark position group.RISKMANAGER Build the 50-50 Custom Index Use the Index builder to construct the custom index: 1.000. Name and save the index. Set the Amount to $100. see 'Index Componets and Weights'. 6. 143 .5 for each. Select the UK 7-10yr BenchMark position group. 2. 3. 5. Set the weights to . 8.

• Now you may use the index or export it. Once processed. applies it to the positions and scales a new object of positions to match your structure. 144 . Processing takes the index structure you have specified with filters and weights.7 RMClient Batch Application Process the Custom Index • • Left click the index and select 'process'. the index can be used in reporting or exported in a variety of formats. • The index listing will show the Risk Setting and 'Yes' for Processed.RiskMetrics RiskManager 3.

In our example. 145 . Select . RM3D. on import.. the portfolio name '50% US 50% UK 7-10yr 100MM' was given.work with Processed Indices and select import. and RM2.3 formats. The only reason you might do this is if you needed to see the actual scaled position list that comprises the custom index. Give it a portfolio name to represent the custom index.RISKMANAGER Import a Processed Index • A processed index can be imported into the system and subsequently exported in xml. • • Position View Manager will show the named portfolio after import..

• Next. 146 . we can examine the xml structure. we can save the query structure to a file for examination: • Once the query is in a file. we can left-click our custom index and export the Index Query.Exporting an Index Query • From the Index Builder screen.7 RMClient Batch Application Detailed . Advanced uses who use RMX Server for their batch processing can utilize this format in an automated fashion.RiskMetrics RiskManager 3.

Each position group does the country and maturity sector filtering. 3. Valuation Specification = <valuationSpec> (this is the Risk Setting).RISKMANAGER Detailed .for our example. 2.Index Query Structure The Index query (<indexBuilder> defines the entire block of xml) consists of three sections: 1. 147 .for our example we specify two position groups at 50% weight each. 2002 as the calibration date indexList . <indexList> <positionGroupList> Valuation Spec . we specified March 20.

contains the actual detailed list of bond positions (with price + accrued interest) that comprise the position groups.RiskMetrics RiskManager 3.7 RMClient Batch Application positionGroupList . 148 . A production system would match up the index description with the position groups prior to handing off to RMX Server for processing. The positions are not scaled. The position lists are raw and unprocessd.

RISKMANAGER 149 .

150 .. The xml file consists of a list of all bond positions.7 RMClient Batch Application Detailed .RiskMetrics RiskManager 3. This file of positions contains the scaled notionals. we can export the processed index.Exporting a Processed Index From the screen .working with processed indices..

4. Import the JP Morgan Broad bond index of Feb 2nd into RiskManager with a portfolio name. Create a second position group that filters the bond portfolio excluding EUR currency.calibrated to prices of 02 Feb 2002.Poland d. 151 . PL . b. We import an excel file (tab delimited) in the JP Morgan Bond Index format directly into the application. 3. This step is the same as in the 'Fixed Income Example'. 80% Euro Zone 20% Excluding Euro GR KR PL ZA Scale the custom index to EUR 100 million (base reporting currency).RISKMANAGER Fixed Income Euro Example Fixed Income Euro Example Objective 1. ZA . 2. 5. and four countries: a. GR .Greece b. a. 4.South Africa Create a Risk Setting for Feb 2. KR . 2002. Use the JP Morgan Global Broad Bond Index . Create a position group that filters out only the bond portfolio and EUR currency bonds. Index Building Exercise 1. The index should reference the Risk Setting and fix the total investment to EUR currency and 100 million PV. The total number in the PV amount can be anything since it is scaled to the investment account PV (for Feb 2nd).Korea c. Fire up the index builder and select each group and assign an 80% and 20% weighting. 2. 3.

we first must isolate the portfolio of the JP Morgan Index bonds under Tags\Portfolio list we have 'jpmgbi broad 20020201'. Step 2: Select the Currency by selecting EUR from under the Engine Dimensions. 152 .RiskMetrics RiskManager 3. This is the portfolio we imported the raw index constituents.7 RMClient Batch Application Position Group of EUR Bonds Only Step 1 In creating a position group.

RISKMANAGER 153 .

RiskMetrics RiskManager 3. this time excluding all but EUR. 154 . Step 2: We need to Filter currencies. we again first isolate the portfolio of the JP Morgan Index bonds under Tags\Portfolio list we have 'jpmgbi broad 20020201'. This is the portfolio we imported the raw index constituents.7 RMClient Batch Application Position Group Excluding EUR and 4 Countries Step 1 In creating the 2nd position group. Note that we have chosen the exclusion filtering option.

Korea. Under Tags\Country we choose to exclude the four countries (ZA not shown in screenshot). we need to exclude four countries: Greece.RISKMANAGER Step 3: Lastly. and South Africa. Poland. 155 .

RiskMetrics RiskManager 3.7 RMClient Batch Application 156 .

The user can then upload a file to this named item. Until the user uploads to the file. the file item is empty. 3. The directory tree can contain multiple folders and files as necessary to organize the user's personal import files. we are focusing on user FuturesOptions. In the directory structure below.xml". 2.allows the user to create a new named file item. Left Clicking the Home directory will show a menu of file system commands. Create a new file . Under Home is a named location our position file labeled "bondFutures. 157 .RISKMANAGER User File System User File System Management Each user has their own file system directory in the RiskManager database (RMDB). File System Directory Commands: 1. 1. Directory tree Home which serves as the users root directory.

Left Clicking a file will allow users to select a file already in the user file system.browse on your local computer to upload the position or market data. delete.7 RMClient Batch Application 2. rename. 3.sub-directories can be created to organize your work. Upload data to this directory . Create a new folder .RiskMetrics RiskManager 3. and export from the user file system to as local computer file. 158 .

RISKMANAGER Market Data Selecting Market Data from the Home Page Mouse over Market Data will describe the function Clicking "Market Data" will bring you to the Market Data Viewer section of the application. 159 .

Differentials between two markets must be calculated externally from RiskManager and imported as a time series. Normalization . For example.Chart actual prices/rates or a normalized view starting at 1. Note: At this time. Data Transformations and Operations: Dates of View .0 (note: normalized data can only be exported from export graph and choose txt format). 160 . you cannot compare an FX rate with an Equity index. the graphical or tabular data view comparisons can only be done within each asset group.7 RMClient Batch Application About the Market Data Viewer The Market Data viewer enables: Graphing daily prices (or rates). T-bonds) and commodity delivery point differentials (i. Note: Basis . You can also examine multiple series within each asset group: • • • • FX Rates Equities Commodities Fixed Income The time series listing within each asset group will depend on your specific DataMetrics data subscription.RiskMetrics RiskManager 3. Base Currency denomination . these series will appear on the asset lists. view data by (base currency per currency) or (currency per base currency). If you have added your own time series to the RM database.Change start date and end date of data views.e. Natural Gas or coffee). Viewing actual prices or rates of historical time series in the RM database. Examples are cash/futures differentials (i.For FX only.e. You can export the actual data to two separate spreadsheets and merge them in a spreadsheet.

B Choose a time series from the list and select "Graph" C The chosen series name appears in the "graphed time series list". Follow the steps A-G to view market data: A Choose a Market Sector.RISKMANAGER Viewing Data Step by Step Select "Market Data" from the task bar at the top of the screen. North American dates will appear as Month/Day/Year. European dates will appear as Day/Month/Year. Interest Rate Curve Note that you can search the top 20 or the whole market sector list for a match. D Graph start and end dates can be changed by over-typing or through the pull-down calendar. Commodity 2. Foreign Exchange (shown) 4. Equity 3. Note that the date conventions use your Microsoft Regional Settings. 161 . Searching Equity exchanges can be done by CUSIP or long name. Valid sectors are: 1.

RiskMetrics RiskManager 3.7 RMClient Batch Application

E Normalize check-box. Unchecked will show actual values of prices or yields. Normalize will scale the left value points to 1.0. This is useful to compare markets of different scales. F Changes to settings D and E can be applied by selecting "Update Graph" (grayed out in example). G Generate Table creates a report of the selected market data. Selecting "Hide Settings" will enlarge the graphing area.

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Market Data Table Report
Selecting "Generate Table" on the Market Data Screen will create a data report.

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Market Data Graphs
Market Data graphs are interactive. Moving the cursor updates the Date and Value (circled upper left).

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Market Data Scatter Chart
Choosing "Graph" from the Market Data table report allows the user to chart the data observations of one series versus another. Selecting "Customize Graph" on the scatter chart allows the user to choose the data pair.

"Customize Graph" Dialog box to choose the time series pair. 1. 1st time series x-axis. 2. 2nd time series y-axis. 3. Depth - (dates are the only choice). 4. Select Root - Choose all roots for all dates in the market data viewer selection or just one date.

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SVG Graphics
RiskMetrics has chosen Adobe's SVG Graphics technology platform. Graphics can be saved to a file, zoomed, and panned.

Right-clicking the graph area enables the SVG (Scalar Vector Graphics) interaction. The menu functions are described in the SVG Viewer Help.

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SVG Viewer Help
Help on using the Adobe SVG Viewer for Windows
®

Navigating Panning: Hold the alt key and click-and-drag with the mouse to pan an SVG image. When the scroll lock is enabled and the Adobe SVG Viewer has the focus, the arrow keys may be used to pan the image. Zooming: Hold the control key and click to zoom in at the mouse pointer location. Hold the control key and click-and-drag to select a region to zoom into. Hold the control and shift keys and click to zoom out. You can also use the zoom commands in the context menu. Using the contextual pop-up menu Right-click in the SVG image area to open the contextual pop-up menu. This will reveal the commands and options for interacting with the SVG image. Links: If you bring up the context menu over a link, you can choose Open or Open in New Window to activate the link. Quality: You can disable the Higher Quality option to cause the SVG image to display more quickly, but with lower quality. Animations: Use the Pause command to pause an animated SVG image. The pause command changes to the Play command when the animation is paused. You can use the Mute command to disable any sounds embedded in the SVG image. Searching: Click Find to open the find dialog box. Here you may enter the text you want to search for, make choices about matching whole words only, case, and the direction of the search. The find command works with transparent, obscured, or moving text. The entire document is searched, regardless of how much of the SVG is currently visible. The result of the search is highlighted, and panned (but not zoomed) into view. Copying: The Copy SVG and Save SVG as commands let you copy the SVG image to the clipboard and save the image to a local file. The copy command places the SVG as it currently appears onto the clipboard in both Unicode and raster formats. Note that this differs from the Save SVG as command, which makes a copy of the original SVG file. When text is selected, the copy command changes to Copy Selected Text. For more information on the Adobe SVG Viewer, please see the SVG area at Adobe.com.

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Clicking Preferences will take you to the section of the application.RISKMANAGER Preferences Selecting Preferences from the Home Page Mouse over Preferences will describe the function. 169 .

RiskMetrics RiskManager 3.Instructions Checking the instruction box on the "Instructions" tab of Preferences shows all the instructions within the application. 170 . Later dialogs will appear on-the-fly to allow the user to turn off these instructions.7 RMClient Batch Application Preferences .

171 .RISKMANAGER Password Preferences Password Tab Selecting the password tab allows the logged in user to change his/her password. The password can also be reset by the administrator.

7 RMClient Batch Application Lines Per Page Preferences . you change the number of displayed lines per web page.Lines per page From the "lines per page" tab of preferences. 172 .RiskMetrics RiskManager 3. The default is 20 lines.

email notification RiskManager users can change their email notification under the "Email" tab. 173 .RISKMANAGER Email Preferences .

7 RMClient Batch Application User Profile User Profile Users may choose a display name.RiskMetrics RiskManager 3. Group Members Users are reminded of other users in their group. Users can be notified by a message within RiskManager. Notification Users can be notified by email by checking the box and entering their email address. 174 . Messages are viewable in a web page.

175 .RISKMANAGER Base Currency Base Currency Base currency default for reports and display are chosen from the drop-down menu.

7 RMClient Batch Application Stress Testing Selecting Stress Testing from the Home Page Mouse over "Stress Testing" will describe the function.RiskMetrics RiskManager 3. 176 . Clicking "Stress Testing will take you to the scenario analysis section of the application.

RISKMANAGER Create Stress Test Scenarios 177 .

Overwrite Existing .(Recommended) All exact duplicates of the stress test scenario name will be replaced by the imported stress test. but this method is unforgiving in that stress tests stored in the database will be erased! 2. Rename Duplicates .3 compatible).. Comma is a comma delimited or csv flat text file (RM2. Ignore Duplicates . you will have PV01. 3. If you have 5 stress tests that perform a present value of a basis point sensitivity analysis. the first stress scenario will be imported and the last 9 will be ignored and skipped. 2.Flushes the database and replaces the stress test database (shared with the position database) with the imported file. This method insures that old tests are flushed. Tab is a tab delimited flat text file (RM2. Choose an import action on existing positions in your positions database: 1. 178 . and just name the scenarios PV01. 3. It avoids deleting carefully saved stress tests but flushes existing tests upon an import of a new scenario with the same name. PV01 (2).. PV01 (3) . XML is an RML formatted stress scenario file. To improve on this. If you have 10 stress scenarios all name "PV01". 4.If you have 10 stress tests all named "PV01". Choose the file format type: 1.3 compatible). the last test will be the only imported scenario. Delete All . PV01 (5).7 RMClient Batch Application Import Stress Test Importing Stress Scenarios Left click the task bar "Create Stress Test Scenarios" and select "Import Stress Tests". construct a more descriptive name "PV01 USD Yield Curves".RiskMetrics RiskManager 3. RiskMetrics has noted this method is used by 90% of all RiskManager clients.Stress Scenarios are unique only by the stress test name only.

RISKMANAGER Browse to the stress scenario file on your workstation file system: 179 .

7 RMClient Batch Application Or from your RiskManager user file system: 180 .RiskMetrics RiskManager 3.

For equities. 181 . Stress Scenario name and Market Sector. Highlight the time series and choose +Add. Interest Rate Curve Choose an Exchange for Equity and Market for FX. You can change the method later.RISKMANAGER Create User Defined Stress Test Creating a User Defined Stress Scenario Read more about stress testing in the RiskMetrics: Return to RiskMetrics: The Evolution of a Standard document. Follow the red letters in the screen shot below to create this stress test. Select "Create new" from the task bar and pull right to select "User Defined Stress Test". Valid sectors are: Commodity Equity Foreign Exchange Interest Rate Curve B Choose a curve 1. 3. search by equity name or CUSIP (recommended). Choose a style that most series will be changed by in the the stress event. A Choose a 1. In this example. time series by time series. we will compose a user defined stress scenario that shocks the Single A Industrial High Grade Corporate yield curve by +25bps. Compose the User Defined Stress Event. D Select a time series change operator style. These are the time series to be shocked in the stress scenario. 4. Commodity 2. if necessary. C Choose a time series from the list. 2.

then the change is applied. If the current portfolio or group of positions maps to the time series. The time period from which the correlations are calculated are defined in Risk Settings..Change each time series by a percentage amount.7 RMClient Batch Application Change by abs . it is ignored. For yields.stores the stress scenario in the database. but for Comex Silver. For more information on commodity price units. see notes on commodity prices stored in the RiskManager Database.You can change a time series by it's price or yield. For Gold. use set to 300. Set to . It can be edited for change or deleted later. a simple stress test modifying the price of oil will have no effect. If you want to set gold at $300/oz. Predictive changes the specified time series by the amount defined and changes all other time series based on the correlation matrix.RiskMetrics RiskManager 3.Reset the current value of the time series with the value in the stress test definition. For example. a change of 1 is in cents per pound. Note: it is recommended that you check the "before" and "after" to see that the desired change is being made. if you shock Crude Oil but don't have it in position. F Save . 0. E Simple or Predictive Simple changes the specified time series only and in isolation.. If not. 182 . a change of 1 is one dollar per troy oz. Change by % .01 is 1 basis point.

A Stress Test PV Delta statistic in a report that references this historical stress event will show the P&L for the first half of 2001. For additional commentary and to clear-up any confusion. The report can break down the market value changes across all your drill-down dimensions. In reports the "Stress Test PV Delta" statistic will show the change in market value due to the event.RISKMANAGER Create Historical Stress Test Creating a Historical Stress Scenario Select "Create new" from the task bar and pull right to select "Historical Stress Test". please see the topic "Historical Stress vs Historical Simulation" The example below defines the 1st half of 2001. • • • Enter a descriptive name for the event. Enter the ending date. Enter the starting date. Compose the Historical Stress Event. 183 . A Historical stress scenario values the portfolio or group at the beginning date and the end date.

7 RMClient Batch Application Edit Stress Test 184 .RiskMetrics RiskManager 3.

Select "Absolute Change" and "Simple".01 in the first amount field (one basis point) Select "Fill Down" from left clicking the task bar USER DEFINED STRESS TEST 185 .RISKMANAGER Fill Down Entries Fill Down Entries Fill-down is a bulk change application of a stress entry change.00 Enter 0. Select "Interest Rates" Select USD Govt Highlight all USD Govt Curve Time Series +ADD Appearance before any changes Note that the amount fields are all 0. EXAMPLE: Building a PV01 of USD Government Curve Create a User Defined Simple Stress Labeled "PV01 USD Govt.

RiskMetrics RiskManager 3.7 RMClient Batch Application Highlight the first time series line you want to fill to the bottom of the screen 186 .

187 .RISKMANAGER Applying Fill Down Entries Select "Fill Down All" Appearance of the Stress Scenario after filling down. Note that the fill down applies to the "change" column (change style). Now. every entry has a 1 basis point increase in yield.

RiskMetrics RiskManager 3.7 RMClient Batch Application

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RISKMANAGER

Remove Stress Entries
Removing Stress Entries
On the stress test editor page, mouse over the time series and select delete

Mousing over the time series will highlight the entry line. Left click and select "Delete Entry"

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RiskMetrics RiskManager 3.7 RMClient Batch Application

Edit Stress Test
Changing or editing stress entries: Pull down Change Style - Absolute, Change by &, and Set-to Value In this example, we have changed the change style to % Current and New Levels - reality check for before and after the percentage change.

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RISKMANAGER

Duplicate Stress Test
Duplicating Stress Tests
Mouse over the stress test name, left click, and select duplicate.

Duplicate Stress Test Confirmation dialog box. The user must confirm duplication. This action cannot be undone.

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RiskMetrics RiskManager 3.7 RMClient Batch Application

Duplicate Multiple Stress Tests
Duplicate Multiple Stress Tests
Select "Duplicate Multiple" from task bar "Create Stress Test Scenarios".

Duplicate Multiple Stress Functions 1. 2. 3. 4. Duplicate - Deletes stress scenario if checked on this page only. Select All - Inserts checks in all boxes. Select None - Unchecks all boxes. Hide Checkboxes - Removes check boxes from screen. You are now out of the delete multiple function.

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Delete Stress Test
Deleting Stress Tests
Mouse over the stress test name, left click, and select delete.

Delete Stress Test Confirmation dialog box. The user must confirm deletion. This action cannot be undone.

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RiskMetrics RiskManager 3.7 RMClient Batch Application

Delete Multiple Stress Tests
Delete Multiple Stress Tests
Select "Delete Multiple" from task bar "Create Stress Test Scenarios".

Delete Multiple Stress Functions 1. 2. 3. 4. 5. Delete - Deletes stress scenario if checked on this page only. Delete All - Deletes all stress scenarios in the database (all pages). This function completely flushes the stress tests from the system. Select All - Inserts checks in all boxes. Select None - Unchecks all boxes. Hide Checkboxes - Removes check boxes from screen. You are now out of the delete multiple function.

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we have a case study that puts various statistics into practice. underlying PV.RISKMANAGER Report Statistics Report Statistics RiskManager has many statistics that can form the columns of risk reports. In this section we describe various statistics in-depth. • Fixed Income Statistics in reports. Many report layouts such as: 1. 195 . • • • • • • Bond Equivalents Duration. 2. 3. Customizable table report. Multi Risk Setting report Risk Attribution report can accept statistics as their columns or add-on columns in the case of the Risk Attribution report. and Contributional Duration Delta Equivalents Underlying Present Value Definitions Future Value Statistic Definitions Generalized PVBP Statistic In addition.

PV of the bond leg only. Bond Future Option Bond Option 196 .same as PV. This is important to ensure the Underlying Duration statistic (which uses Underlying PV) is correct. We call this the Underlying Present Value.7 RMClient Batch Application Underlying Present Value Underlying Present Value Summary The Underlying Present Value statistic is very similar to our usual Present Value statistic in that it defines a measure of worth for an instrument or portfolio. Ignore the settlement payment leg if it is present.0.PV of the bond only. Preserve sign if optionType=call. in which case we can take the “present value” of only that leg as indicative of the true size of the position. . ignoring the “futures” payment. While this is correct. Underlying Present Value is useful as a standalone-statistic as well as in conjunction with the Underlying Duration statistic defined in a previous specification. Note that sometimes the user specifies an underlyingPrice and other times it is left blank in which case RiskServer computes one. Preserve sign if optionType=call. For some instruments one leg may be much more important than the other.0.PV of the bond leg only. reverse sign if optionType=put. For single-legged instruments Underlying Present Value will simply be the same as Present Value. reverse sign if optionType=put. Note that sometimes the user specifies a marketPrice and other times it is left blank in which case RiskServer computes one. This can be computed exactly as underlyingPrice*numberOfContracts*notional/100. the current Present Value statistic for some two-legged instruments can often be zero or near zero. ignoring all optionality. However. . This can be computed exactly as marketPrice*numberOfContracts*notional/100. . . For now we will leave these instruments alone and simply define Underlying Present Value to be identical to Present Value as well. Note that Underlying Present Value is not meant to be a sensitivity measure but rather a value measure.0. .PV of the bond leg only. This can be computed exactly as (underlyingPrice+accrued_interest)*notional/100. As we get feedback from clients concerning this new statistic we may revise some of our definitions for these instruments. Also note that Underlying PV is not meant to be an “exposure” statistic. Definition of Underlying Present Value by Asset Type Amoritizing Bond Amortizing Swap Bond Bond Future . it does not always provide an intuitive sense of the “size” of a position.PV of the fixed leg only (including sign based on pay/receives fixed). ignoring all optionality and settlement. which is why delta is ignored for option positions. For some two-legged instruments we cannot ascertain which leg is more important.RiskMetrics RiskManager 3.

