Interest derivatives products design. Risk management system Apreccia

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about dealing support soft Apreccia

design concept of Apreccia

Apreccia was designed and developed with an unique approach different from other risk management as usual in order to response to the forecast that supply of non-affiliated derivatives products will increase to meet the needs of customer in financail market.

First, the most atractive feature of Apreccia is a well-known fact that swap transaction is the group of a lot of small functions which is the key to construct a risk management system corresponds to the swap with complicated cash flows. Small founctions build on a swap Whichever the kind of swaps is. So, Risk management for irregular swap can be worked out with the same approach just as for common swaps just by means of founctions aggregate which loos like one whole founction.

Existing Risk management systems cost a lot and could be a heavey burder for minor financial institue and business. Appreia achieved a strong performance for enterprise customers to use PC easily.

It is preferable to access with the market rate at real time corresponding to customer's enquiry. It is common that input the market rate by hand in existing risk management system, but Apreccia operates in a rea-time market environment and integrates with information vendors. Instrument values can reflect real-time rates. sourced directly from market data systems without manual entry.

Feature of Apreccia

risk analysis and position management of irregular swap

Appreica achieved accomplished a greate achievment of product design , pricing , mark to market ,risk analysis in irregular swap although it was impossible for existing risk management system which can not deal the swap with complicated cash flow and users have to decompose the combination of swaps.

Apreccia supports the financial products dealed in JPY, US$,Deutsche Mark, Swiss Franc as below

 

interest swap

currency swap

FRA

cap & floor

swaption

Interest rate swap covers below:

Type

explanation

example

plain vanilla the most common type of swap fixedVsfixed、fixed VS floating floatingVSfloating
non-bullet principal can be varied throughout the term of the swap amortization, accumulation, roller coaster
variable by fixedRate level

principal varies in a way dependent on the level of fixed interest rate

step up step down
setting constant or coefficient constant or coefficient can be set to floating rate as mutiplier factor leverage(LIBOR x 7-5 etc)
variable interest calculation effective date can be varied. delayed libor, Aaverage libor
conditional swap conditions such as IF, MAX MIN etc can be set to the interest rate MAX(6 month LIBOR A3 month LIBOR)
fixed-to-floating interest rate swap

fixed interest rate and floating interest rate can be set to the whichever the fixed side and floating side, or can be mixed into both of two sides.

settled with 6 month LIBOR form 1st term to 5th term , settle with fixed rate at last term

stub interest clearing interest can be stubbed. support irregualr 1st term cash flow

real time mark to market

Usually, It takes time to mark-to-market derivatives products. Apreccia has a good performance of speeding up the arithmatic processing by loading necessary information into memory. It will take only no more than 2 minute to mark-to-market 500 to 1000 positions with remaining period of 5 yeas performanced on PC-terminator. Apreccia provides excellent mark-to-market fountion even if compared with other softwares on UNIX. Instrument values can reflect real-time rates.sourced directly from maket data systems without manual entry. mark-to-market calculation can be monitored automatically in 24 hours.

 

risk evaluation −GPS analysis of VAR

stress test and grid point sensiblity (GPS) are used in evaluation of risk exposure. stress test is used when calculating gap of the valuation P/L based on scenrio with ascending yield or descending yield meanwhile GPS is used to exactly calculate the interest sensitivity per term. GPS is essential to calculate VAR and compliant with yield curve's contortion, different from basis point value based on duration concept.

 

hedge support

 Apreccia can automatically provide the amount for delta hedge per term of portfolio including various transaction such as swap, can&floor, swaption.etc. In addition, it is possible to simulate risk immunization degree by combining with stress test in case of hedging trasaction recommended by Apreccia. At that time, Gamma risk can be worked out by comparing with GPS data.

Income determination

 Income determination will be calculated automatically after Accrued compensation and separate setoff regarding interest rate swap , currency swap, cap&floor, etc. It is impossible for calculating settlement interest and forecasting future P/L because Apreccia allows users to set random term regardless of past or future. (Note: Income determination program is in a monitor version.)

management index


Apreccia can not only output original/current exposure report to BIS but also can output the grid-point -packaged cashflows lists for calculation of VAR(value at risk). Besides,Apreccia has powerful functions enabling assortment and counting by user definable key such as executive, administrators, dealers, etc. and it is easy to redigest those reports sent to different receivers.

Gamma risk can be referred to in option transaction.

risk management index in sheet version (Value At Risk with matrix method)

Risk management index in DB version (BIS2compliant ladder creation) (NO var function)

 

about upgrade

version-up released on April 2000 responding to our customer's equiry.

1.calculation of special acount transaction of currency swap

2. figure out present value without accrued revenue(off-book P/L)
3.auto-generated functions of IMM roll transaction's payment date which was carried on manual operation before.

4.Expansion of auto-holiday-exclusion function untill 2025 in each market

5.alteration function of DayCountBasis when entry rate at any time.

Besides, other functions were upgrated to respond to customer's enquiry.

support@cosmac.com


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