Market Risk Factors


Key _Market Risk Factors in
VaR Spec refers to an 1D-array of M integers, where M is the number of simulated market elements, i.e. the number of rows in the Simulated Market table.
Each integer equals the number N of seperately simulated risk factors dedicated to the respective market element.

It is reminded that each row in Simulated Market defines a market element, the value of which at time t affects the price of the referenced tradable at the same time t.
This value may be a single number (for example when the market element is a stock price) or a curve (for example when the market element is a yield curve).
During simulation, the value realized at a future time t' is computed, based on the numerical values attained by N simulated factors at the same future time t'.
These N simulated factors are the so called "stochastic drivers" of the respective market element.
N depends mainly on the respective #BucketsTreatment entry in Simulated Market.

For example, an entry of
Parallel would generally result in N = 1
An entry of
Bipolar would generally result in N = 2

The case where the respective market element is a non flat
Yield Curve is trickier, because the referenced Yield Curve object may specify a special VaR treatment of futures, bond or BMA data.

For example, if the referenced Yield Curve object specifies
VaR Type = By Price, then the futures prices must be simulated separately from any other rates that may be also included in that Yield Curve object.

If for example, the Yield Curve object has been constructed out of futures and swaps, then N = 2 in the Parallel case and N = 4 in the Bipolar case.

Note this key is prefixed by _, which indicates it is regarded as a read-only part of the object's data and therefore its associated value cannot be edited.
For that reason it does not appear as part of the input data.
It carries informational only value for the user and appears as part of its contents.
Also it completely depends on the remaining object contents and therefore is never part of the exported object's data.