PV of the commodity only.same as PV.unknown at this time and waiting further research. reverse sign if optionType=put. Equity Future 197 . reverse sign if optionType=put. This can be computed exactly as marketPrice*numberOfContracts*numberOfUnits. .same as PV. Preserve sign if optionType=call. ignoring the “futures” payment. .unknown at this time and waiting further research. Convertible Bond Equity Equity ARO Equity Single Barrier Equity Double Barrier Equity Option . For now simply set to PV. Commodity ARO Commodity Single Barrier Commodity Double Barrier Commodity Option . Ignore the settlement payment leg if it is present. Preserve sign if optionType=call. ignoring all optionality and settlement. . . This can be computed exactly as underlyingPrice*numberOfShares. If this is not the case (i. This can be computed exactly as marketPrice*numberOfContracts*numberOfShares. This can be computed exactly as underlyingPrice*numberOfContracts*numberOfUnits.PV of the equity leg only. For now simply set to PV. .PV of the convertible bond only. Preserve sign if optionType=call. Commodity Future Opt. Commodity Future .unknown at this time and waiting further research. ignoring all optionality. . For now simply set to PV.RISKMANAGER Cap Floor Collar Cash Cash Flow Commodity .PV of the equity leg only. Note: I assumed that underlyingPrice is the spot price of the commodity. If this is not the case (i. . it actually represents the forward price at optionExpiryDate) then we need to discount the value above by the appropriate yield curve to get a true PV of the equity leg. .PV of the commodity leg only. Ignore the settlement payment leg if it is present. Ignore the settlement payment leg if it is present. it actually represents the forward price at optionExpiryDate) then we need to discount the value above by the appropriate yield curve to get a true PV of the commodity leg. reverse sign if optionType=put.e. Note: I assumed that underlyingPrice is the spot price of the equity. ignoring all optionality and settlement.PV of the commodity leg only.e.PV of the equity only. . This can be computed exactly as underlyingPrice*numberOfUnits. ignoring the “futures” payment.PV of the commodity leg only.

Preserve sign if optionType=call.PV of the mutual fund only. reverse sign if optionType=put. For now simply set to PV. reverse sign if optionType=put.PV of the optionCurrency leg only. ignoring all optionality.0*time_factor. . ignoring all optionality. Inflation Indexed Bond Interest Rate Future IR Future Option Money Market Deposit Mortgage-Backed Sec. . . ignoring the “futures” payment. . For now simply set to PV. if the term is 3M then the time_factor would be 0. Ignore the settlement payment leg if it is present. Ignore the settlement payment leg if it is present.unknown at this time and waiting further research.unknown at this time and waiting further research.RiskMetrics RiskManager 3. where time_factor is a fraction defined as term(in months) divided by 12 months. where time_factor is a fraction defined as term(in months) divided by 12 months. . and settlement.PV of the bond only.25. . Note: I assumed that underlyingPrice is the spot price of the option currency.PV of the interest rate leg only.PV of the equity leg only.e. FRA FRN FX Forward FX ARO FX Single Barrier FX Double Barrier FX Option . If we knew the Swap was fixed for float than we could use the same rules as for Overnight Indexed Swaps and Amoritizing Swaps. Ignore the settleCurrency leg. We do not have a marketPrice field. For example.PV of the underlying “bond” leg only. but if we did the value we need would be computed as marketPrice*numberOfContracts*notional/100. Ignore the settlement payment leg if it is present. But this would not help with fixed/fixed or float/float swaps.PV of the fixed leg only (including sign based on pay/receives fixed). . .unknown at this time and waiting further research. . This can be computed exactly as underlyingPrice*numberOfContracts*numberOfShares. . Mutual Fund Overnight Indexed Swap Swap Swaption 198 . Preserve sign if optionType=call. . Ignore the initial deposit leg if it present.same as PV.PV of the forwardCurrency leg only. This can be computed exactly as underlyingPrice*notional.0*time_factor. . reverse sign if optionType=put. settlementCurrency.7 RMClient Batch Application Equity Future Opt. . For now simply set to PV. ignoring all optionality.PV of the interest rate leg only. Preserve sign if optionType=call. it actually represents the forward price at optionExpiryDate) then we need to discount the value above by the appropriate yield curve to get a true PV of the optionCurrency leg. If this is not the case (i. This can be computed exactly as underlyingPrice*numberOfContracts*notional/100.PV of the bond only.

or otherwise discount it to the present. or the forward price of the instrument at the option expiry date.RISKMANAGER Implementation Issues For options there is always the question of what the underlyingPrice represents. In theory. in practice these values will be similar. Is it the the current spot price of the underlying instrument. However. for the purposes of the Underlying PV statistic we want to ensure it is the current spot price. 199 .

on a future date to remain valued.e. <futureValue> will be relative to that date and thus roll each day as <analysisDate> is changed (or if <analysisDate> is tied to the Market Data Database). a 9-month bond might would appear as a 3-month bond if the <analysisDate> was moved forward by 6 months. but the rates used to discount the bond would be current 3-month rates.RiskMetrics RiskManager 3. This feature is not the same as simply resetting the analysis date into the future for three important reasons: 1. We really want to use 3-month forward rates implied in 6 months from now. no market data changes) of a credit exposure calculation at some horizon. For Credit Exposure computations it is desirable to see the anticipated value of a transaction if markets remain unchanged while the position simply “rolls down” the curve as it ages. This is currently done in the Credit Exposure Module and thus we will be using this section of the analytics. and cashflows that occur. 3. One optional extension to <futureValue> will be to allow instruments that mature. There will be two main uses of this statistic: 1. The difference between <presentValue> as of today and <futureValue> as of tomorrow is a direct indication of theta. <analysisDate> is an absolute date. This will provide hedge-fund clients with a much-needed statistic for their option-based positions.6 Release This specification defines a new RiskServer statistic <futureValue> that is analogous to the current statistic <presentValue>. RML Extensions 200 . This data will be important for margin-like calculations as requested by a client (to be specified in a subsequent document).7 RMClient Batch Application Future Value Statistic Future Value Statistic Summary . 2.RM3. It represents the “base” scenario (i. 2. Reports using the <futureValue> statistic are therefore applicable on any date. The change in <presentValue> that might be observed by increasing the <analysisDate> by only one day could be large if on that next day there was a coupon payment (which would get dropped) or the position itself matured (in which case the <presentValue> would drop to zero). Cashflows occurring on <analysisDate> are ignored as are positions that mature on that date. Setting <analysisDate> to a future date simply ages all positions but not the market data itself. For example. The purpose of this new statistic is to estimate the value of the portfolio at a time in the future with respect to the current <analysisDate>.

each based on a different set of simulated market data scenarios. But in this case if we are trying to measure the anticipated change in PV from the 19th to the 20th we would want to keep that cashflow. . The optional <valueTodaysFlows/> tag is a lot trickier.RISKMANAGER In terms of RML. Implementation of this should be considered a bonus. But if we move forward one day to the 20th we would find the PV of the bond drops by the value of the coupon since the coupon is being thrown out.e. This is the desired course of action for normal RiskServer operation (we always toss cashflows that occur as of today). The idea of this flag is to allow inclusion of positions and flows that “expire” on the future date. The only reason this is important is for the computation of theta by which compare the <presentValue> on one day with the <futureValue> on the next day.this optional. For the <futureValue> statistic we only want the one set of future values that corresponds to the “base” scenario in which no market data is simulated (i. or 3M. Interim cashflows between the analysis date and the horizon are always ignored. It is really only meaningful in the following context: Assume an <analysisDate> of 19 Aug 2002 and a horizon of 1D. For a bond paying semi-annual coupons with a maturity of 20 Aug 2015 we would expect a coupon payment tomorrow. RiskServer should age the portfolio to 18 Sep 2002 (30 calendar days) and compute new present values based on forwardlooking (implied) market data. unary tag indicates that the user wishes to value. <valueTodaysFlows/> RiskServer Analytics Details The Future Value statistic is best described by example: Given an <analysisDate> of 19 Aug 2002 and a horizon of 30D. The same concept applies to positions that would expire on the 20th. Thus the PV of the bond as of 19 Aug 2002 would include that expected cashflow. including those that return results as a percentage of <presentValue>) with two additional tags: <horizon> . inclusion of <valueTodaysFlows/> is probably very difficult. It is a required field. In a subsequent document we will describe a new statistic that allows reporting of all the scenarios themselves. rather then ignore. Only those falling exactly on the horizon are saved. Their PV would be zero unless we include their value. As mentioned.this specifies a single term in day-month-year notation such as 1Y. In this fashion the PV changes only due to movement in time and through the yield curve---not due to expired cashflows. The term itself refers to calendar days and should be treated in an analogous fashion to the horizon terms used by Credit Exposure. nothing moves except time). The results of this should be identical to those obtained by the Credit Exposure Module (which ages positions and uses forward-looking market data) for the equivalent set of <analysisDate> and <horizon> tags. 201 . all positions and cashflows that occur at the horizon. We can leave it for another day. If <futureValue> was 2 days or 1 month in the future then we would have missed a lot of interim cashflows anyway so saving those at the horizon is moot. the <futureValue> statistic should be an exact clone of the <presentValue> statistic (all fields mean the same thing. To compute theta for hedge fund we will simply take note of which options are expiring and exclude them from the calculation. 1D. We can implement <futureValue> without <valueTodaysFlows/> and add it in at a later date. The only difference is that the Credit Exposure Module RiskServer computes a whole distribution of future values at the horizon.

etc.the jth risk factor entering into the pricing equation of an instrument. = Di / D{R} * NLC{R} 202 .total Notional in Local Currency of the reference portfolio. . = Di / D{R} . sector. . generally a two-year or ten-year note.). In practice. Statistics and Variations BEi BENi . D{R} NLC{R} .Present Value of the ith cell (instrument. where the sum is taken over all j interest rate factors. = Di{R} where i represents only the “total” cell of the reference portolio. Di Duration). Notional in Local Currency has been previously defined.7 RMClient Batch Application Bond Equivalents Bond Equivalents Definitions Summary This page describes a statistic called Bond Equivalents. the second “reference” portfolio consists of only a single bond instrument.total interest rate sensitivity for the ith cell (note this is not the same as = Σ Dij.the first derivative of the Present Value of the ith cell with respect to factor xj. However the second portfolio can be any combination of instruments. . . Definitions {P} {R} PVi xj Dij . .Bond Equivalents of the ith cell. = dPVi/dxj = [ PVi (xj + ∆xj) − PVi (xj − ∆xj) ] / (2*∆xj) for small values of ∆xj . The purpose of the statistic is to measure the interest rate sensitivity of one portfolio with respect to another.RiskMetrics RiskManager 3.total interest rate sensitivity for the reference portfolio.Bond Equivalents Nominal of the ith cell.set of all positions in the main position group.set of all positions in the reference position group.

This is a measure of sensitivity to a parallel shift in the interest rate curve. we have created a 10year 4. This is the benchmark bond against which all others will be measured.875 USD Gov bond to use as reference. much like modified duration. Bond (a) (b) (c) Maturity 2/15/2012 2/15/2022 2/15/2012 Coupon 4.000 $1. Bond (b) has the same coupon but is 20 years to maturity.00% Face Value $1. decide on a reference bond (or a portfolio of reference bonds). Note that bond (a) in the portfolio is a duplicate of the reference bond.875% 4. 203 ." We choose the portfolio with the reference bond(s) as the Position Group.875% 0.000 We create a report and select the statistic "bond equivalent.000. In our example below. In the example below.RISKMANAGER Bond Equivalents part 1 Bond Equivalents map securities and portfolios to positions of equivalent sensitivity in a bond of the user's choice. The bond has aged approximately 3 months giving it a duration of about 7.000. Bond (c) is a US Treasury 10yr STRIP dated 2/15/2012.000.51. Now we assign this bond to its own portfolio. We have assigned a 1MM notional for each position.000 $1. An example follows. we will measure the risk of a portfolio of three bonds as follows. First.

RiskMetrics RiskManager 3.7 RMClient Batch Application 204 .

205 . One would need to buy 1.00.5165 as much loss as (a).5165 as sensitive as the reference bond. Note that for confirmation of the results we have run a stress test. The stress test in then last column shows that the same face amount of bond (b) gives 1.RISKMANAGER Bond Equivalents part 2 The report output is below. Note that in row (a) the duplicate of the reference bond has a bond equivalent of 1. Also note that (duration * present value) accurately confirms the P&L (change in market value) generated by the stress test which serves as an additional confirmation of the three bond statistics (PV. as we might expect. Editors Note: The +1bp simple stress test applied to the USD Govt curve can be equivalently defined by using the PVBP delta statistic using a +1 basis point change. exactly as we predicted with Bond Equivalents. Bond Equivalents. Bond (b) is 1. moving the USD Govt curve up 1 basis point. The PVBP delta statistic is an efficient way of applying a simple parallel shift to all yield curves in RiskManager.5165 times as much of the reference bond to achieve the same sensitivity to parallel interest rate changes. and Stress Test).

the jth risk factor entering into the pricing equation of an instrument. Note this definition of duration is known as “effective duration” and it has the nice property that it can be viewed as the sum of all “partial durations” for the ith cell taken with respect to interest risk factor j. . . sector. = − Σ dPVi/dxj / |uPVi|. and current value is simply the Present Value of a position. .total Underlying Present Value of all positions in the main position group {P}. . etc. where the sum is taken over all j interest rate factors. Definitions {P} {B} PVi PV{P} PV{B} uPVi uPV{P} uPV{B} xj Dij .total Present Value of all positions in the main position group {P}.).set of all positions in the main position group. = − Σ dPVi/dxj / |uPV{P}|. . where the sum is taken over all j interest rate factors uDuri .Underlying Present Value of the ith cell (to be described under separate cover). = − Σ dPVi/dxj / |PV{P}|. . . including those that do not have well-defined yield-to-maturities (as would be required for Macaulay Duration).set of all positions in the benchmark position group (if specified).RiskMetrics RiskManager 3. .7 RMClient Batch Application Duration Duration Calculations in RiskManager The duration of any fixed-income instrument is most generally defined as the ratio of its interest rate sensitivity to its current value.the first derivative of the Present Value of the ith cell with respect to factor xj.total Present Value of all positions in the benchmark position group {B}. where the sum is taken over all j interest rate factors uCDuri Underlying Contributional Duration of the ith cell. This computation is known as Effective Duration and has the attractive property of being calculable for many instrument types.Underlying Duration of the ith cell. where the sum is taken over all j interest rate factors 206 .total Underlying Present Value of all positions in the benchmark position group {B}.Present Value of the ith cell (instrument. = − Σ dPVi/dxj / |PVi|. RiskManager measures interest rate sensitivities by parallel shifts of all the zero-rate vertices that comprise a particular yield curve. . CDuri Contributional Duration of the ith cell. = dPVi/dxj = [ PVi (xj + ∆xj) − PVi (xj − ∆xj) ] / (2*∆xj) for small values of ∆xj Statistics and Variations Duri Duration of the ith cell.

and since duration is interest rate sensitivity divided by Present Value. A further problem arises when comparing the duration of two bonds. Again this is because duration is interest rate sensitivity divided by Present Value. But for a bond futures contract Present Value is strictly zero. the relative duration of the two is ill-defined unless they both have the same Present Value. But which Present Value should be used? That of the first bond or the second bond? Taking the difference of Present Values of two bonds does not help because that value can be very small or even zero. Similarly. Present Value can always be computed as current mark-tomarket. While it is clear that the duration of each bond can be separately computed and contrasted. 207 . which also leads to unrealistically high duration numbers. the calculation yields duration numbers of infinity.RISKMANAGER Problems with Duration when Present Value is ill-defined Unfortunately. To help provide meaningful duration numbers in these cases RiskManager offers variations of Effective Duration in which the user has the option of redefining how Present Value is computed under these problematic circumstances. For a simple bond. duration calculations are not always well defined when there is no clear meaning of Present Value. a bond option has a very small Present Value reflecting current premiums.

The first column indicates the Present Value of the Australian Bonds portfolio to be 2. Examining the Long-Term constituents for each portfolio reveals that an AUD Bond Futures contracts is part of the Australian Bonds group. the Underlying Present Value for every cash bond is the same as its Present Value.RiskMetrics RiskManager 3. 208 . As shown in the second column. To alleviate this shortcoming. The bonds in each portfolio are subdivided into different Terms.7 RMClient Batch Application Introducing Underlying Present Value In the Duration Report (shown below) are a series of calculations for two separate portfolios: one labeled Australian Bonds. and one labeled AUD Bond Index. Note that neither column 1 nor column 2 is more “correct” than the other. Column 1 should be used for mark-to-market purposes in order to properly account for the inherent leverage associated with futures positions (they contain risk but no value). but for futures and options Underlying Present Value refers the full Present Value of the bond that underlies the contract itself. comparable to the size of other positions in the portfolio. Since the AUD Bond Index portfolio has only cash bonds its total Underlying Present Value is also identical to its total Present Value. showing a zero for the Present Value of the AUD Bond Futures contract does not shed any light on the size of the position itself. Column 2 should be used for economic purposes in order to measure the “size” of the portfolio.375 MM compared to 30. The total Present Value of Australian Bonds portfolio is therefore indicative of its true mark-to-market. But for the AUD Bond Futures contract the Underlying Present Value is computed to be 154 MM (rather than zero).633 MM for the AUD Bond Index. The Present Value of this position is correctly indicated as zero. The total Present Value of each portfolio is of course the sum of the Present Values of its constituent bonds. For cash bonds these two values are identical. The total Underlying Present Value of the entire Australian Bonds portfolio is likewise raised by 154 MM to 2. Though correct in terms of total mark-to-market computations. RiskManager can compute a variation of the Present Value statistic called Underlying Present Value.530 MM.

RISKMANAGER 209 .

the leverage built into futures contracts being ignored. Which duration number is correct? This once again depends on the purpose of the calculation. However the AUD Bond Futures contract shows very different results. Since the Present Values and Underlying Present Values for each bond in the AUD Bond Index are identical. In order to measure a duration number for a particular futures contract the Underlying Duration computation clearly makes more sense. computed by dividing those same interest rate sensitivities by Underlying Present Value. This is expected because of the inherent leverage embedded in futures contracts. The next column is shows the Underlying Duration of each position and portfolio. which shows a Duration of 3. But note that this also effects the duration of the entire Australian Bond portfolio.55 years but an Underlying Duration of only 3.7 RMClient Batch Application Using Underlying Present Value to compute Underlying Duration These differences become more important in the duration column and the underlying duration column which present two variations of duration. On the other hand. The Duration of the futures contract is infinite (because it has zero Present Value) whereas the Underlying Duration is an acceptable 7.RiskMetrics RiskManager 3. 210 . The duration column represents the true duration of the portfolio in terms of its mark-to-market value.4 years. Both columns are therefore important risk management measures. Adding futures contracts directly increases the total duration of the portfolio because interest rate sensitivity is increased without any increase in portfolio value. The duration column shows the usual Duration of each position and portfolio which is computed by dividing interest rate sensitivities by Present Values. the underlying duration column represents a kind of “economic” duration in which futures and cash positions are treated in the same fashion.33 years. Duration and Underlying Duration are also identical.

difficult because each may have a different Present Values.15 + 2. the distinct contribution of interest rate sensitivity each position imparts to the total portfolio is readily determined. And at the portfolio level Duration and Contributional Duration are of course identical (since the Present Value of that line is indeed the Present Value of the entire portfolio). which is more than twice the duration of Mid Term bonds at 3. or two sets of positions.013 MM of Present Value for Very Long Term bonds. are divided by the Present Value of the total portfolio rather than that of each individual position. compared with 1.51. One nice feature of Contributional Duration is that the components of the total always sum to the total itself (i.29 years for the AUD Bond Index itself.51). it makes comparison of the duration of two positions. To allow a more direct comparison of durations for different groups each having different Present Values. or group. or group. For this calculation interest rate sensitivities for each position. Because the divisor is the same for each position.38 + 1.3 = 0. As shown in the Contributional Duration column of Very Long Term bonds is only 0. This factor of two is as expected since (a) the Present Value of Mid Term bonds is over four times that of Very Long Term bonds. But the Present Value of Mid Term bonds is 9.66 years. 211 . all these sensitivities ultimately yield a total Duration of 4. RiskManager offers another variation of duration known as Contributional Duration.15 for Mid Term bonds. Though this is correct.RISKMANAGER Introducing Contributional Duration As described so far.676 MM. which is more than four times the 2. When combined with the other two groups. within the AUD Bond Index the duration of Very Long Term bonds is shown to be 7. and (b) the interest rate sensitivity of Mid Term bonds is about half that of Very Long Term bonds.e.84 years. For example.22 + 0. 4. all calculations of duration have been performed by dividing the interest rate sensitivity of a particular position by its corresponding Present Value or Underlying Present Value.

RiskMetrics RiskManager 3.7 RMClient Batch Application 212 .

