value at risk mapping

Value at Risk (VaR)

Mapping to VaR:

from Products to PVT/EQT Software Release 5

Document Title Mapping to VaR: from Products to PVT/EQT, Software Release 5

Version 1.0

Status Final

Author Information Alexandre Riesch/Isidore Marcus/Michael Heintze/Marc Nunes/Glenys Lynn

Date Last Revised December 15, 1997

Mapping to VaR: from Products to PVT/EQT

MAPPING Version 1.0 December 15, 1997

I. INTRODUCTION 6

I.1 THE EQUITY POSITIONS FILE (EQT) 6

I.2 THE POSITION VALUES FILE (PVT) 6

I.3 POSITION RISK CODE AND POSITION VALUE 7

I.4 SPLITTING 8

I.5 THE P&L MATRIX (LOOKUP TABLE) 9

II. FOREIGN EXCHANGE 10

II.1 CURRENCY SPOT 10

II.2 CURRENCY FORWARD/FUTURE 12

II.3 CURRENCY OPTION 14

III. INTEREST RATE 16

III.1 GOVERNMENT BOND 17

III.2 CORPORATE BOND 19

III.3 BOND FUTURES 20

III.4 SWAP 21

III.5 EMERGING MARKET BOND 22

III.6 OPTION 23

III.6.1 CAP/FLOOR 23

III.6.2 SWAPTION 24

III.6.3 OPTION ON GOVERNMENT BOND 25

III.7 MORTGAGE BACKED SECURITIES 26

IV. EQUITY 28

IV.1 EQUITY BETAS 28

IV.1.1 Beta Source 29

IV.2 CASH PRODUCTS 29

IV.2.1 CASH EQUITY 29

IV.2.2 SWISS CERTIFICATES, ADRs, GDRs 30

IV.2.3 EQUITY INDEX SPOT 32

IV.3 FORWARD/FUTURE 33

IV.3.1 STOCK FORWARD/FUTURE 33

IV.3.2 STOCK INDEX FORWARD/FUTURE 34

IV.4 OPTION 35



IV.4.1 STOCK OPTION 35

IV.4.2 STOCK INDEX OPTION 36

IV.5 CONVERTIBLE 37

V. COMMODITY 38

V.1 PRECIOUS METAL 39

V.1.1 PRECIOUS METAL SPOT 39

V.1.2 PRECIOUS METAL FORWARD / FUTURE 40

V.1.3 PRECIOUS METAL OPTION 42

V.2 BASE METAL AND ENERGY 43

V.2.1 BASE METAL AND ENERGY FORWARD / FUTURE 43

V.2.2 BASE METAL and ENERGY OPTION 46

VI. SIMULATION BASED VALUE-AT-RISK AND NON-LINEAR RISK 47

VI.1 REPORTING P&L MATRICES FOR VALUE-AT-RISK CALCULATION 48

VI.1.1 WHO REPORTS P&L MATRICES ? 48

VI.1.2 AVOIDING DOUBLE COUNTING OF LINEAR POSITIONS 48

VI.1.3 LEVEL OF CALCULATION/ORGANIZATION 48

VI.1.4 THETA (TIME DECAY) 48

VI.1.5 GUIDELINES FOR MARKET SHOCKS (GRID SPACING) 48

VI.1.6 TERM STRUCTURE OF IMPLIED VOLATILITY 48

VI.1.7 SPECIFICATION OF THE LOOKUP TABLE BY PRODUCT GROUP 49

VII. GENERATING THE FEEDER FILE 50

VII.1 USING THE STATIC DATA EXTRACTION UTILITY 50

VII.1.1 POSITION RISK CODES NAMING CONVENTIONS 51

VII.1.2 RISK SENSITIVITY TYPE 53

VII.1.3 CURRENCY OF THE TIME SERIES 53

VII.1.4 MATURITY OF THE POSITION RISK CODE 53

VII.1.5 PRODUCT 54

VII.1.6 CURRENCY TO WHICH THE POSITION RISK CODE PERTAINS 56

