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Portfolio stress test

How does a sudden change in volatility or underlying price affect the P/L and risk of your derivatives portfolio? Tbricks by Itiviti’s portfolio stress test app offers not only standard greeks, but also test very specific risk scenarios using risk variables based on your own pricing or volatility models.

Theoretical derivatives pricing is based on parameters such as underlying price or volatility. When looking at your current position views, you can see your P/L or risk exposure right now. But what happens if the underlying price jumps by 10%, or volatility jumps from 11 to 15%?

Tbricks’ stress test app lets you take any two parameters, such as price and volatility, and create a number of situations. The results of the calculations are displayed in a matrix illustrating the distribution of your exposure horizontally and vertically. The report highlights the maximum and minimum values and gives the coordinates from which these values originate. Thus, the stress test app helps you answer questions such as “what is my maximum gain/loss?” and “under what conditions does it occur?”

You can also customize this app to simulate more complex changes such as volatility kurtosis and yield curve rotation, as well as changes of proprietary risk parameters.

Highlights

  • Plot a matrix of any portfolio risk value, including results, greeks and custom-defined calculations.
  • Plot proprietary risk values provided by your unique volatility or pricing models.
  • Define your own deviation points (not necessarily equidistant).
  • Perform simulations based on changes in underlying price, volatility, financing rate.
  • Slice data with great flexibility, split by sub-portfolios, products, flexible position filtering.
  • Simulate results in the past using historical prices, volatility and rates.

Integration

  • Output results in any reasonable XML-based format for integration with other systems. This eliminates the need for a converter app and greatly facilitates integration.
  • You can schedule to run at specific time on a daily basis.

Output

  • Print to file using PDF complete or Microsoft’s XPS Document writer.

Building blocks

App_portfolio_stress_test

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