RISKMANAGER Using Underlying Present Value to compute Underlying Contributional Duration Lastly there is one final variation of duration that combines Underlying Present Value with Contributional Duration. But for the Australian Bonds portfolio the difference reflects whether or not to use the Present Value (zero) or the Underlying Present Value (154 MM) of the AUD Bond Futures contracts. As might be expected this is called Underlying Contributional Duration. Neither statistic is more correct than the other. The calculation is identical to that of Contributional Duration except that all interest rate sensitivities are divided by the Underlying Present Value of the entire portfolio rather than the Present Value. it all depends on the purpose of the calculation. The results of this calculation are given in the underlying contributional duration column. 213 . For the AUD Bond Index there is no difference between Contributional Duration and Underlying Contributional Duration since the portfolio only contains cash bonds.

Thus Contributional Duration provides a very powerful method of analyzing fixed income portfolios relative to a benchmark that Duration alone cannot capture. To summarize: Both Duration and Contributional Duration for each portfolio and each sublevel can be measured separately. but the sub-rows indicate precisely where the Australian Bonds portfolio is overweighted (Short Term and Mid Term) and underweighted (Long Term and Very Long Term) with respect to the AUD Bond Index.73 years of duration with respect to the AUD Bond Index. and 0. At the total portfolio level Australian Bonds is shown to be short 0.66 years are due to being net long in Short Term bonds and Mid Term bonds. 1. the differences between Contributional Durations can be measured because each is computed based on the same Present Value (that of the total portfolio). The bottom report section show Contributional Durations for each portfolio. as well as the relative Contributional Duration of Australian Bonds against the AUD Bond Index. And at the top level they can be subtracted to compute a relative measure. as well as individually.7 RMClient Batch Application Contributional Duration is ideal for Measurements against a Benchmark The real power of Contributional Duration comes to light when it is used to measure the duration of one portfolio against another.04 and 0.73 years short of total relative duration of Australian Bonds against the AUD Bond Index. This could not have been computed by taking the differences of the Durations of each sub-level for the two portfolios because the Present Values at each sub-level differ (only at the top level do they match). The top report section are the Present Values columns of the two portfolios relative to each other. PV Total = Overweight / Underweight (in money terms) 214 .RiskMetrics RiskManager 3. More to the point is that the report also indicates the relative duration for each sub-level. However.51 years are due to being net short in Long Term bonds and Very Long Term bonds. The Relative Duration Report (shown below) shows just such a calculation in which the duration of the Australian Bonds portfolio is measured relative to the AUD Bond Index. This result is nothing more than the difference between the total duration of the Australian Bonds portfolio (3.15 and 0. But relative measures at each sub-level are meaningful only for the Contributional Duration statistic. Because the AUD Bond Index has been balanced to the Australian Bond portfolio the total relative Present Value is zero.55) and the AUD Bond Index (4.29). The report readily indicates that for the 0.

RISKMANAGER Relative Contributional Duration 215 .

RiskMetrics RiskManager 3.7 RMClient Batch Application 216 .

533 217 . Example: A very straightforward example is a stock showing a delta equivalent of $100. For Equities.000. It is easy to convert the price-sensitivity of this risk factor to a yield-sensitivity. Thus. Moving the 10-year point on the USD Govt curve –0.614. Commodities. For Interest Rates the number at each point of an interest rate curve represents a delta-equivalent based on price change for the corresponding zero-coupon bond. then the value of your position would move by (5% * $100.000. 10.1%.453) = $3. and FX rates.000.000 13-year 6% coupon bond shows a mapping to risk factors as follows: The USD Govt 10-year risk factor has a value of $361.RISKMANAGER Delta Equivalents Delta Equivalents Delta Equivalent maps a portfolio to its underlying Risk Factors. Example: A $1. This means that if the value of the 10-year zero-coupon bond moves an absolute amount of 1%. just divide by the duration. the bond would exhibit the same sensitivity when the yield of the 10-year zero-coupon bond moves an absolute amount of 0. then your 13-year bond's price would change by approximately (1% * $361. It is literally the sensitivity of the value of your position with respect to % changes in the underlying time series. We can test this by running a simple stress test.1% (in absolute terms) produces Stress Test PV Delta of $3. and shows the equivalent amounts of each risk factor which have equivalent risk. Since the risk factor refers to a 10-year zero coupon bond. This means that if the S&P moves by 5%. the deltaequivalent based on % price changes for the simple underlying time series.453.000) = $5.

g. and two for the yield curve time series (e.IBM). Delta equivalents are shown for each risk factor.g. 2. In the example report below we examine some currency futures positions. 218 . EUR FX Spot EUR Govt curve 1M and 3M points (risk settings analysis date is Aug 15th 2001). For example. an equity option expiring in four months has three delta equivalents: one for the underlying equity time series (e..7 RMClient Batch Application Delta Equivalents A delta equivalent is the derivative of the present value with respect to a given risk factor multiplied by the value of the risk factor. For example. 3. USD Govt 3M point (the reporting currency is USD).RiskMetrics RiskManager 3.. The position is just over 1 month before expiration (expy Sep 17th 2001). three month and six month points in the USD government curve). the Sep 2001 EC futures (comprised of two short positions of one lot each) has exposure to: 1. Delta equivalents are different from other statistics because they always refer to a specific risk factor or ”time series".

219 .RISKMANAGER Delta Equivalents Report Definition The key to a delta equivalent report is to select two parameters (both circled in the layout manager below): 1. Statistic . Drill-down Dimension must include "risk factor".Delta Equivalents. 2.

For example. The extensions discussed herein provide methods for shocking all other time series as well.50 would drop a given equity price from 40 to 39.5825 (assuming a base currency of USD). The units for this are in absolute basis points. a specified shift of 150 would raise a given volatility from 22. For example. For example. a specified shift of -2.75%. a specified shift of 150 would raise a given volatility from 22. For an option-based position. a specified shift of 5. allows users to specifiy a uniform shift to all commodity curves. This field can be any real number.25% to 23.6 This specification defines extensions to the current PVBP and PVBP Delta statistics that generalize the existing framework to all asset classes. 2003 Summary of Generalized PVBP released with RM3. The units for this are in absolute basis points. For example. should be optional. should be optional.7 RMClient Batch Application Generalized PVBP Statistic Generalized PVBP Updated Jan 29. should be optional.RiskMetrics RiskManager 3. and default to zero if left blank. This field should be made optional and default to zero if left blank. <volatilityShiftInBasisPoints> allows users to specifiy a uniform shift to all implied volatilities. and default to zero if left blank. For example. <volatilitySurfaceShiftInBasisPoints> allows users to specifiy a uniform parallel shift to all volatility curves.0 would drop a 3-Month Gold price from 300 to 225. and default to zero if left blank. this field already exists and allows users to specifiy a uniform parallel shift to all interest rate curves. and default to zero if left blank. a specified shift of – 25. The units for this are in relative percent. This field is consistent with the present tag <shiftInBasisPoints> that stresses interest rate curves. Analytics Extensions and Modifications Precedence note: <volatilityShiftInBasisPoints> takes precedence over <volatilitySurfaceShiftInBasisPoints>.75%. This field can be any real number. This field can be any real number. <equityShiftInPercent> allows users to specifiy a uniform shift to all equity prices. the implied volatility can be either specified by the user or calibrated by RiskServer if left blank. allows users to specifiy a uniform shift to all fx rates relative to their base currency. This field can be any real number. should be optional. The units for this are in relative percent. In the present implementation users can specify a uniform parallel shock to interest rate curves only.5 to 1. should be optional.25% to 23.50 would increase a GPB/USD rate of 1. <fxShiftInPercent> <commodityShiftInPercent> <shiftInBasisPoints> 220 . The units for this are in relative percent. and default to zero if left blank. This field can be any real number.

For example. the <volatilitySurfaceShiftInBasisPoints> value will be ignored. and default to zero if left blank. This field can be any real number. 3.” “Spread Rates Shift (bp)”. This field is consistent with the present tag <shiftInBasisPoints> that stresses all interest rate curves. The user can always run a report on only those positions considered spread-based in order to better distinguish instruments. <equityShiftInPercent> is mapped to Equity. Negative interest rates and volatilities may result for some combinations of user values.RISKMANAGER <spreadShiftInBasisPoints> allows users to specifiy a uniform parallel shift to all non-risk-free interest rate curves. RiskServer should set all negative values resulting from a particular instance of this statistic to zero to avoid analytics conflicts. <volatilityShiftInBasisPoints> takes precedence. If all values are left blank then the result will be the simple case of no movement for any curve. price. The definition of a risk-free curve is any curve that has been specified as the default for a currency. No action required at present---just something to note.5%. and <commodityShiftInPercent> is mapped to Commodity. Inflation-Indexed bonds fall into a grey area as do some other curves. When values for <volatilityShiftInBasisPoints> and <volatilitySurfaceShiftInBasisPoints> are both specified. Users can set any combination of values for all six shift tags. <fxShiftInPercent> is mapped to FX. 5. For physical commodities and equity indices the results are fine. “This shifts all FX rates relative to your base currency by the percentage specified.” “FX Rates Shift (%)”. The units for this are in absolute basis points. Labels and mouse-overs for the tags should be as follows: <shiftInBasisPoint> <spreadShiftInBasisPoint> <fxShiftInPercent> “Interest Rates Shift (bp)”. But for eurodollar and bond futures the results are not as meaningful. “This shifts all interest rate curves (riskfree and credit) by the number of basis points specified. or rate---a useless by nevertheless valid case. 6.” 221 .80% to 8. Users are permitted to specify values for <shiftInBasisPoints> and <spreadShiftInBasisPoints> simultaneously in which case the shifts are added together. This particular tag will eventually be superceeded by more precise CreditGrades analytics but is robust enough for general use. 4. Thus non-risk-free curves are all the rest. a specified shift of 270 would raise a non-risk-free interest rates of 5. <volatilityShiftInBasisPoints> is mapped to Vega. a <shiftInBasisPoints> of +200 and a <spreadShiftInBasisPoints> of –100 would result in all risk-free rates increasing by 200bp and all non-risk-free rates increasing by only 100bp (+200 – 100). “This shifts all credit (non-risk-free) curves by the number of basis points specified. should be optional. Note this is only a best-effort determination of what is risk-free and what is considered a spread curve. For example. 2. The riskType drilldown is not applicable for the <dvbpPV> statistic (this is consistent with our other PV-based statistics). Interface Considerations The interface for the two statistics PVBP and PVBP Delta should be augmented to reflect the new tags outlined above. Analytics Considerations 1. The riskType drilldown dimension is applicable for the <dvbpDeltaPV> statistic. Shifting commodity curves is mathematically robust but not always economically meaningful. This dimension should separate delta-PV results based on the type of curve that was moved: <shiftInBasisPoints> and <spreadShiftInBasisPoints> are both mapped to Interest Rates.

” 222 . “This shifts all equity prices by the percentage specified. “This shifts all volatility curves by the number of basis points specified.” “Volatility Rates Shift (bp)”. Applicable only for option-based positions that have a defnied volatility curve.7 RMClient Batch Application <commodityShiftInPercent> <equityShiftInPercent> <volatiltyShiftInBasisPoint> “Commodity Rates Shift (%)”.” “Equity Rates Shift (%)”. “This shifts all commodity curves by the percentage specified.RiskMetrics RiskManager 3.

The second problem is that sensitivities for different classes of risk factors cannot be aggregated in any meaningful fashion (such as interest rates deltas with commodity deltas). <equityDelta/> 223 . RML Extensions and RiskServer Analytics A new statistic will be added to RiskServer called <greekSensitivity>.RISKMANAGER Generalized Greeks Generalized Greeks Summary This specification defines a framework for producing generalized Greek Sensitivities applicable for individual positions as well as complete portfolios. show no interest rate sensitivity. Resulting units are in base currency per %. etc. and (b) a uniform set of relative underlying moves (such as basis points or percentages) instead of absolute moves such as dollars or yen. it does provide a uniform way of producing aggregate Greek Sensitivities across all asset classes from within RiskServer’s current reporting structure. Rather than kludge together an answer we should consider an improved bond futures model).1. Set <greekSensitivity> = (P2 – P1) / (2 * 0. Compute P1 = <dvbpDeltaPV> for <equityShiftInPercent>= –0. when treated as a commodity in order to get more accurate basis risk. The display name for this statistic is simply “Greek Sensitivities”. In deriving a framework for generalized Greek Sensitivities two problems quickly surface. Note that most calculations are based on functionality outlined in specs 1012 and 1014.1). The first problem is that traditional Greek measures such as delta and gamma do not translate well across multiple positions since they refer to absolute price changes per unit move of some other underlying price. While the final framework is certainly not foolproof. Sensitivity Type Computational Procedure Compute P2 = <dvbpDeltaPV> for <equityShiftInPercent>= 0. The table below lists all valid arguments for <sensitivityType> along with the computation to be performed. percent-PV. The statistic will support all the usual tags that allow for drilldows.g. In addition there will be one other required tag called <sensitivityType> whose single required argument defines the particular type of sensitivity that should be computed for this instance of the statistic. Also note the separation of some constants for clarity (in the actual code these constants should of course be pre-multiplied).1. This is solved by creating sensitivities based on (a) present value changes in a common base currency instead of price changes in each position’s own local currency. Creating statistics that separate each asset class solves this problem. The framework builds upon the specifications for Generalized PVBP and Future Value. Some of the outstanding issues that arise from this framework suggest an update to some of our instrument models rather than to a new framework itself (e. bond futures.

Compute P2 = <dvbpDeltaPV> for <fxShiftInPercent>= 0. Resulting units are in base currency per %.1). Compute P1 = <dvbpDeltaPV> for <volatilityShiftInBasisPoints>= –1. Compute P1 = <dvbpDeltaPV> for <fxShiftInPercent>= –0. Compute P2 = <dvbpDeltaPV> for <shiftInBasisPoints>= 1. Resulting units are in base currency per bp squared. Set <greekSensitivity> = (P2 + P1) / (0.2)2. Set <greekSensitivity> = (P2 – P1) / (2 * 0. Compute P2 = <dvbpDeltaPV> for <volatilityShiftInBasisPoints>= 1. Compute P2 = <dvbpDeltaPV> for <spreadShiftInBasisPoints>= 2. Compute P1 = <dvbpDeltaPV> for <spreadShiftInBasisPoints>= –2. Compute P1 = <dvbpDeltaPV> for <spreadShiftInBasisPoints>= –1. Resulting units are in base currency per % squared. Compute P1 = <dvbpDeltaPV> for <shiftInBasisPoints>= –2. Resulting units are in base currency per bp. Compute P2 = <dvbpDeltaPV> for <fxShiftInPercent>= 0. Compute P2 = <dvbpDeltaPV> for <spreadShiftInBasisPoints>= 1. Compute P1 = <dvbpDeltaPV> for <shiftInBasisPoints>= –1. price changes. Resulting units are in base currency per % squared.2.7 RMClient Batch Application <equityGamma/> Compute P2 = <dvbpDeltaPV> for <equityShiftInPercent>= 0. Compute P1 = <dvbpDeltaPV> for <commodityShiftInPercent>= –0.2. Resulting units are in base currency per bp. Set <greekSensitivity> = (P2 + P1) / (2)2. can be approximated at any level of aggregation by: 224 . Resulting units are in base currency per %. Set <greekSensitivity> = (P2 + P1) / (0. Set <greekSensitivity> = (P2 – P1) / (2 * 0. Set <greekSensitivity> = (P2 – P1) / 2. Resulting units are in base currency per % squared. Set <greekSensitivity> = (P2 + P1) / (2)2.1). Resulting units are in base currency per bp squared. <interestDelta/> <interestGamma/> <commodityDelta/> <commodityGamma/ > <spreadDelta/> <spreadGamma/> <currencyDelta/> <currencyGamma/> <vega/> <theta/> When all sensitivities are defined as above. Resulting units are in base currency per basis point.2)2. Compute P2 = <dvbpDeltaPV> for <shiftInBasisPoints>= 2.1. ∆PV.2.1.2.1.1. Compute P1 = <dvbpDeltaPV> for <fxShiftInPercent>= –0. Set <greekSensitivity> = (P2 + P1) / (0. Compute P2 = <futureValue> for <horizon>=1D and <valueTodaysFlows/> Compute P1 = <presentValue> Set <greekSensitivity> = P2 – P1. Set <greekSensitivity> = (P2 – P1) / 2.RiskMetrics RiskManager 3.2.2)2. Compute P2 = <dvbpDeltaPV> for <commodityShiftInPercent>= 0. Compute P2 = <dvbpDeltaPV> for <commodityShiftInPercent>= 0.2. Set <greekSensitivity> = (P2 – P1) / 2. Resulting units are in base currency per calendar day. Compute P1 = <dvbpDeltaPV> for <commodityShiftInPercent>= –0. Compute P1 = <dvbpDeltaPV> for <equityShiftInPercent>= –0.

the 225 . That is. Question: Aren’t the deltas above the same as those in our delta equivalents report? Answer: The are similar. Different columns allow for different display names depending on the nature of the positions being analyzed. gammas. you cannot add equity deltas and interest rate deltas together in a meaningful way.RISKMANAGER ∆PV = + + + + + equityDelta * (proposed %change in equities) ½ * equityGamma * (proposed %change in equities)2 commodityDelta * (proposed %change in commodities) ½ * commodityGamma * (proposed %change in commodities)2 currencyDelta * proposed %change in currencies ½ * currencyGamma * (proposed %change in currencies)2 + + + + + + interestDelta * proposed bp change in interest rates ½ * interestGamma * (proposed bp change in interest rates)2 spreadDelta * proposed bp change in spreads ½ * spreadGamma * (proposed bp change in spreads)2 vega * (proposed bp change in volatilities) theta * (proposed days to age) This approximation is not used at all by RiskServer but rather shows clients how to interpret the sensitivities themselves. theta by risk type). We cannot create all the sensitivities at once in the same column because (a) We would be mixing deltas. (b) Not all drilldown dimensions are appropriate for all types (e. vegas. Deltas are based on zero-rates. In contrast. On the analytics side we have three main differences: • • • Delta-equivalents are pre-multiplied by price (dP/dX * X) whereas deltas are just straight sensitivities (dP/dX) Delta-equivalents for interest rates refer to each individual nodes whereas deltas are based on parallel shifts of the yield curve itself. and (d) Nomenclature is instrument-dependent---interest rate delta is fine for bond options but it’s called “rho” when it applies to equity options. On the structural side we have the fact that the deltas described above are in a more general framework that allows for all the usual aggregations and drilldown dimensions. and thetas. Why not use standard derivative procedures? Answer: By using well-defined “tweak” moves. but not the same. Question: The above procedure are basically numerical derivatives. Creating a separate column for each guarantees that even if you choose to drilldown by risk type (which is fine) then only one dimension will be populated per column. Questions and Answers Question: Why not compute all the sensitivities at once within a single instance of the new statistic? Is it really necessary to create a multi-statistic report where each column is a different sensitivity type? Answer: Yes. (c) There is no concept of total sensitivity even within the same “class”. Delta-equivalents for interest rates are scaled to bond-prices.g. clients can reproduce the exact number by manually creating stress tests and DVBP reports.

as just another statistic. 226 . theta.7 RMClient Batch Application delta-equivalents statistic is tied to the risk-factor dimension. vega. VaR. In a later specification we will define a more general use of the risk-factor dimension to allow it to function with other statistics as well. etc. In the new framework deltas will fit alongside of gamma. Duration.RiskMetrics RiskManager 3. which itself does not work well with the other statistics.

those fields must be entered by the user. Future value: The “future value” described here is not the future value statistic provided by RiskServer. not left blank or calculated. even though the position itself does not. before getting the “future value”. There are some other fields (e. Always. not left blank. Examples are bonds or FRNs with coupons that will be paid tomorrow. Of course. There are several caveats in this description. In the description below. but nothing else changed. the user can do an analysis to get the present value and get position diagnostics at the same time. Resulting units are in base currency per calendar day.g. then edit the position to include the correct values for the calibrated fields.. caps with caplets that expire tomorrow. Theta is described as above in the original specification. If a position has any calibrated fields.RISKMANAGER Addendum to Generalized Greeks <theta/> Compute P2 = <futureValue> for <horizon>=1D and <valueTodaysFlows/> Compute P1 = <presentValue> Set <greekSensitivity> = P2 – P1. volatility for collars) which are not calibrated. “today” is the original analysis date. Rather. 227 . the pricing date must be unchanged. Flows that expire tomorrow: Some instruments have flows that expire tomorrow. These fields must also be entered. or the “future value” will be wrong because the fields will be recalibrated for tomorrow. it is the value of the position given a valuation spec (or risk settings) with analysis date set to tomorrow. and “tomorrow” is the day after the original analysis date. instruments with settlement dates tomorrow. but which are computed from historical data if not entered by the user. or the “future value” will be wrong. Positions that expire tomorrow: Positions that expire tomorrow have 0 theta. In particular. Such a flow will be converted to its value as of tomorrow and theta for the position will include the difference between tomorrow’s value and today’s value for that flow.

Clicking "Reports" will take you to the Reports section of the application.7 RMClient Batch Application Reports Selecting Reports from the Home Page Mouse over "Reports" will describe the function.RiskMetrics RiskManager 3. 228 .

price value of a (number of) basis point(s) move .parallel shift. Incremental VaR 4.display the PV resulting from a parallel shift in bps. VaR 2. Relative Statistics (relative var to a benchmark or index) 6.effective duration by shifting non-parallel spot curves. There are many related topics: General . Stress Test Statistics 1.Working with risk settings Horizon Groups .Working with horizons Statistics 1. PVBP Statistics. • PVBP Delta . 9. Stress PV Delta 229 . • PVBP . Stress PV 2.display the change in market value due to a specified parallel shift in bps.Benchmark Pair Definition Risk Settings . Marginal VaR 3.RISKMANAGER Customizable Table Report Customizable Table Report Select "Customizable Table Report" when creating a report. Fill in the Customizable table report form in the Layout Manager. Delta Equivalents 7. Duration . Statistic as Percent Display (percent VaR example) 5. Expected Shortfall 8.report setup Position Definition .