VII.1.7 MATURITY IN MONTHS 56

VII.1.8 RATING OF THE CORPORATE ISSUING THE BOND 56

VII.1.9 TIME TO EXPIRATION OF THE OPTION 56

VII.1.10 REFERENCE CURRENCY IN CCY PAIR 56

VIII. GENERAL PRINCIPLES OF THE DATA FEED LOADERS 57

VIII.1 ENFORCING UNIQUENESS OF THE PVT/EQT POSITION 57

IX. SPECIFICATION FOR LOADING DATA INTO THE PVT TABLE 58

IX.1 DETAILED INFORMATION ABOUT THE PVT FILE 58

IX.2 POSITION VALUE CURRENCY CONVENTIONS 59

X. SPECIFICATION FOR LOADING DATA INTO THE EQT TABLE 60

X.1 DUMMY ISIN CODES 61



X.2 DEFAULT ISIN CODES FOR THE LOCATIONS 62

X.3 DETAILED INFORMATION ABOUT THE EQUITY POSITIONS FILE 63

X.4 AGGREGATION OF INPUT RECORDS 63

X.5 EQUITYBETAS AND EQUITY INDICES 63

XI. THE FX RATES FILE 64

XI.1 FILE LAYOUT 64

XI.2 ADDITIONAL SOURCE FOR EXOTIC FX RATES IN ZURICH 64

XI.3 SUMMARY OF THE “UNDERLYING CURRENCY” CONCEPT 64

XII. COLLECTION OF EQUITY BETAS 65

XII.1 DELIVERING EQUITY INFORMATION TO THE VAR SYSTEM 65

XII.2 MAINTAINING THE LIST OF ISINS AND DUMMY CODES 65

XII.3 HOW EQUITY INFORMATION IS DELIVERED 65

XII.4 FILE FORMAT FOR NEW RECORDS OR UPDATES 66

XII.5 FILE NAME SPECIFICATIONS 66

XII.6 BETA SOURCE CODES 67

XII.7 VALIDATION RULES 67

XII.8 BETA UPDATE FREQUENCY 67

XII.9 WHICH COUNTRIES DOES EACH LOCATION HAVE AUTHORITY OVER ? 68

XII.10 VALID COMBINATIONS OF COUNTRY CODE AND EQUITY INDEX 69

XII.11 SETTING THE BETA FEEDIDS AND THE BETA FEEDER CONTACTS 70

XII.12 NEW SET OF DUMMY ISINS USING THE COUNTRY CODE 70

XII.13 EQUITY SECTOR BREAKS 71

XII.14 FILE FORMAT FOR NEW SECTOR BREAK UPDATES 71

XII.15 SECTOR BREAK FILE FORMAT 71

XII.16 VALIDATION RULES FOR THE SECTOR BREAKS 71

XII.17 VALID MSCI EQUITY SECTORS CODES FROM BARRA 72

XIII. BANKING HOLIDAY PROCEDURE 73

XIII.1 INSURING A COMPLETE SET OF TRADING POSITIONS 73

XIII.2 DELIVERING HOLIDAY INFORMATION TO THE VAR SYSTEM 73



XIII.3 EXAMPLE OF GENERATING A HOLIDAYS INPUT FILE USING EXCEL 74

XIV. TESTING A NEW FEED 74

XV. REMOTE BANK DATAFEED 75

XVI. ADJUSTMENT (VAR CONTROLLER) FEED 75

XVII. WHO’S WHO IN VAR 76

XVIII. VAR FEEDS 77

XIX. IT TERMINOLOGY 82

XX. BUSINESS NAMING CONVENTIONS 83

XXI. REFERENCES 90



Modification History

Version 1.0 of the ‘Mapping to VaR’ document includes the non-linear part of the Value-at-Risk System (P&L matrices

delivery) which was introduced with Release 5.0 on November 4, 1997.

