ClavisRisk

ClavisRisk involves functions supporting market risk analysis. Basically, it works with market and position data gained from the Front Office system, but it may be used as a complement to portfolio assessment. It may be entirely integrated in the Clavis system, hence the risk management functions will be possible to use freely at other areas of the system (limit checking, position management, transaction management, etc.).

Yield curve estimation processes

Methods for IRR curves

  • Polynomial regression Gauss-Jordan elimination method. It may be chosen until fourth degree regression.
  • Tertiary Spline fitting Gauss elimination method.
  • Linear interlocking

Methods for zero-coupon curves

  • GLS tertiary polynomial regression
  • GLS tertiary spline regression
  • Svensson
  • Nelson-Siegel
  • Bootstrap
VAR calculation methods
  • Historical VAR
  • Parametrical VAR
  • Simple VAR with regression
  • Simple VAR with Maximum Likelihood method
  • Monte Carlo VAR
  • Expected Shortfall
  • Ex-ante Tracking Error

Further VAR possibilities

  • Stress Test: (Scenario Analysis)
  • Increment VAR
  • Diversification
  • VAR BackTest
  • CFAR

Covariance matrix calculation methods (equity, cash flow, foreign exchange)

  • Estimation methods: historical, EWMA
  • Correlation matrix
  • Yield curve: spot (zero coupon), spot (IRR), forward (zero coupon)

Risk indicators

The system allows to make complete risk analysis on portfolio and model portfolio level as well. We can define various risk indicators with the help of covariance matrixes detailed separately, yield curves, VAR etc. In the market risk analysis, the system calculates the following values:

  • yield
  • average yield for a period
  • relative yield respect to a benchmark
  • duration, modified duration, convexity
  • historical, parametrical, simple, Monte Carlo, Expected Shortfall, Ex-ante Tracking Error VAR
  • Increment VAR
  • Undiversified VAR, diversification
  • volatility observed, volatility predicted
  • risk efficiency rate; quotient of the real and predicted volatilities
  • Sharpe Ratio; the surplus yield of the portfolio (risk premium), correlated to the standard deviation
  • Treynor Ratio; the surplus yield of the portfolio (risk premium), correlated to the portfolio's beta
  • Correlation; indicates the "moving together" of the yields between the portfolio and benchmark data
  • Alpha, Beta (we put a line on the yield time sequence of the portfolio and its benchmark. Beta is the gradient of the line, it shows the performance of the portfolio respect to the benchmark; y-intersection is Alpha, it shows the actual risk-free yield of the portfolio.)
  • Tracking Error; portfolio – deviation of the difference of the benchmark yields
  • Information Ratio; portfolio – difference of the benchmark yields projected on Tracking Error
  • Jensen Alpha; difference of the portfolio's and by the CAPM model's yield
  • Appraisal Ratio; Jensen Alpha projected on the observed deviation
  • Modigliani-Modigliani; when the portfolio result on the deviation-yield curve is put under the model, the difference is the M2 value
    Calculators
  • Option – Equity, foreign exchange (graduated), interest rate cap, floor, collar
  • Forward – Equity, foreign exchange, bond
  • Swap – Interest, foreign exchange, cross-currency