For more information on tags and custom dimensions. Maturities dimension using horizon buckets (medium. Position (included with RiskMetrics).included with RiskMetrics). and Stress Scenario on one page Drill-downs dimensions of 1. For more information on horizons see "Working with Horizons". The report definition is 230 .7 RMClient Batch Application Bond Portfolio Summary Customizable Table report for Bond Portfolios PV. 4. Custom nested tag.Maturity\1-3 and Maturity\7-10. Currency (included with RiskMetrics) 2. see "What is a Tag Dimension". 3.RiskMetrics RiskManager 3. PVBP01. Duration.

RISKMANAGER Report Viewer shows expandable aggregation levels 231 .

7 RMClient Batch Application Custom Table Annotated Report Download the annotated (Excel version) report now! Click the "notes" marked in various cells as noted by the red corners. In the downloaded spreadsheet. mouse over the marked cells (with a red corner) for information. 232 .RiskMetrics RiskManager 3.

RISKMANAGER Risk Attribution in Practice 233 .

bets are taken at the security level and at the sector level. Gradients and Relative Incremental VaR Total Tracking Error and Relative IVaR Equivalence Sector Allocation for Systems Hardware Sector Allocation Contribution for Systems Hardware Security Selection Contribution for Systems Hardware Security Selection Contribution for Dell and Sector Level 234 .. Assist in portfolio construction and rebalancing. Correlations. Use as a diagnostic tool to measure the forward looking risk of each decision. and Covariance Bets. we examine an example of a simple portfolio and benchmark containing four stocks.7 RMClient Batch Application Objectives of Risk Attribution Objectives of Risk Attribution • • • • • Risk Attribution segments the relative risk of a portfolio into components that correspond to active investment decisions. Editor's Note: In the Risk Attribution Section.. Objectives of Risk Attribution Risk Attribution Complements Performance Attribution Risk Attribution Decision Process Relative VaR and Risk Attribution Foundations Relative Value-at-Risk Objectives Performance Evaluation Triangle Applying the Evaluation Triangle to Portfolio Managers VaR Calculations start with Risk Factor Returns Forecast Future Price Changes and Volatility Decay Factor Controls the Weighting Scheme Decay Factors and Half Life Trading Days to Reach Time-Weighted Decay Level Applying a Decay Factor to Returns and Estimating Volatility: AT&T Common Aggregate Securities & Sectors Correlation of returns Compute the potential loss over the next horizon period Measure Losses Relative to a Benchmark Risk of Under-Performing the Benchmark A Word on Mechanics: Performance and Risk Attribution must share Dimensions Risk Attribution Reports Risk Attribution Reports and Examples Tracking Error Definitions Fully Worked Example: Simple Equity Portfolio Sector and Security Investments Four Equity Incremental Tracking Error Volatilities.) and discuss the Risk Attribution report output straight from RiskManager. We examine all the risk attribution calculations in a companion spreadsheet (right click this link and save as.RiskMetrics RiskManager 3. The example also follows the white paper on Risk Attribution by Jorge Mina (2002). Estimates the forward looking risk tracking error. Communication tool to enable investors to review risks of decisions. In the portfolio. Companion to performance attribution to measure risks taken to generate excess returns.

RISKMANAGER Security Selection risk at the Sector Level Constant Portfolio BackTesting TE Historical Backtesting TE 235 .

RiskMetrics RiskManager 3. Many RiskMetrics clients have this process in place already. Out of benchmark securities must be measured as well.7 RMClient Batch Application Risk Attribution Complements Performance Attribution RiskManager handles the whole risk attribution process. the country allocation level for global accounts. The benchmark and the managed accounts share these security names so they can be aggregated. sector allocation. RiskManager may accept any dimension name or value. Fixed Income accounts may use sectors of the market according to credit quality or sectors of the yield curve (or both). The naming convention. Non-investments are effectively shorts against the benchmark. many asset managers have sector analysts. They over-weight or underweight securities vis-à-vis the benchmark. These analysts must be assessed for the risks they have taken as compared to the benchmark. it is best to create a ‘Security’ dimension and each stock or bond has the name of the security as the value for that dimension. The risks of securities not invested in must be measured along side benchmark securities. Both performance and risk attribution tie back to the investment process. They may also to choose to invest out of benchmark or even choose to have no investment at all of a benchmark security. At the highest level. 236 . again. Clients may wish to repeat well-known sector names or use their own proprietary names. The glue that binds the investment process and the attribution process are the accounts and benchmarks themselves. The objective is to match the performance attribution levels and names. At the sector allocation level. there may be a third group of analysts or allocation managers that determine the over-under weight on a country basis. It is completely up to the user what these names contain. is purely up to the user. The risk attribution reports are a companion set of reports of the performance process. The objective is to match the performance attribution process. At the security level in RiskManager. Each of the RiskManagerrisk reports can be structured to match the dimensions measured in the performance process. The performance attribution process is handled externally (pictured in yellow in figure 1). Many asset managers divide the investment process into a security selection. security analysts pick stocks or bonds. The risk attribution process complements the reporting process of performance attribution. At the bottom of the process. and country allocation for global investments shown on the left of figure 1.

RISKMANAGER Figure 1 237 .

only performance attribution contributed information to this process. sector. Performance is just a part of the whole picture. Figure 2 238 . Objectives are set as to the investments to be made. Market price action and economic conditions fuel this objective setting process and subsequent reviews (performance and risk). Reports decompose the risks into the security. Now. These portfolios are stored along with their corresponding benchmarks in a database. and now. what benchmarks are track.RiskMetrics RiskManager 3. and country dimensions. Market data time series are stored in a database and feed to the RiskManagerapplication through DataMetrics which publishes daily price data to the application. risk attribution enters the picture. In the past. The portfolio manager takes the objectives and market information to construct or rebalance the client’s accounts. what risk limits are to be adhered to.7 RMClient Batch Application Risk Attribution Decision Process The entire risk attribution decision process revolves around the portfolio manager and his clients (shown in figure 2). Results from the portfolio construction process or rebalance are rendered as the account holdings. RiskManager takes the historical price data along with the portfolio and benchmark and measures an accurate picture of the risks being taken.

not an intermediate dataset. Equity sectors will follow benchmark standards or may be proprietary sectors. Unlike risk modeling of the past. equities. VaR techniques can combine all markets and rank the risk of every position on an equal basis. The value-at-risk methodology is not segmented into asset classes. fixed income. Volatility – the standard deviation of market data returns. Key advantages of the value-at-risk approach • Measures equally well across all asset classes. and Security levels. Decompose this number into Country. The RiskManagerVaR system recalculates numbers from original price data. Measures equally well for International. Assumptions can be revised at any time. Correlations between risk factors.RISKMANAGER Relative VaR and Risk Attribution Foundations Relative Value-at-Risk Objectives • • Estimate by how much the current portfolio will under-perform the benchmark. Uses daily returns for highest accuracy. 239 . – Over the next horizon period (year). and Large Cap stocks. Method stays close to the original price data. Analysis can be done real-time. 95%. The modeling techniques of twenty years ago constrained us to daily or weekly data. Draws upon 500. RiskManager draws from a price database of individual equities. We have more powerful computers now so we’ll make good use of them. Fixed Income sectors may follow credit ratings or maturity sections of the yield curve.000+ time series. • • • • VaR Ingredients • • • • • • Daily price returns of each fundamental risk factor (time series). commodity prices. Give more recent returns more emphasis than old returns. The sectors of an individual market don’t matter. Small Cap. The calculated value is daily price volatility. volatility surfaces. key fixed income spot rates. individual equities. commodities trading and FX market positions can be combined into the same reporting framework. futures. Mid-Cap. FX spot rates. Aggregate distributions to sector and country levels. Sector. and commodities. – At a given level of confidence (1 standard deviation. 99%). Risk Factors: The market data. FX rates. Apply a decay factor to returns. VaR draws upon daily data. With the data always available. any assumption underlying the risk reporting can be altered.

RiskMetrics RiskManager 3. volatility of revenues. It is often referred to as giving traders a freeoption on the capital of your firm. Including estimated (ex ante) and realized (ex post) volatility of profits adds an extra dimension to performance evaluation. Given the high rewards bestowed on outstanding trading talent this may bias thetrading professionals towards taking excessive risks. trading and position taking talent have been rewarded to a significant extent on the basisof total returns. Here the position taking talent is security selection. sector allocation.7 RMClient Batch Application Performance Evaluation Triangle These ideas can be applied to portfolio manager investments compared to benchmarks. To quote the 1996 RiskMetrics—Technical Document Fourth Edition: “To date. Ideally risk taking should be evaluated on the basis of three interlinked measures: revenues. To do this correctly one needs a standard measure of risks. The ratio of P&L over risk (risk ratio) and of P&L over volatility (Sharpe ratio) can be combined into what we define as a trader’s efficiency ratio (estimated risk/realized volatility) that measures an individual’s capacity to translate estimated risk into low realized volatility of revenues. and risks.” 240 . and country allocation for global portfolios. The interest of the firm or capital provider may be getting out ofline with the interest of the risk taking individual unless the risks are properly measured andreturns are adjusted for the amount of risk effectively taken.

you can only examine the history of their respective returns compared to the benchmarks. With risk information you can compare the portfolio manager more effectively. 241 . but says nothing about the risks each portfolio manager took to obtain their results. The next chart shows the risk ratio. Sharpe ratio. and efficiency ratio for the two portfolio managers over time.RISKMANAGER Applying the Evaluation Triangle to Portfolio Managers If you were to compare the performance of two portfolio managers without a risk system. This process accurately measures their performance and volatility of excess returns.

If we examine the returns of our investment over the two year period. The blue line is the mathematical density function of the empirical distribution (shown by the green bars). we could plot out the distribution of gains and losses. The graphics module allows us to superimpose the normal distribution on top of the empirical histogram of returns. The red line is the normal distribution. We call this the look-back period. this period is two years.7 RMClient Batch Application VaR Calculations start with Risk Factor Returns We start with an example of AT&T Common Stock. the risksettings. We setup an assumption list. We can show. that instruct the application to pull the price series from the most recent date back a certain period of time. 242 . This period of time is listed as the time-series dates. For our example. we can show the actual mathematical historical distribution of the empirical distribution. in graphical form. We instruct RiskManagerto locate this time series in its price database. The RiskManagerreport. In addition. the return distribution for our AT&T investment.RiskMetrics RiskManager 3. the portfolio simulated returns report. does exactly this.

2. We forecast each of a portfolio’s underlying instrument’s future price changes using only past changes to construct these forecasts. 243 . Use a random walk model that describes the evolution of price returns. The graph below shows this effect upon returns.RISKMANAGER Forecast Future Price Changes and Volatility The next step in the value-at-risk calculation is to forecast price changes: 1. the volatility declines exponentially as the weight of the shock observation falls.1) & µ=0 Forecasting Volatility • • • • RiskMetrics uses the exponentially weighted moving average model (EWMA). In contrast. the use of a simple moving average (SMA) leads to relatively abrupt changes in the standard deviation once the shock falls out of the measurement sample. Variance is modeled as a function of past variances as shown below: Pt = µ + Pt-1 + σtεt where εt = N(0. The latest observations carry the highest weight in the volatility estimate. Following a shock (a large return). 3.

pp 243-246. This parameter determines the relative weights that are applied to past observations (returns) and the effective amount of data used in estimating volatility. 244 . Appendix C.94 decay and about 130 days for the 0. What is the appropriate decay factor λ? To answer this question we must explore the impact of various decay factors on the lookback period.RiskMetrics RiskManager 3. We conclude that a longer risk horizon requires a wider look-back period. Note that the weight of the daily returns approaches zero in about 80 days for the 0. the decay factor found to work best for 1-day risk horizons is 0.94. The best decay factor for monthly horizons is 0. These empirical values follow research and methods explained in the RiskMetrics Technical Document (1996). In the graph below. We need more historical data.97 decay factor.97.7 RMClient Batch Application Decay Factor Controls the Weighting Scheme • • • The exponentially weighted moving average model depends on the parameter λ (0<λ<1) which is often referred to as the decay factor.

RISKMANAGER Decay Factors and Half Life The half-life is defined as the time taken to reach 50% weighting of returns. The table on the right quantifies the half life in trading days and years for various decay factors. the higher the half-life and the longer the look-back period for returns is required. 245 . As the decay factor approaches equal weighting. the half-life becomes longer and longer. This is shown in the graph on the left where the decay factor is the horizontal and the numbers of trading days to reach 50% weighting are the vertical.0. or 1. The closer the decay factor approaches 1.0.

The use of a 0. we require 229 trading days. Even at the 10% weighting level. 246 .7 RMClient Batch Application Trading Days to Reach Time-Weighted Decay Level Another way of looking at decay factors and look-back periods is to examine the number of trading days to reach a certain level of weighting.99.99 decay factor for a one-year risk horizon requires that we use more than one year of returns for our look-back period.RiskMetrics RiskManager 3. We suggest a two year look back period for decay factors of 0.

410% 1.648% 0. 2001 to Nov 22.7065 34.94 260 261 Source: Return to RiskMetrics (2001) pp 14-15 standard deviation 2.84327E-12 0. The following table is a spreadsheet that records the daily closing prices (column 2) of AT&T Common Stock from Nov 22.14919E-06 1.32413E-12 1.66 28 27.030% decay factor M t = m+1 0.0755 27. the next step is to follow a full example on how RiskManagerestimates volatility.4860% volatility annualized v * sqrt(t) 40.163% 247 . The volatility is calculated as: SQRT(sum of rows*(1-decay factor)/(1-POWER(decay factor. we see that the oldest returns (above the red line) are extremely small. The calculation is explained on pages 14-15 of the Return to RiskMetrics: Evolution of a Standard. If we then apply a 0.94 decay factor to the returns. The third column is the return being the natural log of prices today over yesterday.222% -0. 2002. M +1))) Download spreadsheet Computation of Daily Returns over Look Back Period Application of the Decay Factor to Weight Recent Data Calculation of Volatility of Weighted Daily Returns Prices P[t] Date 11/22/2001 11/23/2001 11/26/2001 11/20/2002 11/21/2002 11/22/2002 AT&T 34.677% 1.97 LN(P[t]/P[t-1]) Return Log of Returns Number 0.000140304 1. Returns below the red line are recent and show a much higher weighting.107% 1 2 259 260 261 Index [i] 260 259 2 1 0 sum of rows decay^i*r(t-i)^2 4.000248508 0.RISKMANAGER Applying a Decay Factor to Returns and Estimating Volatility: AT&T Common Once we can visualize what the decay factor is doing.932 35.

etc. For equity portfolios. The 50-50 weighting blend was created using the index builder. The graphics were produced by the RiskManager report ‘Simulated Portfolio Returns’ histogram.). 248 . For fixed income. the weights are set by investment decisions or by the index weights. For international positions. The next task is to aggregate all the securities into sectors and portfolios. we aggregate two stocks (LEH and JPM) of 50% weighting into a sector (Capital Markets).RiskMetrics RiskManager 3. sector. N rpt = Σ wirit i=1 Where w are the weights. is a weighted average of continuously compounded returns. r are the log returns across N assets.7 RMClient Batch Application Aggregate Securities & Sectors RiskManager calculates the returns for every risk factor in the portfolio and benchmark. Aggregation may be done at any level (country. the individual stocks are analyzed. To illustrate this visually. FX rate returns are also calculated. key spot rates contribute to each cash flow. Normally. A portfolio return. RiskManager calculates the returns for each key spot rate. rp.

RISKMANAGER Correlation of returns Next. The positions themselves are weighted combinations of the underlying stock risk factors. 249 . the correlations between position returns are calculated. Here. we run a RiskManagerreport ‘Portfolio Correlations and Volatilities’ to compute the correlations between the two stock positions.

7 RMClient Batch Application Compute the potential loss over the next horizon period RiskManager pulls all the information we have already reviewed into a VaRcalculation.13%). we show the loss at a one standard deviation of confidence (or 84. 250 . The report shows a potential loss of $3. Here.390 to JPM alone. The level of loss is shown at a given confidence level.RiskMetrics RiskManager 3.724 for a joint 50% position of $5000 invested in both stocks. This means that we have a 15. The report also shows we are exposed to $2.724 in the next horizon period.8% chance we could lose at least $3.

251 . To do this. The benchmark is scaled to match the market value of the portfolio. we illustrate the original two security portfolio compared against the Capital Markets sector of the S&P 500 index. In the chart below. we note the joint distributions of returns: the long positions of our two stock holdings and the short positions from all stocks in the Capital Markets sector. we must take the benchmark holdings and negate them.RISKMANAGER Measure Losses Relative to a Benchmark Asset managers must measure the level of potential loss relative to a benchmark portfolio. If we suppose this sector serves as our benchmark. there would be no tracking error. All positions would cancel. If your investments equaled your benchmark.

7 RMClient Batch Application Risk of Under-Performing the Benchmark For Risk Tracking Error.13%).RiskMetrics RiskManager 3. Definitions: Relative VaR: The percentile of excess returns at a certain confidence level. Risk Tracking Error: Special case of relative VaRunder normality assumptions when the confidence level is one standard deviation (84. 252 . we are interested in the loss tail of the joint distribution of the portfolio and benchmark.

and the attribution value. 253 . Each benchmark holding must share the same dimensions of the investment portfolio.RISKMANAGER A Word on Mechanics: Performance and Risk Attribution must share Dimensions Measurement dimensions used in Performance Attribution should be used in Risk Attribution. the tag dimensions would appear as shown below. Lists of portfolio and benchmark holds are formatted in either XML or text. Examples of dimensions we have seen used in risk attribution are: • • • • • • Country Sector Industry Group Asset Class Region Security Portfolio and Benchmark must share dimensions RiskMetrics uses tag’s to allow users describe these dimensions. 2. a delimiter. we call these attributes dimensions. The risk side of the equation must be measured along the same lines as performance. In RiskManager’sposition import format. RM3D. Tags are just text labels of any dimension or category you wish to use and are attached to each investment holding. This is a fundamental requirement for any attribution program. Portfolio| SP500 |Security|MICROSOFTCORP|Country|US|Sector|Software & Services Extending this concept to all holdings 1. In RiskManager. Here we have an attribution name. Text is TAB or COMMA delimited in RM3D format.

RiskMetrics RiskManager 3.7 RMClient Batch Application Risk Attribution Report and Examples Tracking Error Definitions • Tracking Error – Standard deviation of daily excess returns over a one year time horizon – Indicates level of risk in each position – Always positive – Not additive due to diversification Incremental Tracking Error: – Change in risk due to a small change in position size – Indicates level of sensitivity of risk to changes in holdings – Additive – May be negative • 254 .

RISKMANAGER Risk Attribution Reports 255 .

RiskMetrics RiskManager 3. In the portfolio.7 RMClient Batch Application Fully Worked Example: Simple Equity Portfolio In this example we take a simple portfolio and benchmark containing the same four stocks. We examine all the risk attribution calculations in a companion spreadsheet and discuss the Risk Attribution report output straight from RiskManager. 256 . bets are taken at the security level and at the sector level.

RISKMANAGER Sector and Security Investments The left side of the Risk Attribution report shows the weights of the portfolio and benchmark at both the Sector level and Security level. In addition. hence a zero weight. we have no bet in General Motors. This set the sector bet to 5% overweight as well. The net bet for Systems Hardware is -5%. we have a 5% positive bet in Ford. In the systems hardware sector. 257 . we are overweight Dell Computer by 10% and underweight IBM by 15%. In the simple equity example of four stocks. The bet is the simple subtraction of Portfolio – Benchmark weights. In the same sector of Consumer Cyclical. the bets taken at all levels are shown.

The report follows a bottom-up approach favored by many asset managers. by Jorge Mina (2002). How are these numbers calculated? 258 .7 RMClient Batch Application Four Equity Incremental Tracking Error In this section we examine the incremental tracking error and its decomposition. Download Risk Attribution Spreadsheet Bottom-Up: The Security Selection Level If we examine our investment in Dell Computer where we had a positive 10% bet over the benchmark. we see the following numbers in the Risk Attribution report: Here we have Dell contributing 239 basis points of Security Selection Tracking Error risk. This review follows the RiskMetrics Group Working Paper. The discussion also follows a spreadsheet replication of the calculations. We will walk through the report in a bottom up fashion.RiskMetrics RiskManager 3. Risk Attribution.

119582211 0.079433039 0.093458756 0.06568789 0. Running the RiskManager report ‘Market Data Volatilities and Correlations’.99 decay factor along with a 252 trading day analysis horizon. In this example.255888629 0.71998490% 50. we use a Risksetting with a two year look-back period and a 0.80802775% 37.093458756 0.354449447 We can transform this information back into the covariance matrix by computing: Correlation of stock A with Stock B * Volatility of Stock A * Volatility of Stock B to obtain the covariance matrix: Ford Ford GM Dell IBM 0.489804751 0.454240831 0.142279726 0.616614103 1 40. 2002. we obtain the following matrix: Correlation Matrix GM Dell 0.657546907 0.489804751 1 0.119582211 IBM 0.354449447 0.06568789 0.079433039 0.055453318 GM Covariance Matrix Dell 0.454240831 0.384795582 0.101214761 0.055453318 0. Correlations.384795582 1 0.101214761 0.657546907 0. and Covariance We start with return volatilities and correlations of the individual stocks.616614103 Volatility 252d IBM 0.RISKMANAGER Volatilities. 2000 to August 30.166529513 0.58543551% 38. The date rate is August 30.33783913% Ford Ford GM Dell IBM 1 0.146978991 259 .