I. INTRODUCTION

The VaR calculator needs as input the sensitivity of all positions involving market risks. This sensitivity is expressed

for instance as the value of a basis point for interest rate products or as the number of shares for the equity business. This

manual explains what information is required by VaR (examples of what has to be sent to VaR is given for each product).

The methodology used in VaR involves the daily production of two files containing all market exposures. The first

one, which we call the “Equity positions Table” or “EQT” file will contain the list of all exposures to specific stocks. The

second one, the “Position Values Table” or “PVT” file, will contain all remaining exposures (interest rate, foreign exchange,

equity index, commodity and volatility). The format of these files is described in the chapters VIII and IX of this document.

Starting with Release 5.0, the standard non-linear risk matrices (the so-called P/L matrices) used by the Bank for

reporting options risks must be delivered to the VaR system with a sufficient level of granularity.

The simulation based framework introduced with Release 5.0 covers both the first order delta and vega risks, also referred as

linear risk, as well as the second order non-linear risks due to optionality in the portfolio.

I.1 THE EQUITY POSITIONS FILE (EQT)

This file contains records of all risks resulting from exposures to specific stocks at a level of aggregation determined by the

organization structure. A record in this file corresponds to the end-of-day inventory (number of shares) of a given equity as

indicated by its ISIN code and its ReptID (“Report ID”), which can be a trading portfolio or a desk. ReptIDs map to Business

Units in the Risk Delegation Hierarchy and to the Minor Business Lines. These risks are derived from positions taken in:

stocks

futures on a stock

options/warrants on a stock

convertible bonds

Example of an EQT record:

TradeDate RepID ISINcode FeedID # of shares MktPrice CaptPt Currency

12/24/1996 170017 CH0001361010 GEOP0002 1000 267 ZH CHF

(the full description of these field can be found in chapter IX).

In the case of an option/warrant on a stock, a future on a stock, or a convertible bond, only the delta expressed as an

equivalent number of stocks should be included into the EQT file. The interest rate and volatility sensitivity resulting from

these positions must be included in the PVT file.

I.2 THE POSITION VALUES FILE (PVT) The PVT file holds all interest rate, foreign exchange, equity index, commodity and volatility sensitivity at a level of

aggregation determined by the organization structure and the granularity of the GTRM reporting ladders. In short, this file

contains all risks coming from all exposures except those reported in the EQT file. The current PVT holds only linear

sensitivity.

The positions that have to be included in the PVT file are due to exposure in:

interest rate (bonds, convertible bonds, futures on interest rate, swaps, options on interest rate,...)

foreign exchange

stock index

commodity

implied volatility

The following figure shows the structure of the PVT file:

TradeDate RepID PRC FeedID PositionValue CapturePoint Currency

12/24/1996 10023 2231 NYFXdesy -1000000 NY GBP

(the full description of these fields can be found in chapter VIII).



I.3 POSITION RISK CODE AND POSITION VALUE

The PositionRiskCode and the PositionValue fields need to be explained in details. The risk associated to a position has to be

identified by a PositionRiskCode (PRC). Example of PRCs are:

“2226” (USD/DEM SPOT), “2294” (GOLD SPOT), “192” (DEM GOVT 7Y), “6409” (USD/FRF FX OPT 3M VOL)

This code ties the exposure to the Market Structure through 3 levels of classification:

Risk Class Broad Risk Type Commodity

Here some examples of how a PRC is hooked up in the Market Hierarchy:

PRCs are associated with time series, which determine the volatility and the correlation with other exposures. For instance,

PRC “2275” (DEM DAX CASH EQUITY) is associated with the time series “DEMEQT” (WEST GERMAN DAX INDEX -

CLOSE) which is in turn associated with the currency “DEM”.

Once the risks are identified for each product, a sensitivity to these risks has to be reported. This is represented by the

“PositionValue” field. The content of this field varies according to the type of risk:

Type of risk Content of PositionValue field

FX spot amount of currency

Equity index spot size of the exposure expressed in market value term

Commodity spot quantity held in position (in ounces for precious metals, USD for crude oil,...)

