VaR Price Fn


??VaR Price Fn is a direct subtype of Real To Real Function
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with functions ??VaR Price Fn Functions, keys ??VaR Price Fn keys and example object VaRPriceFn

TYPE INCLUSION RELATIONSHIPS

Real To Real Function

??VaR Price Fn

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AVAILABLE FUNCTIONS

Create

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AVAILABLE CREATE FUNCTION KEYS

Market

Model

Reference

Reset Objects

Tradable

VaR Spec

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TYPICAL OBJECTS OF TYPE ??VaR Price Fn

VaRPriceFn

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This type represents a function that maps the values realized by the market factors that drive the VaR of a specific tradable to the corresponding price of that tradable.
More specifically, assume that in the context of a VaR computation, the price of a given tradable depends on the values of u factors x₁, x₂, ..., xᵤ as specified by a given object of type VaR Spec

For example, in the case of a stock option, these factors could be chosen to be u = 3 numbers x₁, x₂, x₃ that affect respectively the spot stock price, flat interest rate and flat implied vol in a multiplicative fashion.
In other words, given today's observed fixed values S₀, r₀, σ₀ for the above market data respectively, the factors x₁, x₂, x₃ result in market data x₁S₀, x₂r₀, x₃σ₀ as of the VaR horizon date.

Then this function expects as input an array of u real numbers x₁, x₂, ..., xᵤ that specify these market factors.
The function's output is the price of the referenced tradable as calculated after the market data - on which the price depends - have been set to reflect the given values of the u factors.

The ordering of the supplied u numbers x₁, x₂, ..., xᵤ is important and must match the ordering of the market elements as appear under the title #MarketFactor of the Simulated Market element of the given object of type VaR Spec

A flag determines if after this function has been evaluated, all market data inside the supplied objects should be reset to their initial values and all involved objects are synchronized with these initial values.

Also note that the global valuation date is not adjusted according to the VaR horizon specified in the latter object.
This means that this function will return results compatible with a VaR calculation only if the global valuation date has been previously set to the VaR horizon date and this function object has been recreated afterward.