0522% 52. arriving at the 10% bet.00% 5. Gradients and Relative Incremental VaR If we recall our equity bets.3882% Portfolio Weights 24.00% -5.6619% 10.00% 10.8977% 80.4404% 38.5596% 13.7 RMClient Batch Application Bets.4404% 28.3882% Bets = W vector 5. Benchmark Weights Consumer Cyclical Ford Motor General Motors Systems Hardware Dell Computer IBM 19.00% 0.RiskMetrics RiskManager 3.8977% 75.5596% 8. we computed our bet in Dell by subtracting the benchmark weight from the portfolio weight.00% -15.6619% 10.00% 260 .0522% 37.

261 . Cell G10 is the right hand side of the equivalency equation 34 in the Risk Attribution paper.RISKMANAGER Total Tracking Error and Relative IVaR Equivalence The sum of the relative IVaRs is equal to the total relative VaR (tracking error) of the portfolio. We can check this in the spreadsheet. namely: √wTΣw The sum of the relative IVaRs (H9 in the spreadsheet) matches the Total Tracking error of 515bps.

Also shown is the total amount of security selection risk within systems hardware. and in the RiskManagerreport.7 RMClient Batch Application Sector Allocation Contribution for Systems Hardware Completing equation 38 in the spreadsheet by combining the Gradient and the Systems Hardware vector as a proportion of the total TE. 262 . the 12bps of Systems Hardware sector allocation risk is shown below. The next pages show how this is calculated with our example spreadsheet.RiskMetrics RiskManager 3.

RISKMANAGER 263 .

for stock s. for Dell Computer in Systems Hardware.RiskMetrics RiskManager 3. φA (s) = (PA – BA) (BS/BA – BS) if S is a member of sector A and –(PA – BA)BS if S is out of sector The portfolio positions for sector A minus the benchmark positions for sector A times the ratio of Benchmark position for stock S to the Benchmark positions for sector A minus the benchmark positions for stock S.7 RMClient Batch Application Sector Allocation for Systems Hardware The sector allocation contribution for Systems Hardware (A) can be calculated as: φAT∇ (equation 38) where. the sector allocation vector element for Dell. φSystems Hardware (Dell): 264 . Is shown in the spreadsheet.

RISKMANAGER Security Selection Contribution for Systems Hardware The security selection contribution for Systems Hardware (A) can be calculated as: θAT∇ (equation 39) where. for the bottom-up security selection method for stock s (equation 20). for the sector level security selection: θA(s) = (PS – BS * PA/BA) if S is a member of Sector A and 0 if S is out of sector. θDell : if S is out of sector Is shown in the spreadsheet. θS (i) = (PS – BS) * (1 – PS/BA) if S is a member of sector A and 0 vector element for Dell. for Dell Computer in Systems Hardware. the security selection 265 .

we see the 239bps of security selection risk for Dell.7 RMClient Batch Application Security Selection Contribution for Dell and Sector Level Completing equation 39 in the spreadsheet by combining the Gradient and the Dell security vector as a proportion of the total TE. and in the RiskManager report. 266 .RiskMetrics RiskManager 3.

RISKMANAGER Security Selection risk at the Sector Level At the Systems Hardware sector level. the Security Selection (SS) risk contribution is sum of the SS of the individual stocks (Dell and IBM): 267 .

where each TE is synchronized with the last date in each return block. we could show even more detail. 268 . each block of returns is two years of daily observations. we can do this by shifting the window of returns one-month at a time to calculate TE. we show the constant portfolio backtesting of the portfolio.RiskMetrics RiskManager 3. Each block of returns contains varying volatilities and correlations. Here. If we calculate the today’s portfolio TE over these multiple blocks of returns and plot the values over time. In RiskManager. we test today’s portfolio against many blocks of returns. If we were to use daily or weekly shifts.7 RMClient Batch Application Constant Portfolio BackTesting TE There are two types of backtesting: a) constant portfolio and b) historical. In constant portfolio backtesting.

Daily storage of TE values can be accomplished through a batch facility called RMX Server. Next. RMX is orchestrates the process of: a) b) c) d) e) f) Managing multiple accounts and benchmarks. plot the values over time for each account portfolio and compare the TE drift against a risk target. users of RiskManager must store account tracking error values on a daily basis.RISKMANAGER Historical Backtesting TE To perform historical backtesting. Managing the calculation process (RiskServer Director) Managing the Risk Attribution report generation (Risk Reports) Storing parsed elements of the calculations in a results database. It is the results database we can draw upon to plot historical tracking error. Dividing the blocks of accounts into individual calculations (Divider). The changes in the portfolio and benchmark will be reflected in the TE numbers. Directing the translation from tab-delimited to RML conversion (Data Translator). 269 .

In this example. relative PV (to show overweight and underweight a drilldown dimension). Multiple blocks of analysis may on a single page may be defined using the multiple benchmark pair section of the report layout manager. Each block collapses (aggregates) to a line item on the report. If the report defines five blocks (five multiple benchmark pairs). Add . There is not further aggregation because each analysis is done separately. relative stress test. 3. Choose the base position and press +select. Each block will be analyzed separately and collapse to a single line in the report. Edit .quickly replicate portfolio selection definitions. Each group of positions is selected by highlighting the position group or Tag dimension that carves out the portfolios needed out of the position database. Choose the Benchmark position and press +select. Each report may be turned into a relative report with each statistic relative to an index portfolio or group. Each block in the multiple benchmark pair definition has the option to be a relative analysis to an index by checking the check-box for the benchmark and selecting the group of positions that comprise the index.add a second block to the report. then the report will collapse to a five lined report.7 RMClient Batch Application Multiple RiskSetting Report Multi-RiskSetting Report Single or multiple statistic reports refer to portfolios or groups of positions to analyze. 2.name and select the portfolio or group of positions to analyze. Each block is analyzed separately. Users may choose: 1. Duplicate . In the example.RiskMetrics RiskManager 3. 270 . A benchmark or index may be optionally selected for relative analysis. a managed account is to be analyzed relative to the a five country bond index derived from the JP Morgan Global Bond index. The selection navigation is the same logic that is used in the Position View Actions. we select the account and the benchmark index by highlighting the appropriate portfolio tag. Examples would be relative VaR.

RISKMANAGER 271 .

If only one position list is used. which is incorrect. running Relative VaR and Marginal VaR on the above Position Group would render a report like this one: Note that the benchmark has been scaled to match the combined value of the two portfolios. generating combined statistics.7 RMClient Batch Application Using Multiple Position Blocks Some report types allow multiple Position Lists. The correct way to generate this report is to add a separate position group for each portfolio: which would generate a report like this one: 272 . For example. the S&P 500 then the resulting report will aggregate the two accounts.RiskMetrics RiskManager 3. like this group of portfolios vs. This may give incorrect results.

273 . In fact. the user may create two sets of Risk Settings with two different Analysis Dates. if some trades were made.RISKMANAGER Using Multiple Risk Settings A Multi-Risk Setting report allows comparison of statistics across two sets of assumptions. and run them side by side. However. a better approach would be to use Multiple Risk Settings and Multiple Position Groups simultaneously. the report will show both columns The user can measure the change in VaR from one day to the next. this report shows how the VaR of one portfolio changes given different Risk Settings. For example.

trades which changed the composition of the portfolio reduced the VaR by approximately $10. from $1.834 to $1.000 (across the row.052.087.857) 274 . This report clearly shows that the VaR dropped by $45.087. The drop was due to: 1. changes in the analysis date of the report.7 RMClient Batch Application Multiple Risk Settings and Multiple Position Groups To best understand the change from one day to the next. from $1. which uses volatility measured one day later.077.042.834 to $1.087.000 (down the column.834 to $1. together with each risk setting.166) 2.RiskMetrics RiskManager 3. use each portfolio separately.322 overnight (diagonally. reduced the VaR by approximately $35. from $1.512).

RISKMANAGER Credit Exposure 275 .

• Save as "web page complete" in the web browser.RiskMetrics RiskManager 3.the limit for the Goldman counterparty dimension was set by policy to $715MM. • "Play" with the interactive report in the next topic. 276 . Ability to extract the highlighted tree (counterparty) "Goldman". The base credit exposure for the report (using the current risksettings) exceeds the limit by $133MM.7 RMClient Batch Application Base Credit Expousre base credit exposure highlights LIMITS .

Users may add an additional drill-down detail to the report (not netted) and may add detail of the position level. Limits and Horizons will may be shown as an option.choose the drill-down dimension that represents the netting structure for this report. Netting . 277 .RISKMANAGER base credit exposure layout Select Statistic .Base Credit Exposure Choose to display as percent or as value.

827-- 278 .000.RiskMetrics RiskManager 3.592-● Unit 2125.007-● Unit 3299.7 RMClient Batch Application Base Credit Exposure/Limits/Horzons [credit] Row Dimensions: Column Dimensions: Netting Tag: Netting Hierarchy: Base Positions: counter party netting\businessUnit\positionName statisticName.787.765. Difference counter party netting CounterParty Displaying columns 1 to 3 of 3 SubTree Path: Goldman NameBase Credit ExposureLimitDifference ○ Goldman848.000-133.719715. Limit.293-● Unit 4171.406.719 ● Unit 1252.059.765.512.

If the dimension is nested. 279 .RISKMANAGER Expected Credit Exposure Expected credit exposure highlights Expected credit exposure is the average exposure across all scenarios. In the example below. • "Play" with the extracted "Goldman" counterparty dimension interactive report in the next topic. • Save as "web page complete" in the web browser. then the expected credit exposure is the average exposure of all scenarios in each bucket. In the example below.The maximum credit exposure of all scenarios and all horizons is reported. Note that the average exposure (expected credit exposure) was 931MM for the 6M bucket. Peak of Peaks Term . Format of limit file used in the example (this file is tab delimited between fields): Counterparty Counterparty Counterparty Counterparty Counterparty JPM 575000000 Merrill Lynch 700000000 Morgan 700000000 HSBC 700000000 Goldman 715000000 Ability to extract the highlighted tree (counterparty) "Goldman". Peak of Peaks . The base credit exposure for the report (using the current risksettings) exceeds the limit by $133MM. If horizon bucketing is used in the report.The ability to set a limit to each netting drill-down dimension. the "Goldman" counterparty dimension Peak of Peaks occurred in the 6 Month horizon bucket and was 989MM odd. the limit for the Goldman counterparty dimension was set by policy to $715MM. each sub-dimension may have a limit.The horizon bucket in which the maximum credit exposure occurs (highest exposure for all scenarios). LIMITS .

Limits and Horizons will may be shown as an option.7 RMClient Batch Application expected credit exposure layout Select Statistic .Expected Credit Exposure Choose to display expected credit exposure as percent or as value.choose the drill-down dimension that represents the netting structure for this report.RiskMetrics RiskManager 3. Netting . Users must have previously defined horizon groups and limit files. 280 . Users may add an additional drill-down detail to the report (not netted) and may add detail of the position level.

529.3316M-877.RISKMANAGER Expected Credit Exposure\credit rating\limits [credit] Row Dimensio ns: Column Dimensio ns: Netting Tag: Netting Hierarchy : Base Positions : counter party netting\creditRating\positionName PeakOfPeaks.511931.3316M715.393289.933716. maxExposure [Max Credit Exposure]\creditExposureHorizon.007. Term.331877.393.393.604.25755.387-- 281 .511931.933716. Limit. statisticName [Expected Credit Exposure]\creditExposureHorizon counter party netting CounterParty - Displaying columns 1 to 11 of 11 SubTree Path: Goldman ----Expected Credit Exposure NamePeak Of PeaksPeak Of Peaks TermLimitDifference1M6M1Y2Y3Y4Y5Y ○ Goldman989.000274.393289.000.239. Difference.973.387-● AA989.25755.007.604.529.973.529.239.

7 RMClient Batch Application Max Credit Exposure max credit exposure highlights Maximum credit exposure is the highest exposure across all scenarios at a given confidence level. the "Goldman" counterparty dimension Peak of Peaks occurred in the 6 Month horizon bucket and was 989MM odd.The horizon bucket in which the maximum credit exposure occurs (highest exposure for all scenarios). 282 . LIMITS .The maximum credit exposure of all scenarios and all horizons is reported. If the dimension is nested. the limit for the Goldman counterparty dimension was set by policy to $715MM. In the example below. Note that the maximum exposure (highest credit exposure) was also 989MM for the 6M bucket (same as the peak of peaks). Peak of Peaks . In the example below. then the maximum credit exposure is the exposure of all scenarios in each bucket.The ability to set a limit to each netting drill-down dimension. If horizon bucketing is used in the report. The base credit exposure for the report (using the current risksettings) exceeds the limit by $133MM. • "Play" with the interactive report in the next topic. each sub-dimension may have a limit. Peak of Peaks Term .RiskMetrics RiskManager 3. • Save as "web page complete" in the web browser. Format of limit file used in the example (this file is tab delimited between fields): Counterparty Counterparty Counterparty Counterparty Counterparty JPM 575000000 Merrill Lynch 700000000 Morgan 700000000 HSBC 700000000 Goldman 715000000 Ability to extract the highlighted tree (counterparty) "Goldman".

Max Credit Exposure Choose to display maximum credit exposure as percent or as value. 283 .RISKMANAGER max credit exposure layout Select Statistic .choose the drill-down dimension that represents the netting structure for this report. Netting . Users may add an additional drill-down detail to the report (not netted) and may add detail of the position level. Limits and Horizons will may be shown as an option.

340---● Unit 2149.529. statisticName\creditExposureHorizon counter party netting CounterParty Displaying columns 1 to 10 of 10 SubTree Path: Goldman ----Max Credit Exposure NamePeak Of PeaksPeak Of Peaks TermLimitDifference6M1Y5Y10Y20Y30Y ○ Goldman989.281.043.967.331777.748---● Unit 3312.2541Y--238.773.445171.529.811.634.4456M--312.164.072.164.529.331989.000.580245.175211.145---● Unit 4245.132.3316M715.000-274.200---● Unit 1292.254---- 284 .1756M--292. Term.072.7 RMClient Batch Application Max Credit Exposure\business Unit\limits [credit] Row Dimensions: Column Dimensions: Netting Tag: Netting Hierarchy: Base Positions: counter party netting\businessUnit\positionName PeakOfPeaks.7481Y--146. Difference.634.RiskMetrics RiskManager 3. Limit.281.940149.

and the Credit Manager on-line help. etc. Such exposure profiles can be entered directly into CreditManager or imported from RiskManager.htm 285 .RISKMANAGER MDI Report MDI Report – Risk and Credit Manager Integration The RiskManager solution simulates market movements (e. called a Market Driven Instrument (MDI).com/WebHelp/Help. CreditManager represents counterparty exposures as an exposure profile. The MDI Report in RiskManager automates the creation of exposure profiles for use in CreditManager.riskmetrics.) to determine potential credit exposure (in the money) to counterparties.g. CreditManager enables users to measure counterparty risk based upon: • • Probabilities of counterparty rating migration and default Exposures the users has against the counterparty Clients may choose to aggregate counterparty credit risk with their other credit exposures such as the lending book. Please also refer to the sections on Expected and Maximum Credit Exposure. http://cm3. interest rates. FX rates. RiskMetrics CreditManager (CM) simulates defaults and credit quality movements of counterparties.

and is not used in CreditManager. User-defined name (optional) 286 . This will be used in CreditManager as the portfolio name for the exposures created. The name of the field is user-defined.7 RMClient Batch Application RiskManager MDI Report set up In this example. Expected or Max Credit Exposure. FX. Select the exposure horizons group. Position Statistic Horizon Group Name Netting Netting Display Name The filter to determine what set of positions to include. in this case by desk per counterparty. Choose the drill-down dimensions that represent the netting structure for this report.RiskMetrics RiskManager 3. MM. the institution’s four desks (Swap. Options) have exchanged positions with a series of counterparties. Netting occurs at the desk level.

if there are 4 desks that one has counterparty risk to for a particular counterparty. In this example. desk level exposures for each counterparty). The tag used for Counterparty Dimension must also exist in the netting dimensions Users can specify at what level exposures should be created for use inside CreditManager (in this case.RISKMANAGER Counterparty Dimension User must specify the tag that is used to describe the counterparty. then… Selecting MDI Level = Counterparty will create 1 MDI Selecting MDI Level = Desk will create 4 MDIs MDI Level On screen you will see the following report 287 . The tag used for MDI Level must also exist in the netting dimensions. The names of the counterparties used must match the respective names of the obligors in CreditManager.

This can be done in two ways. The first is to navigate to the stored reports page. Export the job. The second method is to create a batch job to run the report. The XML format of this report contains a series of MDIs (exposure profiles) that can be then be imported into CreditManager through the screens shown below 288 . selecting to export the results of the analyses in XML format. Use RMClient to execute the resultant script.7 RMClient Batch Application Passing of Exposure Profiles (MDIs) to Credit Manager To pass these exposure profiles to CreditManager. and then to export the report as shown below. Please refer to the section on RMClient Batch Application.RiskMetrics RiskManager 3. RiskManager users must export the generated report in XML format.

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The revaluation of exposures in all possible credit states. The definition of the possible “states” for each obligor’s credit quality. or incremental changes in the spread for a particular obligor or rating. such as the standard deviation of value changes. and • Evaluation of potential hedging or investment strategies to optimise the return on risk. It takes information on the individual obligors in the portfolio as inputs. In all of these cases. 2. and produces as output the distribution of portfolio values at some fixed horizon in the future. we may also analyse our risks at as fine a level as by exposure. • Identification of significant risk concentrations or inefficient uses of capital. While this gives a picture of the total risk of the portfolio. or the worst-case loss at a given level of confidence. Applications of these analyses include: • Determination of the institution’s total capital (or risk) usage. it is possible to produce statistics that quantify the portfolio’s absolute risk level. From this distribution. obligors. or exposures. • Assessment of profitability of product types or individual exposures. The interaction and correlation between credit migrations of different obligors. 3. and a description of how likely obligors are to be in any of these states at the horizon date.RiskMetrics RiskManager 3.7 RMClient Batch Application Introduction to CreditMetricsTM CreditMetrics is a portfolio credit model. The model itself is best described in three parts: 1. 290 . • Allocation of capital to individual business lines. portfolio managers. it is important to bear in mind that the value changes being modelled are only those changes in value due to significant credit quality changes (rating changes and defaults) and do not include changes due to moves in the prevailing risk free interest rates.

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RiskMetrics RiskManager 3. Important Note: The Risk Settings determines the base of the volatility figures. 292 . 3. Name of the report. If a one-month horizon is used.7 RMClient Batch Application Market Data Volatility & Correlations Volatility & Correlation Report Layout Users must first create a market group. Cross checking with external systems such as Bloomberg usually require the user to turn off the decay factor and equally weight the data. Market Group definition. If a 1-day horizon is selected. Sharing permissions. Risk Setting to specify the time-frame for the block of data. then one-month volatilities are reported. then one-day volatilities will be presented. The Risk Settings also determine the block of data that is used to calculate the report (just as in a VaR report). 4. 5. Choose: 1. Select Positions->Working with Market Data Groups Use the Market Group Report Layout manager to select the market group from your personal list. be aware of the decay-factor selected (if any). Interest Rates vols & corrs will use Yield Volatility if "unchecked" or price volatility if "checked". 2. In addition.

and term of the volatility number is selected in Risk Settings.RISKMANAGER Volatility & Correlation Report Each time series in the selected market data group will appear in the vol-corr matrix. 293 . The data matrix may be viewed or exported in a variety of formats. decay factor. The time-frame.

e.Market Data Volatility and Correlation Report 294 . Correlation is between -1 and +1. Input Screens . The Evolution of a Standard). • • • Volatility displayed as percent (i. Changing reporting currency will change the correlation sign with 12M Govt Curve (see calculations). 0.. Daily prices are Natural log changes (see p 22 Return to RiskMetrics. The Evolution of a Standard).7 RMClient Batch Application Volatility and Correlation Example • • • • Volatility and Correlations are run for USD/EUR exchange rate and USD Govt 12M. reporting currency USD and EUR. 12M USD is converted to Bond Prices at semi annual continuous rates (see p 9 Return to RiskMetrics.5594 implies 0.5594 percent). • Volatility and Correlation calculated with expected return at zero (see p 14 Return to RiskMetrics. The Evolution of a Standard). Risk Settings are for 1-year lookback with no decay.RiskMetrics RiskManager 3.

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Download Spreadsheet (right click and save as) A second spreadsheet which includes the decay factor weighting (Download decay factor version) 297 .RISKMANAGER Volatility Correlation Excel Example Excel Calculations .

usual risk-factor covariance matrix. The purpose of the statistic is to measure the correlations of positions within one bucket of a specific drilldown dimension against all other buckets. = PC (d ij ) * (σ (d j ) / σ (d i ) ).standard deviation for the ith bucket of drilldown dimension d. 298 .7 RMClient Batch Application Portfolio Volatility and Correlations Portfolio Correlations Definitions Summary This document reviews a report named Portfolio Correlations.vector of simulation returns for the ith bucket of drilldown dimension d from which MonteCarlo of Historical VaR is normally calculated (same as Simulated Returns report). r (d j ) ] for Historical • ( δ (d i ) Σ δ (d j ) ) / (σ (d i ) *σ (d j ) ) for Parametric. .RiskMetrics RiskManager 3. . given by: • correlation [ r (d i ) .Portfolio Beta of the ith bucket of drilldown dimension d with respect to the jth bucket of drilldown dimension d.vector of risk-factor deltas for the ith bucket of drilldown dimension d from which Parametric VaR is normally calculated (similar to Delta Equivalents statistic). thereby forming a correlation matrix across all buckets. where the σ's are computed consistent with the correlation methodology selected. given by: stdev [ r (d i ) ] for MonteCarlo stdev [ r (d i ) ] for Historical sqrt [ δ (d i ) Σ δ (d i ) ] for Parametric. Statistics and Variations PC (d ij ) . Definitions {P} r (d i ) δ (d i ) Σ σ (d i ) • • • . • PB (d ij ) .set of all positions being analyzed.Portfolio Correlation of the ith bucket of drilldown dimension d with the jth bucket of drilldown dimension d. . Portfolio Correlations depend directly on the positions being analyzed. r (d j ) ] for MonteCarlo correlation [ r (d i ) . .