Interest rate change in the value of the portfolio for 1 bp increase in the corresponding interest rate (zero, par rate)

Volatility change in the value of the portfolio for 1% absolute increase in volatility

... ...

Look at the specific products sections for a full description of what has to be sent.



I.4 SPLITTING

Overview

In the case the sensitivity captured does not match the maturity ladder specified by GTRM, a splitting of the position should

take place.

The interest rate sensitivity is reported along the following maturity grid:

1M 2M 3M 6M 9M 12M 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 20Y 30Y

For Repo only, the following maturity grid has been retained:

ON 2D 1W 2W 1M 2M 3M 6M 9M 12M

Splitting the cash flows

The splitting of the cash flows should preserve both the PV and the sensitivity. The method how to perform the cash flow

splitting is described in details in 1 and 2.

Assume that there are two grid points at time ti and ti+1. A cash flow ct occurring at time t, lying between ti and ti+1, with a

discount factor DFt can be bucketed at ti and ti+1 in the following way:

ct t

t t

D F

D Fc

t

i

i i i

ti

( )

( )

1

1

ct t

t t

D F

D Fc

t

i

i i i

ti

1

1 1

( )

( )

Cash flows occurring before the first grid point are bucketed into the first maturity; equally, cash flows falling after the last

grid point are bucketed into the last maturity date.

In cases where the recommended solution is too difficult to implement, a simple work around solution consists in mapping

the sensitivity to the nearest available maturity bucket (e.g. maturities from 10.5 month to 1.5 year are mapped to the 1 year

grid point).

Splitting the Vega and the PVBP

The splitting of the vega and the PVBP is done using the pro-rata temporis rule:

Ex:

A vega falling at time t between the maturity grid points ti and ti+1 should be split in the following way:

v e g at t

t tv e g a

t

i

i i

ti

( )

( )

1

1

v e g at t

t tv e g a

t

i

i i

ti

1

1

( )

( )

The following chapters gives examples of how risks for selected products must be entered in the PVT/EQT files.



I.5 THE P&L MATRIX (LOOKUP TABLE)

Portfolios which carry non-linear risk and which currently report the linear sensitivities to the VaR system are required to

report in addition a P&L lookup table to the simulation based calculator. The linear part of their risk will still be captured

through the PVT/EQT interface and the P&L lookup table will only serve to calculate the non-linear add-on. Therefore, term-

structure risk of yield curves and volatilities are captured through the linear VaR, same as the specific risk of equities.

In order to avoid double counting of linear positions, there is additional information needed, either

a) an additional linear matrix which corresponds to the positions fed through the PVT/EQT interface,

or

b) a description (linear equation) in the matrix feed which allows the construction of the linear matrix in the VaR System.

Below, a sample of a P&L matrix file:

[Header]

TradeDate=05/01/1996

FeedID=NYGXDNL

CapturePoint=NY

[PLMat]

ReptID=10001

PRC=8001

NumberofAxes=2

Axis1Desc=AUD/DEM Spot

Axis2Desc=AUD/DEM Vol

Axis1Size=9

Axis2Size=5

Axis1Eqn=(1 + P2222)/(1 + P2226) - 1

Axis2Eqn=P6000

Theta=15000

ThetaPRC=8005

Currency=USD

Fvalue=(1.076, 9.4, 3175011.0)

Fvalue=(1.076, 11.1625, 4341187.0)

Fvalue=(1.076, 11.75, 4731247.0)

Lvalue=(1.076, 9.4, 175011.0)

Lvalue=(1.076, 11.1625, 341187.0)

Lvalue=(1.076, 11.75, 731247.0)

[PLMat]

ReptID=10002

PRC=8001

NumberofAxes=2

Axis1Desc=AUD/CHF Spot

Axis2Desc=AUD/CHF Vol

Axis1Size=9

Axis2Size=5

Axis1Eqn=(1 + P2222)/(1 + P2225) - 1

Axis2Eqn=P6000

A comprehensive discussion of how to deliver non-linear information to the VaR System (full P&L matrices, linear P&L

matrices, Theta) is provided in reference 5.



