In a first step we set up the risk factors (Interest, Equity, FX, Credit) as a list. These list also contains the historical values and the information up to what extent the information will be taken account in the calculation (number of principal components).
|Setup risk factors|
With a one-liner we can set up the Monte Carlo scenarios. All necessary information, not explicitly passed will be calculated, for example the correlations between the risk factors.
|Generating Monte Carlo scenarios, necessary parameters are calculated automatically from the market data.|
Now the scenarios will be applied to a single instrument. Using UnRisk Financial Language it would be of course possible to apply the scenarios to arbitrary portfolios.
|With the time series command one can specify which risk factors will be applied.|
|The actual market data set describes today's market data and is needed to create scenario deltas.|
|We will apply the scenario deltas to a fixed rate bond.|
|We calculate the scenarios deltas|
The results can be extracted easily by again providing high level commands.
|Scenario Delta Values for the fixed rate bond. Additionally one can of course get out the single risk factor scenario deltas.|
The above example shows how a programmatically elaborate task can be simplified significantly by using a domain specific language like UnRisk Financial Language.