2002. A portion of the report is shown here: 299 . portfolios. sectors.Country. the report will give us a grid of country correlations and volatilities (in USD). we examine the country correlations embedded in the JP Morgan EMU Index as of June 28. Note the Dimension -. or any dimension. By selecting 'country'.RISKMANAGER Portfolio Volatility & Correlation Report The portfolio volatility and correlation report shows the volatility and correlation between positions. In this example.

Create a tabular report of these return vectors for viewing. Slice and dice by any drill-down dimension: region.RiskMetrics RiskManager 3. or even at the position level. Positions set to be analyzed. portfolio manager. These returns are the basis for VaR calculations. fund. 300 . currency. 2. printing. or exporting to excel. Simulation Returns Layout Manager Control these parameters: 1. Historical or Monte Carlo Reurns Drill-down dimension. 3. Historical returns by date (as specified by the "risk setting"). 4. Risk setting or period over which the underlying time series are based.7 RMClient Batch Application Simulation Returns Analysis Simulation Returns Analysis Report Simulations Returns Analysis allows users to extract the vectors of historical or Monte Carlo returns on any drill-down dimension. Monte Carlo simulation return trials (as specified by the number of simulations set in "report setup".

Monte Carlo simulation trials are row-wise. Historical return dates are row-wise.RISKMANAGER Simulation Return Report Content Drill-down dimensions are column-wise. 301 .

2. Market Group definition. 3. 302 .RiskMetrics RiskManager 3. Risk Setting to specify the time-frame for the block of data. 4. Select Positions->Working with Market Data Groups Use the Market Group Report Layout manager to select the market group from your personal list. Name of the report. Choose: 1. Sharing permissions.7 RMClient Batch Application Market Group Report Market Group Report Layout Users must first create a market group.

Each historical date is presented row-wise. The data may be viewed or exported in a variety of formats. 303 .RISKMANAGER Market Group Report Each time series in the selected market data group will appear column-wise. The time-frame is selected in Risk Settings.

RiskMetrics RiskManager 3. Fill in the Histogram VaR Report form in the Layout Manager.7 RMClient Batch Application VaR Histogram Report VaR Histogram Select "Histogram VaR Report" when creating a report. 304 .

RISKMANAGER VaR Histogram Graphics 305 .

7 RMClient Batch Application Other Report Topics 306 .RiskMetrics RiskManager 3.

Delete multiple reports . Users can select from several report layout managers. c. or bucketing of instruments by maturity utilize horizons. Each report is date and time stamped. d. View Saved Reports This choice takes you to a list of saved reports. Reports can be generated and saved for subsequent viewing. Work with Horizons Horizons are used by reports. Base currency. b. Additional custom horizons can be added as necessary. Statistics such as credit exposure. Work with Risk Settings Users can create an unlimited collection of named risk settings: a. Decay factors. and long term). Generate Multiple reports Users are able to select one or more reports to run by checking off the reports they wish to generate. analysis by cash flow bucketing out the yield curve.remove reports in bulk. 307 . Look-back periods (relative or displaced windows in time) Analysis and pricing dates for as-of reporting. medium term. Three default groups are given (short term. The saved reports can be deleted.RISKMANAGER Defining and Running Reports Defining and Running Reports The menu choices from left-clicking "Defining and Running Reports" on the report screen allow you to: Report Menu Choices Create a new report A new report template will be presented.

The report menu is extensible in that java classes can be dropped into the web-application directory tree structure and appear as a selection. Fill in the Report Layout Manager Form. 308 .RiskMetrics RiskManager 3. Note that choices are interactive and will refresh the screen periodically. For this reason. we call these drop-in reports.7 RMClient Batch Application Create New Report Creating a Report Select a report from the drop-down menu.

Optional sharing of saved reports with group members. the reports will be displayed in HTML in the browser immediately after creation.Users may trim very wide reports to display a specified number of columns in a viewable report frame. Expansion and Contraction Management 1. For those who love wide-body reports. For later viewing. check the box. They will be listed by report name and list a time-stamp of the time and date of run-time.Long display names for statistics or other column headings can be trimmed. Optional appending of creator's name to position names . 309 . use the setting "display all columns in a single frame".RISKMANAGER Report Setup Report Setup Function List Select Report Setup Report Control: 1. Users will see the report blank and refill as the server re-paints the screen. Users may specify a maximum width by character count. For large reports with more than 500 drill-down dimensions. This dynamic action can be off-loaded to the web-application server side.Microsoft IE5 can handle the dynamic report expansion and contraction. Reports can be saved for later viewing. Use this setting for more than 500 drill-down dimension items. Displaying of reports immediately or for later viewing. Users will notice a "repainting" of the browser screen during the expansion and contraction. HTML Column Visibility Setting . This setting is useful for generating multiple reports. Client Side . If users have chosen to be notified in "Preferences .5 will work very hard to display the contents of reports. The normal setting is Client-side. they will receive a message when their reports are complete.Set the global number of Monte Carlo Trials to be used in this VaR methodology type.Use this setting to off-load the expansion to the server side. Simulation Run .for group users of RiskManager. Saved can be shared with group members or viewed privately for security reasons. The user can page right to view the hidden columns. 4. 5. Server Side . If the selection is checked. Optional notification of when reports are ready. 3. IE5. Optional saving of reports with report name and time stamp. HTML Column Label Width . 2. This is demanding on the users memory and cpu speed. appending the creator's name to position names makes it absolutely clear whose positions are whose. 2.User Profile" for message or email notification.

RiskMetrics RiskManager 3. and shrinkage factor are given. Choices for portrait / landscape. 310 . Title pages may be deselected.Users can set their global preferences for the exported pdf report layout. paper size.7 RMClient Batch Application PDF Display information .

Unchecks all report checkboxes. If the report setup saves reports.Exits multiple report generation mode and returns to the main report screen (without the checkboxes). then these reports will be time-stamped and stored in the report viewing section. 4. Check each of the Reports desired and select a function: 1. Select All . Hide Checkboxes . 3. 2. Results are displayed to the browser unless the "report setup" declines this option. Generate .Runs each of the checked off reports. 311 . Select None .RISKMANAGER Generate Multiple Reports Generate Multiple Reports Select "Generate Multiple Reports" from the report task bar.Checks all report checkboxes.

Select All . 312 .Deletes all checked reports on this page only. 5.Exits multiple report delete mode and removes checkboxes.7 RMClient Batch Application Delete Multiple Reports Delete Multiple Reports Select "Delete Multiple Reports" from the pull-down menu of the report task bar. Delete .Unchecks all reports marked for delete on the this page.Checks each of the reports on this page as marked for delete. Select None . Delete All . Hide Checkboxes .RiskMetrics RiskManager 3.Deletes all reports in the report database. 3. 2. 4. Check each report to delete or the function desired: 1.

it will be listed here. 313 . Name of the report Time stamp and date. Base positions used for the report. 2.RISKMANAGER Saved Reports Viewing Saved Reports Select "View Saved Reports" from the Report task bar "Defining and Running Reports". 3. Saved Report List (left click items to view or delete) Note that each saved report shows: 1. 4. Creator of the report (user that generated the report). If a group or tag was selected.

The browser will open the report viewer in a new window. Note that the report repeats the time stamp information. Full graphing and export capabilities are offered with saved reports.RiskMetrics RiskManager 3. 314 .7 RMClient Batch Application Viewing Saved Reports Viewing a saved report Select the report to view by left-clicking. The dynamic nature of the tag dimensions works as well.

RISKMANAGER Deleting a Saved Report To delete a saved report. The saved report will be deleted from the database. select it by left clicking and choosing "Delete Report". 315 . There is no undo function.

4. Saved report is displayed in the browser.Retrieves each of the checked off saved reports. Select None .7 RMClient Batch Application Viewing and Deleting Multiple Reports Viewing Multiple Saved Reports Select "View Multiple Reports" from the Saved Report List task bar Check each of the saved Reports you wish to view and select a function: 1.Unchecks all report checkboxes. Select All .Checks all report checkboxes on this page.Exits multiple saved report listing (with checkboxes) and returns to the main saved report screen (without the checkboxes). Hide Checkboxes . 316 .RiskMetrics RiskManager 3. View . 2. 3.

Check off each of the saved Reports you wish to delete and select a function: 1. 5. 3. Delete .RISKMANAGER Deleting Multiple Saved Reports Select "View Multiple Reports" from the Saved Report List task bar. 317 .Deletes each of the checked off saved reports. 2. Select None . 4.Unchecks all saved report checkboxes.Deletes all checked reports.Exits multiple delete saved report listing (with checkboxes) and returns to the main saved report screen (without the checkboxes). Delete All .Selects all saved reports on this page marking for deletion. Hide Checkboxes . Select All .

Browser will show the report in the pdf viewer. 318 .7 RMClient Batch Application Report Exporting Report Export to PDF Format Select Export from the report viewer. Choose PDF format Select the specific format and orientation of the PDF document.RiskMetrics RiskManager 3.

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RiskMetrics RiskManager 3. 320 . or xls spreadsheet form. comma. Browser will show the report in excel. Choose Tab-Delimited for excel output.7 RMClient Batch Application Report Export to Tab-Delimited Excel Format Select Export from the report viewer. This excel can be saved as tab.

<statResults> <statResult> <valuationSpecName>CHF 1d1yr. The exported format will be XML .927937608</resultValue> </statResult> 321 .portion of xml report shown below. On the stored reports page.94</valuationSpecName> <statisticName>VaR</statisticName> <drilldownName>Chf Risk Type drilldown</drilldownName> <baseBenchmarkPairName>My Base/Benchmark Pair</baseBenchmarkPairName> <resultCell> <currencies>EUR</currencies> </resultCell> <resultValue>323251.446771041</resultValue> </statResult> <statResult> <valuationSpecName>CHF 1d1yr.RISKMANAGER Report Export of XML results Stored reports may be exported into xml during an interactive session. left click any report and select export stored report.94</valuationSpecName> <statisticName>VaR</statisticName> <drilldownName>Chf Risk Type drilldown</drilldownName> <baseBenchmarkPairName>My Base/Benchmark Pair</baseBenchmarkPairName> <resultCell> <currencies>EUR</currencies> <maturities> <customDimensionName>Medium-term [Everyone]</customDimensionName> <horizon>5Y+</horizon> </maturities> </resultCell> <resultValue>286739.

The default is 1 day. All reports and monetary figures are presented in the base currency. Note that the dates are shown. tomorrow's vol = yesterday vol * df + (today return) ^2 * (1-df) RiskMetrics' research group has done a number of tests to determine which decay factor is best for forecasting future vol. If you select July 20th. Return Horizon Instruct RiskManager to compute volatilities and correlations directly from multi-day returns thus eliminating the need to scale 1-day returns by the square-root of the analysis horizon. a relative look-back period of one year will be used. users may want to select a specific time period window from the past. For example. The pricing date in this case would also be set for June 30th as well.94 is best for overnight. A decay factor of 1. Decay Factor What decay factor level should be used? If the dacay factor (df) is larger. Time Series Dates Time series dates corresponds to the period in time that time series volatilities and correlations will be calculated. the VaR numbers would be how much money you could expect to lose in one day at a specific confidence level (i.RiskMetrics RiskManager 3. if it is set for one-day. While a decay factor of 0.0 will equally weight all data and is equivalent to a setting of "None". a decay factor of 0. In addition to relative look-back periods. For example. 322 .e. you could run analysis on June 30th evaluation using a set of prices from 1998. if you set this to 1Y. all positions will be marked against the market data prices of the 20th. the volatility (or RiskGrade) is more stable. 95% corresponds to 1 in 20 days). Recent interesting periods might include the summer of 1998 or the spring of 2000 where dramatic market moves correspond to time series correlations that differ from quiet market periods. On reason this would be useful is if you want predictive stress testing to use correlations from an unusual time in the markets. The dialog box entry can be set to a period of months or years.sets the look and feel of the application. Pricing date refers to the set of prices that all positions will be marked-to-market. However. Base Currency .7 RMClient Batch Application Working with Risk Settings Risk Settings Explained Analysis date is the evaluation date or analysis date.97 is better suited for longer term horizons. If you want reports as of quarter-end. you would select June 30th for example. Analysis Horizon Analysis horizon sets the time frame over which Value-at-Risk is calculated.

Brings you to "Working with Risk Settings". select "work with Risk Settings". 323 .RISKMANAGER Navigating to Risk Settings From the Report screen.

22day. If your database has daily observations in the market data (this is typical for DataMetrics data) then you should leave this at 1 (for one-day). VaR. This is because non-linear instruments. The first is that square-rootof-time scaling is no longer required to compute 5-day. The analysis horizon setting allows users to generate VaR for longer time periods such as 5. Benefits There are two very important benefits of the return horizon setting. as it is called. This method works well if risk factor returns truly follow a standard log-normal distribution. 22 days. volatilities and correlations were always computed based on the 1-day returns of those risk factors. Return Horizon is the frequency of the return observations you wish to use to generate statistics. users can now instruct RiskManager to compute volatilities and correlations directly from multi-day returns thus eliminating the need to scale 1-day returns by the square-root of the analysis horizon. [Note that VaR itself is never directly scaled.RiskMetrics RiskManager 3. This feature is controlled by the return horizon setting which. Simply set return horizon to 5 days. returns.. With the release of RM 3. in order to directly compute 5-day. only underlying risk factors. But if risk factors tend to regress to their mean or otherwise drift then the square-root-of-time method may not be appropriate for the estimation of longer-term volatiltities. and decay factor. is set to 1 business day. This is completely appropriate for computing 1-day VaR results. has been a standard of the RiskMetrics methodology since inception.. The resulting VaR does not follow the square-root-of-time rule.5. use 252 (business) days. 324 . or even 250 business days. result in highly non-normal portfolio distributions from which VaR is calculated. etc. 10-day. Since the early days of RiskMetrics. Instead. etc. 22-day. RiskManager typically accomplishes this by scaling all risk factor volatilities by the square-root of the analysis horizon. discount factors and even implied volatilities. Overview RiskManager computes VaR based on the volatilities and correlations of underlying risk factors such as equity prices.] The square-root-of-time method. 10 days.7 RMClient Batch Application RiskManager Volatility and Correlation Computations Analysis Horizon and Return Horizon This document describes the following settings that control RiskManager’s computation of volatilities and correlations: analysis horizon. can be scaled. by default. This use satisfies a very long-standing request from clients who want to compute longer-term VaR without the need for scaling. assumed log-normal. scaled returns can be used by RiskManager’s full-valuation engine to produce VaR for analysis horizons greater than 1 day. 22. such as options. 10. One Minute Manager Summary Analysis Horizon: is the distance into the future you wish to extrapolate the risk. etc. 10-day. To see how much you could lose in the next year. return horizon.

325 . This causes returns to follow a pattern of 4 days flat followed by a 1-day spike. Note that this works because RiskManager samples daily data on a weekly basis thereby effectively converting it to weekly data. or use 10-day returns without any scaling at all. For example. RiskManager automatically scales returns as appropriate. If one were to enter a weekly time series into RiskManager then system would fill forward 4 out of every 5 days. For example.RISKMANAGER Note that analysis horizon and return horizon can be set independently. In principle one could use 264-day returns to compute 264-day VaR but 50 years of data would be required. Recall that RiskManager automatically forward fills missing data to ensure an observed price is available every weekday regardless of holidays. For example. In general return horizon should always be set to the longest-period data to be processed. But if return horizon were set to 5 days then RiskManager would sample this weekly data at its natural frequency therefore producing completely valid volatilities and correlations. The second important benefit of the return horizon setting is that it allows RiskManager to work with non-daily data. Scaling is therefore by the square-root of 12. For example. The reverse is not true. return horizon should be set to 10 days. weekly. Scaling 45 years of monthly data seems like a good compromise. One popular combination is to use a 22-day return horizon (1-month) to compute 264-day (1year) VaR. Volatilities and correlations computed in this fashion are meaningless. RiskManager cannot convert weekly data into daily data. Any combination is allowable provided there is sufficient data. In this fashion daily and weekly data can be processed together. 5-day returns by the square-root of 2. to compute 10-day VaR RiskManager can either scale 1-day returns by the square-root of 10 (traditional). 2-day returns by the squareroot of 5. if mixing daily data with weekly data based on Friday closing prices then all analyses should be performed as of that Friday’s close of business. Each combination should give slightly different answers depending on the nature of the applicable risk factors. and bi-weekly data. if mixing daily. Care must also be taken to ensure that analyses are performed as of days in which all data exists. If the analysis horizon were set to less than the return horizon then inverse scaling would be applied. For 1-year VaR this is perhaps more appropriate than simply scaling 1-day returns by the square-root of 264. This ensures accurate correlations between all risk factors. RiskManager can compute 5-day VaR by scaling down 15-day returns by the square-root of 3.

Also note that when return horizon is set to any value greater than one the analysis date itself can affect volatility and correlation computations since different sets of returns will be used each from one day to the next. For large values of return horizon (such as 22 days). respectively. and 264 days. 22 days. 326 . But since there are not a fixed number of business days in a month it is not possible to exactly match a 1-month sampling period. 53 weekly-return samples. at least 3 years of data are required in order to obtain reasonable statistics. According to DataMetrics standards a business day is any weekday (Monday-Friday) regardless of holidays. Because 5 business days always equals 1 calendar week setting return horizon to 5 days ensures a weekly sampling period such as every Wednesday depending upon the analysis date. But if the data to be sampled is truly monthly (such as end-of month NAVs) then at some point 22-day sampling will get out of sync with the actual data. When sampling daily data on a monthly frequency this prevents no problem as there is always data available with the exception of weekends at which time RiskManager forward fills the previous Friday’s price. One year of data contains about 264 daily-return samples. That is.RiskMetrics RiskManager 3. if a particular risk factor had a valid spike somewhere in its past then that spike may be passed over for some combinations of analysis date and return horizon but be present in others. Setting the analysis horizon to 31 days results in an overstatement of monthly VaR. VaR for periods of 1 week. For return horizons greater than one it is important to realize that return samples are contiguous. In a future release of RiskManager this issue will be addressed by allowing users to specify true one-month sampling. 1 month.7 RMClient Batch Application Business Day Conventions and Sampling Frequencies The settings for analysis horizon and return horizon are always in terms of business days. and 1 year are therefore best computed by setting the analysis horizon to 5 days. but only 12 monthly-return samples. A return horizon of 22 days will slowly rotate around the calendar as long and short months are encountered. they do not overlap. For example.

In computing volatilities and correlations RiskManager normally assumes the mean of all returns samples are zero. Instead. then the zero-mean assumption is made as usual. Note that VaR itself is never directly scaled---only underlying risk factors. For example a decay factor setting of 0. and so on. for return horizon settings greater than one day this may not be the case and RiskManager therefore includes the sample mean in all calculations with the following caveat: The sample mean is included only if the decay factor is set to 1. assumed log-normal. 327 . When a decay factor is set it always refers to the decay of each return sample versus the next regardless of the number of days between samples. However. The resulting VaR does not follow the square-root-of-time rule. For direct comparison of results using different return horizons it is therefore best not use a decay factor in order to ensure all returns are equally weighted. result in highly non-normal portfolio distributions from which VaR is calculated.0 (no decay). or if return horizon is set to one day. can be scaled. such as options. This is because non-linear instruments.RISKMANAGER Decay Factor and Zero-Mean Assumptions Volatilities and correlations can be calculated with or without a decay factor even in cases in which return horizon is set to a value greater than one. a 94% weight given to the previous 5-day period. This is in accordance with the original RiskMetrics methodology and is justified by the fact that 1-day return means are generally insignificant in comparison with sample volatility.94 used in combination with a return horizon setting of 5 days results in a 100% weight being given to the return sample from the most recent 5-day period. scaled returns can be used by RiskManager’s fullvaluation engine to produce VaR for analysis horizons greater than 1 day. If a decay factor is present.

RiskMetrics RiskManager 3.7 RMClient Batch Application Creating a Risk Setting Working with Risk Settings Select "Create a new Risk Setting" from the pull-down menu on the "Work with Risk Settings" task bar on the Risk Setting Screen. Unlimited groups of risk settings may be saved and stored by users for reporting. 3. 5. 2. These dates may be relative to the current date or absolute to fix regimes such as highly volatile or periods where market correlations were abnormal. 6. Analysis Date Pricing Date Analysis Horizon Time Series dates defining the look-back window. 4. Base currency 328 . Decay Factor applied to market data (exponential damping factor). Risk Settings: 1.

RISKMANAGER 329 .

4. Alternative "high volatility" or correlation breakdown look-back periods. Several themes of usage come to mind.RiskMetrics RiskManager 3. 3. 330 .94 decay for 1-day horizons as the best predictor of losses.Multinational money manager can report multiple currency results within the same report. one can see the effects of aging on the current position set. For monthly horizons.Moving the decay factor to 1. Users can do sensitivity analysis of the decay factor by using alternate decay factors in their risk settings. By moving the pricing date but maintain the same age of the position set (by keeping the same analysis date). Multi-period results are scaled by the square root of time. RiskMetrics recommends 0.Users can change the number of days or months of the horizon period. if you have an option portfolio.0 equally weights the data. 1. Alternate reporting currencies . Alternate pricing dates. 6. By moving the analysis date but maintaining the same pricing date. VaR numbers calculated using these "high vol" periods will probably be higher. RiskMetrics recommends 0. 5. Think of various periods in the markets where volatility was higher than the norm or where correlations broke down (or both). For example. It is interesting to see how much higher. You are doing sensitivity analysis on the VaR numbers Alternate analysis dates. 2. Alternative decay factors .97. This is backtesting. by checking different analysis dates in the same report you can see the effect of moving toward expiration without changing the underlying price.7 RMClient Batch Application Risk Setting Ideas Multiple Risk Settings are a powerful tool. Alternate horizon periods .