II. FOREIGN EXCHANGE

INTRODUCTION

The methodology used to compute VaR consists in looking at volatility and correlations of time series. For FX spot positions,

the time series taken into account are the one of “currency against USD” spot.

As a result, the risk in holding a DEM position is identified with the PRC “2226 “ (USD/DEM SPOT). The risk in holding a

USD amount is identified with the PRC “3029 “ (USD/USD SPOT).

Synthetic FX position

Having the FX position of the base currency, in the PVT file, is required even if it carries no risk because the core of the

calculator measures all currency exposures against USD. Therefore, all FX positions, even those not “at risk” (i.e. base

currency), should be sent to the VaR system. If the sum of all FX positions for a specific RepID, converted into the base

currency does not equal zero (using end-of-day FX spot rates), a synthetic position in the base currency is generated by the

system to set this sum to zero. Hence, the creation of the synthetic position handles the case where the position in the base

currency is not sent to the VaR system.

II.1 CURRENCY SPOT

Overview

When holding a spot currency position, the amount of currency held must be included in the PVT. If the FX position is

expressed in term of cross currency exposure, it has to be decomposed into 2 positions corresponding to the positions in

the two respective currencies.

What has to be included in the PVT

Consider a currency spot position. The amount of currency held should be input in the “PositionValue” (Pval) field. For

each exposure, an appropriate PRC, corresponding to the PositionRiskName “USD/currency SPOT” must be assigned.

The record in the PVT file should look like:

TradeDate RepID PositionRiskCode FeedID PositionValue CapturePoint Currency

12/24/1996 xxxxxx PRC xxxxxx PVal xx Curr1

A few PRCs are shown in the table below:

Exposure to the FX spot rate:

PRC Position Risk Name

2225 USD/CHF SPOT

2226 USD/DEM SPOT

2230 USD/FRF SPOT

2231 USD/GBP SPOT

3029 USD/USD SPOT

... ...



Examples

Ex1: Short FX spot position of 1 million GBP with SpotGBP/CHF = 2.3025

1 record in the PVT file has to be created:

PositionRiskName PRC PositionValue

USD/GBP SPOT 2231 Quantity of GBP = -1000000

Note that in this case, the financing of this position is assumed to be done in the base currency. If this position is not

transmitted and if, for instance, the base currency is CHF, a position equal to: 1000000/2.3025 = 434310 CHF will

be created automatically.



12/24/1996 xxxxxx 2231 xxxxxx -1000000 xx GBP

Ex 2: Long 1 million FRF/DEM (long FRF, short DEM) with SpotDEM/FRF = 3.3925

In this case, the FX position is expressed in terms of FX-cross exposure. It needs to be decomposed into two

amounts of currency corresponding to the exposure in both currency. Therefore, 2 records must be generated in the

PVT file:


USD/FRF SPOT 2230 Quantity of FRF = 1’000’000 FRF

USD/DEM SPOT 2226 (-1)Quantity of FRF / SpotDEM/FRF

= -294’768 DEM

The records in the PVT file should look like:


12/24/1996 xxxxxx 2230 xxxxxx 1000000 xx FRF

12/24/1996 xxxxxx 2226 xxxxxx -294768 xx DEM

Ex 3: Long 1 million USD/DEM (long USD, short DEM) with SpotUSD/DEM = 1.5560

In this case, the FX position is expressed in terms of FX-cross exposure. It needs to be decomposed into two

amounts of currency corresponding to the exposure in both currency. Therefore, 2 records must be generated in the

PVT file:


USD/USD SPOT 3029 Quantity of USD = 1’000’000 USD

USD/DEM SPOT 2226 (-1)Quantity of USDSpotUSD/DEM

= -1’556’000 DEM



12/24/1996 xxxxxx 3029 xxxxxx 1000000 xx USD




II.2 CURRENCY FORWARD/FUTURE

Overview

The FX forward/future risk has to be decomposed into a sensitivity to USD/Currency spot rates and a sensitivity to

interest rates.


Consider a currency forward position on the cross-currency curr1/curr2, with maturity t. This forward position must be

decomposed into the following 4 exposures, each of these identified with an appropriate PRC:

Exposures to USD/Currency rate:

USD/Currency1: PVal1 = D F C Ft cu rr cu rr

t

,*

1 1

USD/Currency2: PVal2 = D F C Ft cu rr cu rr

t

,*

2 2

Exposures to Libor Interest ratecurrency,t :

Libor Interest ratecurrency1,t : PVal3 = P V B P C Fc u r r

t( )

1

Libor Interest ratecurrency2,t : PVal4 = P V B P C Fc u r r

t( )

2

with: D Ft c u r r x,

: Discount factor using the interest rate of the currency x and the maturity t.

C Fc u r r x

t : Cash flow in currency x falling at time t.

P V B P ( ) : Change in the portfolio value when the interest rate increases by 1 basis point.



25/06/1995 xxxxxx PRC1 xxxxxx PVal1 xx Curr1





Exposure to the USD/Currency spot rate:


2225 USD/CHF SPOT

2226 USD/DEM SPOT

2230 USD/FRF SPOT

3029 USD/USD SPOT

... ...

Exposure to the Libor interest ratecurrency,t :


572 CHF LIBOR 1M

573 CHF LIBOR 2M

... ...

300 DEM LIBOR 1M

301 DEM LIBOR 2M

... ...



Example

Ex 1: Long 1 million DEM/FRF 6 month forward

with: 6mth DEM Libor = 3.59%

6mth FRF Libor = 3.25%

FRF/DEM 6mth forward = 3.3975

D Fm th D E M6 ,

= 1/(1+0.0359/2) = 0.982

D Fm th F R F6 ,

= 1/(1+0.0325/2) = 0.984

Generate 4 records in the PVT file with:


USD/DEM SPOT 2226 D F C Fm th D E M D E M

m th

6

6

,*

= 0.9821’000’000 = 982’000

USD/FRF SPOT 2230 D F C Fm th F R F F R F

m th

6

6

,*

= 0.984-3’397’500 = -3’343’140

DEM LIBOR 3M 303 P V B P C FD E M

m th( )

6

=-48

FRF LIBOR 3M 1119 P V B P C FF R F

m th( )

6

=163



25/06/1995 xxxxxx 2226 xxxxxx 982000 xx DEM

25/06/1995 xxxxxx 2230 xxxxxx -3343140 xx FRF


25/06/1995 xxxxxx 1119 xxxxxx 163 xx FRF



II.3 CURRENCY OPTION Overview

Currency option risk has to be decomposed into the following components: the delta of the option expressed as two

equivalent spot positions in the respective currencies, the sensitivity to +1 bp move of the corresponding interest rates

and the sensitivity to a 1% absolute increase in volatility of currency1/currency2 spot rates.


Consider a currency option on the cross-currency curr1/curr2, with maturity t. This option must be decomposed into the

following exposures:

Exposure to USD/Currency spot rate:

USD/Currency1: PVal1 = Equivalent spot exposure corresponding to currency1

USD/Currency2: PVal2 = Equivalent spot exposure corresponding to currency2

Exposure to Volatilitycurrency1/currency2, t:

Volatilitycurrency1/currency2, t PVal3 = Sensitivity to a 1% absolute increase in volatility, with a time horizon t,

of currency1/currency2

Exposure to Libor Interest ratecurrency:

Libor Interest ratet,currency1: PVal4 = Sensitivity to 1 bp increase in the corresponding interest rate.