331 .RISKMANAGER Delete Multiple Risk Settings Delete Multiple Risk Settings Select "Delete Multiple Settings" from the "Work with your Risk Settings" task bar.

Credit Exposure . The "By yield curve" is a drop-down selection in the report layout manager. 1 year. and 30 year dates. Horizon Group List Screen Lists all your stored horizon group definitions. or even five years. and 5 year dates. 9 months. 2. There are three RiskMetrics default (read only) horizon groups to get users started: 1. 10.out to one year. 3. For example. 4-6 months. and a 1 year date.consisting of 1 month. For this report. 6 months. Short-Term . a 6 month date. They are used in risk reports: 1. and 7-12 month risk exposure. 3.RiskMetrics RiskManager 3.One might want to view the peak credit exposure to counterparties out to various time horizons. one would define a horizon group to consist of a 3 month date.consisting of 6 months. 4. 20. 3 months. For example . An example is shown in the topic "Bond Portfolio Summary". 3. 332 . 2. 1.consisting of 1 month. two years. 6 month.7 RMClient Batch Application Working with Horizons Working with Horizons Select "Work with Horizons" from the Report Screen Horizons are groups of dates relative to today's date. Medium-Term . Long Term . By yield curve analysis . 2.Fixed Income risk reports can be viewed by cash flow out the yield curve. one might want to group together 0-3 month risk. 5.Examining fixed income instruments by horizon groups grouped by their maturities. and 1 year horizon dates. Maturities .

RISKMANAGER 333 .

User defined label for the horizon group name.Add Horizon value .Add button .Horizon term list .Add Horizon Term .7 RMClient Batch Application Creating Horizon Groups Creating a Horizon Group Select "Create Horizon Group" from the pull-down menu on the task bar of the Horizon Group List. This action brings us to the Horizon Group Editor.list of time horizons which defined the named group 334 . B .Horizon term period (days.adds the horizon term value into the list.Numerical value for the horizon time period to add.RiskMetrics RiskManager 3. E . or years). we can create a Horizon Group A . The task bar is underlined "Setting your Horizon Group Lists". months.Horizon Group Name . D . C . Step-by-Step.

335 .RISKMANAGER F .Save & Reset buttons . Reset flushes the horizon list in E.Save stores the named group in the Horizon List.

4.returns to the Horizon Group List Selecting delete as an action must be confirmed. This action cannot be undone. Select All . 336 .check the horizon groups to be deleted.Deletes all user-defined horizon groups from all pages. Select None . Pressing delete removes the horizon groups marked for delete from the database. 3. Hide CheckBoxes . Read-only default horizon groups cannot be deleted. Delete All . Read only items will not be deleted. 1. This adds in the multiple delete navigation buttons. 2. Delete .7 RMClient Batch Application Delete Multiple Horizon Groups Deleting Multiple Horizon Groups Select "Delete Multiple Groups" from the Horizon Group List task bar "Setting your Horizon Group Lists".Deselects the horizon groups marked for delete. 5.Selects all horizon groups to be marked for delete on this page only.RiskMetrics RiskManager 3.

RISKMANAGER 337 .

example shown is a collection of FX spot time series. 338 . Choose each time series .7 RMClient Batch Application Working with Market Data Groups Creating a Market Data Group Location of Market Data Groups: Reports->Working with Market Groups Select "create market group" from the menu choice.RiskMetrics RiskManager 3.

RISKMANAGER Legacy Reports 339 .

RiskMetrics RiskManager 3. Fill in the Single Statistic form in the Layout Manager.7 RMClient Batch Application Single Statistic Report Single Statistic Select "Single Statistic" when creating a report. 340 .

rows (the labels along the lower left.RISKMANAGER Graphics and Charts 3D Data Charts Columns vs. The rows shown will depend on the level you have drilled down to. The columns are the same as the columns in the RiskManager report. Pagination If there are more rows than will conveniently fit on a given page. Display Options (Shape type) There are three shape type buttons at the top of the “Selected Items” list. By clicking one of these. page shifter buttons are displayed at the bottom of the chart. Hierarchy Navigation 341 . you will change the shape of all items on the chart to match the indicated shape. These allow the user to shift to the rows of interest. and values (the numerical labels along each vertical side of the chart). Rows The data plot is shown with columns (the labels along the lower-right side of the chart).

just as in the original report. leaving the columns the same. click the category name in the “Selected Items” list.7 RMClient Batch Application As in the pie chart. you may click on any object to drill down in the report hierarchy. 342 . If you wish to move back a category. or click the “Move Up” button. This will expand the row categories.RiskMetrics RiskManager 3.

The positive values will be listed before the negative values in the legend of the chart. Negative values If a report contains negative values. and one with negative. if you are long 1M and short 500. To extrude a slice from the pie. the negative pie will be half the size of the positive one). click the pie icon next to the colored box. two pies will be displayed. From here.000.RISKMANAGER Pie Charts Drilling Down the Report Hierarchy When it is first displayed. The export function is described in Exporting Graphics. one with positive values. the pie chart represents the first level of the report hierarchy. click the “Move Up” button in the “Selected Values” area of the chart. “Extrude/Intrude all slices”. click the colored box next to its label in the Legend area.g. To find a slice’s label. 343 . To move back a level. “Display in 2D”. move the mouse over the slice. “Make all slices transparent/solid”. The pie with the smaller set of values will be scaled relative to the other (e. From left to right they are “Display in 3D”. just as you would drill down on a report row. “Whole-pie” options The bar above the “Selected Values” section holds a number of buttons that perform actions on all slices at once. Use the rotation arrows at the bottom of the chart to rotate the display of the chart around the central axis. Rotation) To mark any particular slice as transparent. The name of the originally selected slice will be listed with its value in the “Selected Values” section on the left side of the screen. Display Options (Transparency. Click on either button again to reverse the effect. Extrusion. you may drill down within any slice by clicking on it. and the label will be highlighted. Any changes made to the display options will be saved in an Exported pie (see Exporting Graphics).

7 RMClient Batch Application 344 .RiskMetrics RiskManager 3.

the values for the highlighted dot are shown in the following order: X Dimension. Search Click the “Search” button to search through the names of the points on the current chart. then the dots will be of various sizes based on the values of the dimension chosen. Click the “Unzoom” button to reset the original zoom ratio. The chart will be rescaled to show the area that was one quarter of the original chart area around that point. Y Dimension. Point Size If the user selected the “Use Size Dimension” in the chart setup system. The window may need to be resized to match the exact sizes of the dots.RISKMANAGER ScatterPlots Charts Mouseover On mouseover. Click the “Legend” button to see the start and end values of the various sizes. putting GOV in the search bar will highlight the government points (search is case-insensitive). Zooming Click the zoom button followed by a point to zoom in on that point. if you have a chart of Govt and Swap Rates. and (optionally) Size Dimension. 345 . For example.

If you wish to move back a category. 346 . or click the “Move Up” button.RiskMetrics RiskManager 3.7 RMClient Batch Application Hierarchy Navigation You may click on any point to drill down in the report hierarchy. click the category name in the “Selected Items” list. This will create a new plot showing the children of the selected point.

The line will be permanently removed from the chart. The square will become transparent to indicate that the element is currently hidden. Additionally. The value of all lines under the date marker are shown on the legend. 347 . or percentage increase. Display Options (Log Mode. Show/hide. this is the 4-5 month level). and Remove Lines By using the buttons in the legend. Zooming To zoom in a certain section of dates. all lines start their history at 1. Normalize. from that point. a marker will appear with the value for that line on the selected date. the chart will be rescaled to better display the remaining lines. the chart is shifted to a base-10 logarithm scale. click on the circle filled with the X. If you want to get the chart back to the original state after zooming. To remove a line from the chart. click the "UnZoom" button in the upper-left corner. you can hide or show and remove elements from the chart. then show the “growth of a dollar”. click on the chart when the desired start (or end) date is highlighted in the legend bar. a black line running from the top to the bottom will follow the mouse cursor. a dot appears at each point where there was an actual data point (Note: the points option is ineffective and time consuming unless the chart is zoomed to a point where there is significant space between each point. Click on the colored square indicator to hide a line. When the points option is selected. This line shows the date represented on the legend. on a time series. If you mouse-over a line. Move your mouse until the desired time range is highlighted. When normalized. Points) In log mode. then click again. and if it was the top or bottom line. there is an option to not display the legend if you wish for the chart to have more vertical space.RISKMANAGER Market Data Line Charts Date Marker As you mouse over the chart.

Negative Values If there are negative values in the report being considered. as it is only chosen to create the best fit for all values in the chart. The chart is divided so that the area of each rectangle is proportional to its value in the dimension chosen to represented by area.RiskMetrics RiskManager 3. The name of the originally selected cell will be listed with its value in the “Selected Values” section on the left side of the screen. The vertical/horizontal alignment of the rectangle has no meaning. just as you would drill down on a report row. the heatmap represents the first level of the report hierarchy. you may drill down within any cell by clicking on it. area and color. click the “Move Up” button in the “Selected Values” area of the chart.7 RMClient Batch Application HeatMap Charts General HeatMap Info A heatmap has two dimensions. To move back a level. For example. Search Click the “Search” button to search through the names of the cells in the map. putting GOV in the search bar will highlight the government cells (search is case-insensitive). Mouseover On mouseover. From here. then they will be listed in a separate map below the positive map. The color values are set along a spectrum running from green to red. Drilling Down the Report Hierarchy When it is first displayed. with green representing the low end of chart values. Example HeatMap Chart 348 . if you have a chart of Govt and Swap Rates. the values for the highlighted cell are shown with the area dimension followed by the color dimension. and red the high end.

RISKMANAGER 349 .

you get a list of all the values in that bin. Curves) You may display either Frequency (percentage occurrence) or Count (number of trials) on the y axis by selecting the appropriate radio button. the Normal curve. A 95 quantile indicates that 95% of values lie in the indicated bin and the bins to its right. and the Kernel Distribution. By mousing over a bin. Or if you are zoomed. Click on the bin again to close the list. The bins are evenly split between the highest and lowest values into equal-sized tranches. 350 . You can add a new quantile of any percentage value. the right-most green. which is a “fitted” Normal. Display Options (Frequency/Count. you have four options. and the colors shift with each quantile. which will re-bin them with the number of selected bins. you may return to the original fully unzoomed view of the Histogram. Quantiles The square boxes with numbers above certain bins are quantile indicators. The size of the bin shows the number of elements held in that bin. You can zoom in to show all the values to the left of the quantile. You may adjust the number of bins by clicking on the “Set Bins” button on the control panel. You may remove the quantile you clicked on to bring up the menu. There are two curves you can display to compare with your histogram. By clicking on the bin. The bins will rescale to the number of bins you select. Click on a quantile indicator to bring up the quantile menu.RiskMetrics RiskManager 3. The left-most bins are red. From the quantile menu.7 RMClient Batch Application Histogram Charts Bins The colored vertical bars represent bins of values. you get the start (lowest) and end (highest) values that fit into that bin. and 5% lie in the bins to the left. The colors of the bins are based on the number of quantiles.

On the Stored Chart Image page (which can also be accessed by the button of the same name on the main report screen). 351 . When “Export” is clicked. They may also click on the thumbnail of any chart to bring up a full sized JPG. They may change the order that the charts will show up in the Exported Report PDF. A note to this effect is shown and the user is given the option of continuing or jumping straight to the Stored Image page.RISKMANAGER Exporting Graphics All report charts have an “Export” button that will allow the user to access the chart in its current format (any user interaction will be saved) as a JPG or in the standard report PDF. or edited with a Graphics editing program. the images will be placed in the PDF report in the selected order after the main report body and before the appendices. When the user runs a PDF Report Export with chart images exported. the user has two options. a process is kicked off performing a conversion of the chart from the current SVG format to JPG. which may be saved and copied into Word. as well as delete charts that are no longer needed.

. Batch jobs may be run on-the fly from any remote computer. All users have permission to create batch jobs. 352 . the user has one batch job called 'FuturesOptions'.7 RMClient Batch Application Batch Control Work with Batch Jobs Batch processing automates routine tasks such as importing of market data and positions. To create an automated task a user clicks on ‘Reports’ and then selects ‘Work with..Batch Jobs’ from the drop down menu. The Batch Jobs Screen will appear and have all previously created batch jobs are listed. select Programs->Accessories->System Tools->Scheduled Tasks. as well as the production of reports. All users may schedule the RMClient utility to run at pre-determined times by using the Microsoft Scheduler. From the Start button. If access has been granted. the top menu bar will include a selection called ‘Administration’ All users may use a utility RMClient to execute batch jobs without the needing the Administrator to schedule the job. A user can find out if they have administrative rights by checking their top menu bar. The ability to schedule batch jobs is limited to those users who have administrative privileges. In the example below.RiskMetrics RiskManager 3.

RISKMANAGER 353 .

In addition. Name this batch job task so it can be scheduled later. the user may have desired a message to be sent upon notification. define a new batch job by selecting ‘Create a new Batch Job’ from the drop down menu. A log of the events that occurred during the run will be emailed to the user if this box is selected.7 RMClient Batch Application Create a Batch Job From the Batch Job List Screen. A descriptive name such as ‘Import of daily market data and production reports’ will help identify this job during the scheduling process. This screen requires the user to define what task or tasks he or she would like to automate.RiskMetrics RiskManager 3. 2. 354 . A wizard aids in the task of creating the batch job sequence. These notification selections are done in the User Profile Tab of Preferences. (screen shown below) 1. ‘Create a new Batch Job’ opens a window labeled ‘Download and Import data – Batch Job Definition’. ‘Notify me’ checkbox. The notification presents the user with a log of the batch job status.

By selecting ‘Yes’ the Admin's batch job will process the daily downloads of subscribed time series from RiskMetrics through http protocol when the batch job is scheduled. (Administrators only) Administrators will see a radio button for Download DataMetrics market data. 6. 7. Choice for file import. For example.constant maturity zero coupon spot rates. The files are stored in the RiskManager database (RMDB). 8.xml would not import since the changing date would not be picked up by the system. Position files. Stress Tests Limit Sets (for Credit Exposure reports only {RM3. When the batch job is created. Commodity price data. 2. Equity price data 355 . Client imported market data or position data is loaded into the users file system. 5. 4. Curve data (Fixed Income Yield curves) . See the example of a position file import. Currency FX Spot data.3 and higher}. Stress Tests. When selecting the position files. A dated file such as 20010923. This is the most heavily used automation task.RISKMANAGER 3. 3. At run-time. fxhedges. the file is checked for proper format. the user links up each loaded file with the specific import task. Here the user selects one or more position files. The user can load any type of file into their file system. 4. Users can import various file types: 1.xml can be set to run each day.fxhedges. the user needs to make sure the position file names are the same each day.

it is a position file. 356 . For example. or delimited). Clicking +Add will open the import file screen. If "Notify me" check-box is checked. Let's say that everyday we want to analyze the risk of two portfolios a) bond futures. 2. if you auto-delete on the tag dimension portfolio then only the portfolio names encountered in the import file will be deleted from the position already loaded into RiskManager. Set sharing permissions to private or shared. This topic is covered in batch notification and logs. and b) bond futures options.RiskMetrics RiskManager 3. Users may specify: 1. 3.either upload on the fly or from the users personal file system. select the +Add button to select position files to import.for this example. 4. When creating the batch job. If we set the import to auto-delete on portfolio then only the two portfolios (a) bond futures and (b) bond futures options will be deleted. 5. Set any delete action on existing Records . The users other portfolios already loaded into RiskManager will be unaffected.either deletion by group or tag dimension or a smart delete by tag. The smart delete will delete only the tag values seen in the import file. File to import .7 RMClient Batch Application Batch Job Position Import Users may automate the import of position data. Set the file format (XML. Set the file type to import . an import log will be placed in a message or email if the notification box was checked for the batch job. This message or email will show any errors.

tags can be added on-the fly by entering the list: 357 . Action on existing records .RISKMANAGER 7.

the pull-down menu of File to import will show all files in the file system for the current user. or tab delimited). 358 . Here we are uploading a position file. Set the uploaded file compression format (if any). Each user has his their own File System directory to work with.but this upload is not automated. The import file dialog allows the user to upload file to the file system area -. Uploading a position file to the File System manually involves browsing to the files from the user's system and selecting these files from the file system directory (shown below).RiskMetrics RiskManager 3. csv. Batch control can import any position file that is already in the file system directory. In the import dialog shown below. The user must select the format of the file (XML.7 RMClient Batch Application 8.

RISKMANAGER To upload a file. see the topic File System 359 .

we are focusing on user FuturesOptions. In the directory structure below.RiskMetrics RiskManager 3. the file item is empty. Under Home is our position file labeled "bondFutures. 1.xml". Until the user uploads to the file. File System Directory Commands: 1. Directory tree Home which serves as the users root directory.7 RMClient Batch Application User File System Each user has their own file system directory in the RiskManager database (RMDB). The user can then upload a file to this named item. 2. Left Clicking the Home directory will show a menu of file system commands. 360 .allows the user to create a new named file item. Create a new file .

RISKMANAGER 2. 361 . Upload to this directory . Left Clicking a file will allow users to select a file already in the user file system. 3. rename.browse on your local computer to upload the position or market data. and export from the user file system to as local computer file.sub-directories can be created to organize your work. Create a new folder . delete.

see the topic User File System. 362 . If "Notify me" check-box is checked. This topic is covered in batch notification and logs. This message or email will show any errors. For additional information on the user file system and how make files visible to the user.RiskMetrics RiskManager 3. If the data files are not yet in the user file system. Uploaded files will show a success/failure dialog.7 RMClient Batch Application Batch Job Client Data Import Users may also want private data to be loaded into the Market Database on a daily basis. an import log will be placed in a message or email if the notification box was checked for the batch job. browse to their location and upload them.

use the drop-down selector to choose the data files to upload.RISKMANAGER Bach in the batch job file import screen. Match the File type with the second drop-down chooser (shown below). 363 . The batch wizard will then show the selected file as marked for import.

RiskMetrics RiskManager 3.7 RMClient Batch Application 364 .

Once completed. The user needs to already have created some reports in order to see reports that can be run (See section in Help Menu on Defining Reports). the user hits the save button and the batch job is complete.RISKMANAGER Batch Job Reports The next screen of the batch wizard on reports after the data or position import section. The reports can either be personal or shared. 365 .

7 RMClient Batch Application Batch Notification and Logs Each users has a message icon in the upper right hand corner of the main screen.RiskMetrics RiskManager 3. The message is from "System" and appears like this: Left-clicking the entry and selecting "View" allows the user to read the batch log. Therefore.user profile). Batch Log Message Header contains summary information In this case. the system database didn't contain any historical equity data. Both the email and message will contain the logs of batch jobs. At the time this file was loaded. our "badfile. all positions in this file were rejected. 366 .csv" portfolio file contained equity positions. If the user selected "notify me" in the their batch job. and completed the setup of what type of notification is desired (in user preferences .

RISKMANAGER Batch Log Message details . the import log message contains details on what occurred and reported specific error conditions.Below the header information. 367 .

Cannot map equity positionswithout equity price data in our Local Market database (RMG_LMDB). we purposely imported a position file with equities we didn't have in our market database. and paste into another document.RiskMetrics RiskManager 3. The contents of the log describe the process that was run and the files imported.7 RMClient Batch Application The log is a web page. copy. For user "Keith".csv located in his file system. 368 . the user can right click and 'select all'. Each of the position lines with a problem are shown as a line item in the xml log. The file is being picked up from our user file system. In our example. If the Preferences -user profile chose to have an email sent from which the user could print or store this message log. From the web-page message. Here we did a position import. his file was badfile.

sequences can be created and saved. The administrator only needs to be involved to export the sequence for the user's use in the RMClient utility. ‘Create a Batch Sequence’ A new window called ‘Batch Sequence Definition’ allows the user to select how and when the task is scheduled. On the ‘Batch Scheduler’ screen. This utility gives users the ability to run batch jobs at any time without contacting the administrator.Batch Sequences and Scheduling . Administrators Only . All users may run batch jobs remotely by using the RMClient utility. should be selected to schedule a new job. left clicking task bar and selecting Batch Sequences. Only users who are members of the Administration group can schedule batch sequences to run. 369 .RISKMANAGER Admin Batch Sequences Batch jobs will not run until they are scheduled.from the admin users "Administration" Screen.

The administrator can schedule one or more of these jobs to run. immediate daily weekly monthly B The top middle box contains the Batch Job list The administrator will see all jobs that were created and the login ID of the creator. 2. The default selection is ‘Do not schedule now’. 370 .RiskMetrics RiskManager 3.7 RMClient Batch Application A The top left box requires the user to select a schedule time. 4. By clicking the Edit key the user will select: 1. 3.

371 .e. (Note: Circular references are prohibited) Recommended: The administrator should prepare a sequence ‘Run Immediately’ to make sure the tasks complete as anticipated. to create nested task sequences). (i.RISKMANAGER C The top right box shows other task sequences available to the user which can be included in the sequence that is being created.

The admin batch wizard screen is shown below. This sets up the DataMetrics username. see the topic Batch Job Client Data Import. Users can also import their own market data. and proxy server settings. The DataMetrics download must first be configured. See the topic Administration Download Preferences.7 RMClient Batch Application Admin Batch Market Data Download Only Members of the Administration Group may download data from RiskMetrics DataMetrics Servers. merely select the "yes" radio button for downloading DataMetrics market data. password. For more detail. To download RiskMetrics data. 372 .RiskMetrics RiskManager 3.

RMClient Batch Application RiskManager Batch Client Architecture 373 .