Libor Interest ratet,currency2: PVal5 = Sensitivity to 1 bp increase in the corresponding interest rate.











2225 USD/CHF SPOT

2226 USD/DEM SPOT

2230 USD/FRF SPOT

3029 USD/USD SPOT

... ...

Exposure to the Libor interest ratet, currency:


572 CHF LIBOR 1M

573 CHF LIBOR 2M

... ...

300 DEM LIBOR 1M

301 DEM LIBOR 2M

... ...

Exposure to the FX volatilityt, currency:


8318 DEM/ITL FX OPT 1M VOL

8319 DEM/ITL FX OPT 2M VOL

... ...

The available maturity buckets are: 1 month, 2m, 3m, 6m, 9m, 12m, 2y, 5y, 10y



Example

Ex: 1 option to buy 1’000’000 DEM with ITL / maturity = 3 mth / strike = 1100

with:

FX spot USD/ITL = 1600 FX spot USD/DEM = 1.5 Vol. DEM/ITL =14.4%

delta12= 0.568 vega12 = 2’140’000 ITL for a 1% abs increase in volatility DEM/ITL

delta transformation:

Spot exposure in DEM = 1’000’0000.568 = 568’000 DEM

Spot exposure in ITL = -1’000’0000.5681600/1.5 = -606’000’000 ITL

vega = sensitivity to a 1% abs increase in volatility = 2’140’000 ITL



USD/DEM SPOT 2226 Spot exposure in DEM

USD/ITL SPOT 2234 Spot exposure in ITL

DEM LIBOR 3M 302 Sensitivity to 1 bp increase in the DEM Libor 3months

ITL LIBOR 3M 438 Sensitivity to 1 bp increase in the ITL Libor 3months

DEM/ITL FX OPT 3M VOL 8320 Sensitivity to a 1% absolute increase in volatility of DEM/ITL 3months



25/06/1995 xxxxxx 2226 xxxxxx 568’000 xx DEM

25/06/1995 xxxxxx 2234 xxxxxx -606’000’000 xx ITL

25/06/1995 xxxxxx 302 xxxxxx -1’477 xx DEM

25/06/1995 xxxxxx 438 xxxxxx 1’446’000 xx ITL

25/06/1995 xxxxxx 8320 xxxxxx 2’140’000 xx ITL



III. INTEREST RATE

INTRODUCTION

The products sensitive to interest rates should be incorporated in the PVT in the following way:

The interest rate sensitivity is the change in the present value of the portfolio following a one basis point upward shift in

the interest rate. Since the methodology adopted consists in looking at the volatility of “benchmark” interest rates (e.g.

swap rate, government rate, Libor rate, ...) the sensitivity must be reported accordingly (+1 bp shift of the par yield for

maturity 1year, +1 bp shift of the zero rate for maturity 1year) of the appropriate daycount and compounding

convention.

The interest rate sensitivities are reported according to the following maturity grid points.

1M 2M 3M 6M 9M 12M 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 20Y 30Y

For Repo only, the following maturity grid has been retained:

ON 2D 1W 2W 1M 2M 3M 6M 9M 12M

In the case where the interest rate sensitivity falls between 2 maturity grid points, it has to be split. The method how to

split the sensitivity is given in the chap. “I.4 Splitting”.

The interest rate sensitivity is reported according to the currency and the Commodity Name of the product (e.g. govt,

corporate, ...). Corresponding Position Risk Codes have been defined to cover the different currencies and Commodity

Names.

Below, some Commodity Names that are defined in the Market Hierarchy:

GOVT: government interest rate

LIBOR: Libor interest rate

CORPORATE: corporate interest rate (defined by sector and rating for USD exposures)

AGENCY: agency interest rate

GOVT Future: government interest rate exposure resulting from a position in interest rate futures

GOVT Options: government interest rate exposure resulting from a position in interest rate options

...

Note that Commodity Names representing interest rate spreads have been defined for some markets (e.g. government-swap

spread) in order to better capture the risk taken in spread positions. Explanations on how to capture spread positions in VaR

can be found under the instruments concerned.