This will require hand editing of any existing RMClient 3. as the RMClient needs Java to run. You will need the Java RMClient file (this may be obtained by contacting Riskmanager.5 format: RMClient 3.exe. To run this utility the following are required: 1. The Environment (JRE) available directly RiskMetrics Help Resources j2re-1_3_1_04-windows-i586i.5 scripts to provide the domain information before they can be used with version 3. 2. 4.6.6 requires users to log in under a domain. RMClient can safely work with additional workstation memory. please unpack this zipped files.RiskMetrics RiskManager 3. Please install this by following the default settings.com) to reside on the machine where the positions are held. Important Note: RiskManager 3. for transparency we recommend that the unpacked files reside in C:\RMClient. This would be done automatically if within WinZip if "use folder names" is selected. 5. This set of pages describe the steps required to run the utility and it assumes that the reader is familiar with RiskManager and has used it interactively. Batch jobs to import positions or run reports can be set-up by any user with a valid username and password. 374 . stress tests) from any remote computer into the RiskManager. Make sure that under "Download Preferences" within RiskManager is correctly configured to the right IP address and port.6 RMClient Application RM3.6 RMClient Application installer (zipped file for sensitive fire walls). run reports and retrieve these reports into the same remote computer. market data. (You will Download Preferences under Administration Window and is only available to a user with Administrator rights). Since Java applications max at 64 MB of memory (there is an override to access more memory).7 RMClient Batch Application RMClient Download & Setup Using RMClient to run Batch Jobs in RiskManager from any Remote Machine.6 format: LOGIN user="JJones" xpwd="ih2tsx8Baew=" LOGIN user="JJones" xpwd="ih2tsx8Baew=" domain="003" The Java RMClient may be used to upload files (positions. On the workstation where the RMClient will reside (and therefore position file exists or reports extracted) we need Java RunTime Environment installed. see picture: 3. An example is presented here: RMClient 3. You will need to make sure that the command for the RMClient is run from within the directory where the RMClient resides (in my case C:\RMClient\) or specified within a batch file that can be run by Windows Scheduler within this window.support@riskmetrics. Although you can unpack it in any directory. RM3.

Choose "Work with… Batch Jobs" from Reports 375 .RMClient Batch Application RMClient Step1 Step 1.

This is important as this creates the virtual file system within the database (you will not be able to choose files without doing this).rml for xml files).RiskMetrics RiskManager 3.txt for text files. Create a File within the File system. *. Since I am going to be uploading positions file in RML format I have named it "PositionFile.7 RMClient Batch Application RMClient Step2 Step 2.RML" 376 . *. You can call this file anything you like but best to keep to names that best describe it (for example.

"Add" 377 . Name the job (I have named it "uploading Positions") and then press.RMClient Batch Application RMClient Step3 Step 3: Create a New Batch Job from within "Working with Batch Jobs".

RiskMetrics RiskManager 3.see Step 4b below. However click "Next" if you also want to run reports within this same batch job . On the next screen browse on the "Edit" button to upload the file existing in your virtual file system. To complete the details of importing. Choose to "Use this file". 378 .RML that I have uploaded earlier. In our case we have to choose PositionFile. Other choices allow you to delete existing positions (either all or by tags). file type (Positions in this case) Note that there are a whole hosts of other files you could upload via this process but it is important to correctly specify these files otherwise you will receive an error. Save this window by pressing "OK" and then choose "Finish" in the next screen if all you want to do is Import Position. add tags (if you want to add any) and whether the file is compressed (RiskManager would automatically unzip) and whether you want to save import and log files within the file system for later viewing.7 RMClient Batch Application RMClient Step4a Step 4a. choose Permission (shared or private).

RMClient Batch Application 379 .

7 RMClient Batch Application 380 .RiskMetrics RiskManager 3.

RMClient Batch Application 381 .

If you want to also run reports within the same batch job then rather than clicking on "Finish" click on "Next" to take you to the next screen. In this case reports "correlation and vol" and "PV VAR IVAR MVAR" are chosen by placing a tick next to it and then click on "Finish" to complete setting up the batch job. 382 .RiskMetrics RiskManager 3. Here you will be given a choice of Reports you want to run.7 RMClient Batch Application RMClient Step4b Step 4b.

running immediately will result in an error. Note: You have a choice to run the Batch Job immediately but this would only work if you have already uploaded the file to import within the virtual file system. Since the steps described here have not done so. 383 .RMClient Batch Application RMClient Step5 Step 5 From within "Working with Batch Jobs" click on the Batch Job just created select to Export Batch Job.

Again. if you are creating a report it is important that the delay is set to err on the side of giving extra time. Tries: Refers to the maximum number of tries the RMClient will go back and look for the file in RiskManager Server.7 RMClient Batch Application RMClient Step6 Step 6: The Export screen will bring up the Configuration Screen. If no report is created within your batch process this element has no meaning. Within this screen you need to set parameters. However. Max. Interval: Refers to the interval in minutes whereby the RMClient will again look for Report file in the RiskManager Server if it did not find it in its last search. reason: if you run this on a daily basis then the RMClient will find the already existing file (say from yesterday) and pick this up. PDF/TAB/XML/Web Archive refers to the format of the reports to be saved. However if there are no files present then when it goes to look for the created file and does not find a file it will go back after "Interval" minute. If the report is not completed after it reaches the maximum tries then the RMClient will not pick up any files (although the report would be saved in RiskManager if this is one of your settings within RiskManager). 384 . Delay: Refers to the time after which the RMClient will go and look for the created report from RiskManager Server to your workstation. Create Time Stamped Directory will create a new directory within your workstation directory where the reports are kept but with Time format for easy identification. if you have only imports then do not select this as it will create an empty time stamped directory.RiskMetrics RiskManager 3. If this is not selected then previous reports with the same name are simply overwritten.

Open the saved file (in my case in C:\RMClient\Uploading_Positions.jar file=Uploading_Positions.RMClient Batch Application RMClient Steps7-9 Step 7: Now you need to export the batch sequence so that you can put in the information where the file to be uploaded resides. e.txt): java -jar RMClient.jar file=Uploading_Positions.cfg) in notepad and look for PUT SRC="%BASEDIR%/PositionFile. To Run the Batch file immediately. Note 2: In the rare occasion that memory is not sufficient if you are uploading large files then increase memory to 128 by typing: "java -jar -Xms 128 RMClient. C:\RMClient>java -jar RMClient.50. i. c:\RMClient\upload.RML " dest="/PositionFile.jar file= Uploading_Positions.01_11.g.RML" dest="/PositionFile. Go ahead and save this file.04.14\John\ Step 9a. To Run the Batch file with a schedule. mine is Position_Upload.bat Then use Windows scheduler to run this file.RML" Note: Use only forward slashes (/) as Java needs it as such. create a file in notepad with the following text in it (note: your filename may be different. I have also made the following changes and saved the file # set root directory CHDIR local=".bat extension.e.RML" PUT SRC="c:/data/PositionsExample. The name of the file would be taken from the name of the batch job (although you can rename this).cfg Note 1: You have to be in the directory where the client piece is located otherwise it will not run.cfg save this within c:\RMClient with a *.. 385 .cfg". Step 8. click on "Export" and save it to RMClient Directory.RML Change this to read the path of the PositionFile (For example if I had the file in C:\data\PositionsExample./Results/%TIMESTAMP%" To put the results in C:\RMClient\Results\2002.jar file=Uploading_Positions. within the c:\RMClient Directory type "java -jar RMClient.cfg" Step 9b.

exe -jar c:\RMClient\RMClient.txt On Windows 2000.3. The Scheduled Task Wizard will guide you to choose the . Browse to the . we must use the Microsoft Windows Scheduler. 2. select a time of day.bat file 386 .bat file and schedule the .java command to run RMClient referencing the sequence.RiskMetrics RiskManager 3.bat file. From Step7-9 we can place the DOS command in a .bat file to run 5 days a week before the market opens (for example).change the directory to the RMClient directory (or where the extracted sequence is located) Line 3 . Note: use full paths where indicated as the Microsoft Task Scheduler does not make any assumptions about the location of programs. . users with IE5 will find the Scheduled Tasks Icon located in "My Computer" from the desktop. you must specify using full paths names. Example of RMClient_Test. and frequency.jar file=extracted_script_name. To schedule. the scheduler is started from Start->Programs->Accessories->System Tools>Scheduled Tasks On NT.Schedule a RMClient remote batch run from your Workstation.bat File Contents 1.7 RMClient Batch Application Scheduling RMClient Batch Runs Objective .bat cd c:\RMClient c:\jdk1. Line 1 .1_01\bin\java.

387 .RMClient Batch Application Select a frequency to run the RMClient position upload & reports: Choose the time 0f day: The user enters their domain and login details along with the password authentication. This is the login details the user types into their workstation every morning or to unlock the display.

7 RMClient Batch Application The user Exits the Scheduler Wizard 388 .RiskMetrics RiskManager 3.

..................195..... 282........ 203 Duration Statistic..................................... 69 Credit Default Swaps ..... 284................... 372 batch sequence .. 352........................................ 184 Horizon Group .............. 59 administrator messages .. 11..... 333 Delete Multiple Reports ....... 106 389 ...... 231 Browser ........................... 36....................... 336 Creating User Groups ........9..............277......................Index 3 3D Data Charts................................... 182 Creating .. 126 Report ........ 207........ 118 Administration .......................... 106.............................. 310 Creating ....................................... 118 Editing Detail Lists ......................................... 151 Exporting Graphics............ 78...................................... 320 export xml report results .. 329 Defining ........................ 91.......... 317 Single Position ..... 87. 375 Administration Specific Site Map ........... 47 Adding Call Schedules ................. 11 export excel/delimited report ...36..............................84............ 322 Expected Shortfall. 224 EquityGamma ........... 345....................... 83 Duplicate Multiple Positions ............................ 285 Credit Manager................. 368............. 84...................................................... 291 CurrencyDelta ............................. 314 Delete Multiple Stress Tests ... 120 Deleting ......... 309 Delete ......................................................................... 286 CreditManager..... 112 Effective Duration ........................................... 113 Editing .............................. 78..........84.. 87................... 162............... 113 Editing .............................. 314......................................................... 128 Deleting Multiple Saved Reports .............. 131......... 375 DataMetrics.... 103........ 207.............................................................................................................................................................. 212.................................... 323 Exporting. 336 Position Group .... 353 Client PC............................ 317 Deleting Multiple Horizon Groups ....... 220 demos ................. 293........................................................... 347.......................... 349.................................. 326...............................................212............... 356........................... 214.................................................................................. 356 correlation report ......................... 55 Business Day Conventions ........................................................ 111 Edit.................................................... 287 Counterparty ................................. 80 Apache Tomcat WebServer .... 46 Commodity Rates Shift .............................. 174 Equity Rates Shift . 350.......... 369.......... 22.......... 191 Edit User Profile. 319 Deleting Stress Tests .. 46 Browser Configuration Settings.. 287..... 182 Creating ............... 23 Chart.................... 36..... 221 CommodityDelta ...... 310 User Defined Stress Scenario...................... 224 Contact Information .. 215......... 192 Duration ......... 343................. 184 Creating ............... 278 Base Credit Expoure ............... 279 Base Currency ...................................... 294................... 333 Delete Multiple ................ 224 CurrencyGamma............ 11................... 326 Counterparties..... 23 credit exposure.......... 14 Disable logins............................... 224 CommodityGamma ..... 51 Applying Fill Down Entries .. 375 Decay Factor ....................... 206 Bond Equivalents ...... 372 batch scheduling.............. 123 Duplicate Multiple Stress Tests ................ 224 Custom Bucket List ........... 49 Browsing RM3 Web Application Host .............. 353 Exporting Positions ................................ 66 Editing Custom Bucket List ................... 354................ 283........ 113 D Data ........... 103................... 87........................................................................................................................84. 211................ 194 Delta Equivalents..... 11.... 365........................................................................................................... 224 Excel................................................................ 193 Duplicating Stress Tests ........................ 204 Bond Report Summary Example....... 322 export pdf report ................................ 231 E Edit Select Position .... 286 Create New Position ......... 363....... 128 Deleting Multiple Positions ................ 343 A Acrobat Reader.................. 100..... 88....................................................................... 36........................... 176 batch....................... 375.............. 203..................................... 221 EquityDelta ............ 214 Control ............... 218............. 109 Create New Users .... 300 Correlations ........ 126 Creating ................................. 65 Create Position Content ........................................................................................................ 338 Deleting Multiple Position Groups . 9............................................................. 208.............. 192 Duplicating ........... 87.................................................... 208 Email notification .................. 271 Bond equivalent............ 99................................................... 60 Contributional Duration...... 281.......... 22.................................. 372 Benchmarks ...... 111 Edit.............................. 120 Deleting ........................................................................................................... 110 Creating Historical Stress Scenario ..... 280................... 92................. 188 B Base Credit Exposure ........ 195 Deleting Saved Report ............................. 55 Browsing....... 88.. 289 CreditMetrics........... 124..... 63... 191 Edit Stress Test ............... 328 C Callable Bonds .. 390 Batch Job....................... 299...................... 372... 147..................................

.......................... 173 Loading Positions ...... 126 Position Group..................... 299 Portfolio Volatility .......... 153................... 141......................... 144............................... 88.......................... 325 Netting ............ 152................... 124. 11 Incremental VaR .......... 229................. 317 Report........ 305 Market Data Returns ..... 20 Removing Stress Entries ...................................... 170................................ 179 Incremental Tracking Error....................... 286 market group .. 158 Import market data.......................................................................................... 221 G Generalized Greeks ......... 283......... 26 Historical Stress Scenario Creating...... 36.................................................. 95............ 155 Position View............ 177. 145 Importing duplicate positions........ 369 Log off multiple users ........... 175 Message List ........................................................... 206 PVBP Delta............................ 311 Report............15....... 152.................................................................................................................. 56 M Macaulay Duration ....... 273 Multiple Risk Settings .................... 273 Multi-Risk Setting report.................... 233................................................RiskMetrics RiskManager 3.... 313 Report....................... 26. 161 Market Driven Instrument................................. 94..... 23 Mandatory Convertibles ................... 350 Hierarchy ........ 350. 11 Market Data78....................................................... 356.. 6.................................. 147 Index Query Structure ............... 300 position commands .. 231............94......................... 9...................... 343. 133.............. 9....... 231 R Read Me First ................. 152........................ 340 Market Data Viewer .................. 305............... 310 Report................................................................... 26 Map....... 7.. 132............................. 100................................ 347 Histogram .....................76............ 184 Historical Stress Scenario..... 171.................................... 97...................... 315 Report............. 126.................7 RMClient Batch Application F file system .. 100..11............... 273................. 289 message... 345................... 26 J JP Morgan Bond Index .... 165 market data report........... 174 Preferences Password Tab......... 286........................................... 139.......... 228 Generalized PVBP..... 135 Index of Application Functions ....... 138. 143... 352...... 345...... 151 PVBP ................. 184 Home Page ........................ 125 position groups....... 161.................................. 186 FutureValue ............. 136..... 375 Market Data Graphs ....... 3 Relative Contributional Duration ...... 125 Position Group. 145............................. 100 Importing Positions ....................... 318 Report.. 273.................................................. 27 Release . 334 I implied volatility ......... 287 Notification . 340 MarketServer ........................ 313 Getting Started.304...... 215 Release 3.. 310 Report............................................................................................................... 148 Instructions............ 201 FX Rates Shift....... 171 Interest Rates Shift .................. 336 Horizon Group ............... 96 Position Group Creating .......... 369 P PC Client Browser Settings.. 319 Report............................. 100 Report Creating ..... 196........................................... 356.................... 275 Multiple Statistics .... 349 Lines per page .........................................304.. 303 Issuer Specific Risk ............................... 23 Import.... 99 Positions............................ 99...................................... 88 Max Credit Exposure ................................. 11 Mandatory Convertible Bonds ................. 48 Pie chart ..... 97..................................................................................................... 136....... 100 Importing Stress Scenarios ... 316 Report....................................... 36.. 221 Generate Multiple Reports ....... 6............. 365 import processed index...... 172 Present Value .......................... 224 groups................................ 233...7 ....... 349...........9....... 309 Report............................................ 82 Logging into RiskManager3................... 87......................... 352 Historical Equity Vol ................. 137. 4.......................................................................... 112............. 23................................................................................... 46 multi-blocked report .............................................. 353 Greek Sensitivities ... 103.... 287................... 26.............. 153.......... 158.........4 Log ...................................................... 62 Microsoft Internet Explorer Browser ........................... 175. 3........................ 96........... 100.... 88........................ 304 H HeatMap Charts .. 284 MDI ........... 58 Index Query ...... 7 Graph......... 11 PVBP Statistic.....................5.. 158...................................... 173.......................... 165.... 221 Intermediate Results report................. 11 Index Builder131............. 138....... 22 process index ....................................... 144................................................ 27 Release Notes 3.. 74.. 166 Market Data Table Report ....................... 230 Multiple Statistics Report ........................... 229 Horizon Group Creating.....................................11... 160... 345 Plug-ins ....................................... 158 Fill Down Entries .......................................... 275.............................. 9 Report Setup Function List ..................................... 164......................... 80.. 328...... 155 Index Components .. 271 Report Reference Guide ........................................... 359 Preferences..................................... 47 Portfolio Correlations.......9 Market Data Scatter Chart ........231..... 336 Horizons ...................................302............................................. 155 L Line chart .............................................................76................... 78....... 190 Rename duplicates................ 125.......... 172........................ 58 Marginal VaR . 311 390 ............... 106..................................................... 274 N Navigating ................ 126 Position Group Maintenance ....... 36.. 224.................................................. 368 report position selection ....

. 196 Reporting Currency ............ 114 Tag Example ............................................................ 342 Software Version ........................................ 60 RiskMetrics Contact Information .............................................. 11 Starting RM3 Application ......... 23.. 11 Stress Test PV Delta......................... 221 volatility report............................ 315 Volatilities................................. 192 SVG Graphics ........... 115 Tag Maintenance Controller............................ 22. 26 RM3 Administrator Home Page .......................................................................................... 54 RM3 Application .......................................................................... 100....................... 92...... 387.................. 23 swaptions .......... 44................................................................... 168 scatter chart.............. 120 Single Position ................................................. 389.................................................................................... 324 RiskManager Home Page................ 95 X xml results............................................................. 182 User Defined Stress Scenario ............... 224 Square-root-of-time ................................................ 94 Selecting Preferences ................................... 54 Starting ......22.................. 103 Sending messages to multiple users .. 182 Stress Test PV ................. 168 SVG Viewer Help ........ 117 Tag Dimension .......................302............................................... 293.. 39 RM3 Client PC Configuration ........................................ 330..................................................78.............. 318 Viewing Saved Reports ...... 54 Statistic .... 275........................................................................ 57 RiskManager product summary................................................. 316 Viewing Data.............. 388.... 111 Selecting Market Data ............. 55 RM3. 72 Services. 11 VaR........... 378......4 new features ................ 79 simulation return report....... 79 V Value-at-Risk .................................................................... 91 Spread Rates Shift ............. 95 With Positions.. 325.... 11 VaR Histogram ............................. 381.......................................................................................................... 326 Volatility Rates Shift........................................................................... 54 RM3 Architecture Diagram ....... 329 391 ...... 160 Selecting Positions .......... 274............................ 317 Viewing...... 377 Running Reports ..................... 33 RMClient377......40............................. 317 Saving RML on file system ................................................. 64 RM3 Administrator Session Timeout .............................. 170 Selecting Reports ............... 220 Statistics Reference Guide .... 22.................. 382..... 63 Select Position Edit ................... 51 U Underlying Duration ..................... 175 users logged on ......................................................................... 121 Single Statistic ............................................................... 326.................................... 390 RMClient Architecture Diagram ........................................................ 386..................................................... 176 Return Horizon ...................................... 91 system usage .................................................. 11 Risk Services ................................ 182 User Group Maintenance.......................................................... 329 Standard Deviation .. 306..... 79 T Tag ........................................Delta Equivalents ........................................... 68 User Groups..................... 120 Single Position .......................... 41..22........ 379............ 90 RM3 Application Starting ..... 316 Viewing ................ 51 Risk Setting Ideas ...... 11 Stress Tests ................................... 121 Single Position Detail Report........................ 316 Saved report ................... 95 Working ..................................................................... 229 Selecting Stress Testing................ 60 RiskSetting ............................ 211 Underlying Present Value 11..............Index Report Statistics .. 111 Select Position ......... 316 Saved report ........................... 328 Saved report Deleting ................. 347 Security ................................................................. 117 Tags ....... 106 Scalar Vector Graphics..... 221 SpreadDelta ......................................................... 36................................................................... 11 Stress Scenario ..................... 224 SpreadGamma ........ 114..................................... 315 Saved report ............................... 326 Risk Attribution Report ..............................9 Risk Contribution ................ 211.................... 46 RM3 Key Features ............................................. 138 Tomcat Application Server ...................................... 333 Risk Settings Explained............................... 332 Risk Settings 273................ 23.....1 RiskMetrics....................................................................................................................................................................................................................................... 214 User Defined Stress Scenario Creating ..................... 23 Version of Software....................78.. 169 Swaps . 309 S Sampling Frequencies............. 209..... 380.............. 71 User Profile ....................... 303 Single Position Deleting ....... 294 W Working With ........ 162 Viewing Multiple Saved Reports .... 35 System Information . 197...........................................6 Release Features..................................... 45 RM3 Web Application Host Browsing.................................. 42 RiskManager Resources ............. 323 Z Zero-Mean Assumptions ......................................................... 142 RM 3........................................ 91 Viewing saved report.......................................... 307 Vega Risk . 51 session information ....................... 324............... 55 RM3 Web Application Host.. 177 Selection............................

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