III.1 GOVERNMENT BOND

Overview

A government bond portfolio is represented through its par yield sensitivity (1 bp increase in the corresponding interest

rate) and must be included in the PVT file. Alternatively, non-USD positions can be expressed in term of a sensitivity to

the swap rate and a sensitivity to the swap-government spread (not yet available for CHF and JPY).


Consider a government bond in currency1 with maturity t. This bond is represented through its par yield sensitivity

according to the pre-defined maturity buckets (see chap. III Interest rate Introduction). Two different methods exist to

report the sensitivity of the bond:

1) Report the par yield sensitivity of the government bond, along with the PRC corresponding to the government bond.

PRCs that are used to capture government interest rate exposures are defined for different currencies and the

maturity grid.

The record in the PVT file should looks like:



with: PRC1 = PRC corresponding to an exposure in government interest rate

PVal1 = par yield sensitivity to a +1 bp move in the interest rate corresponding to PRC1.

2) For non-USD sensitivity only: report the par yield sensitivity of the government bond with the PRC of a Libor rate

together with the sensitivity to the yield spread swap-government with its PRC.





with : PRC1 = PRC of the swap interest rate


PRC2 = PRC of the swap-government spread.

PVal2 = sensitivity to a 1 bp decrease in the swap-government spread corresponding to PRC2.


Exposure to the government interest ratet, currency:


453 CHF GOVT 1M

454 CHF GOVT 2M

189 DEM GOVT 4Y

Exposure to the government-swap spreadt, currency:


7214 DEM GOVT SPREAD TO SWAP 1M

7222 DEM GOVT SPREAD TO SWAP 4Y

Exposure to the swap interest ratet, currency:


300 DEM LIBOR 1M

308 DEM LIBOR 4Y



Example

Long 10 millions notional government bond 6% DEM with 4 years to maturity.

The sensitivity of this bond is expressed as the par yield sensitivity, in this case -300 DEM when the interest rate

increases by 1 bp, associated with the PRC representing the DEM 4Y government bond.



12/25/1996 xxxxxx 189 xxx -300 xx DEM

Alternatively, this exposure can be expressed as the par yield sensitivity of the bond, in this case -300 DEM,

associated with the PRC representing the DEM 4Y Libor, together with the opposite sign sensitivity (+300 DEM),

associated with the PRC representing the DEM 4Y Govt spread to swap.

The change of sign of the sensitivity is due to the fact that the spread is defined as ‘swap minus government’

(a 1 bp increase in the government interest rate implies a reduction of the swap-government spread).


12/25/1996 xxxxxx 308 xxx -300 xx DEM

12/25/1996 xxxxxx 7222 xxx 300 xx DEM



III.2 CORPORATE BOND

Overview

A corporate bonds portfolio is reported through its par yield sensitivity (+1 bp increase in the corresponding interest rate)

and must be included in the PVT file. Alternatively, the sensitivity can be expressed in terms of a sensitivity to the

government rate and a sensitivity to the corporate-government spread.


Consider a corporate bond in currency1 with maturity t. This bond is reported through its par yield sensitivity along the

pre-defined maturity buckets . There are two methods to report the sensitivity of a corporate bond:

1) Report the par yield sensitivity of the corporate bond, along with the PRC of the corporate bond. PRCs used to

capture the corporate interest rate exposures are defined for different currencies and the maturity grid. Note that

the PRCs for “USD corporate interest rate” are defined for different sectors and agency ratings.




with: PRC1 = PRC corresponding to an exposure in corporate interest rate


2) For USD sensitivity only: report the par yield sensitivity of the government bond, along with the PRC of a

government bond, together with the sensitivity to the corporate-government spread, along with its PRC.

For non-USD sensitivity: report the par yield sensitivity of the government bond, along with the PRC of a Libor

rate, together with the sensitivity to the corporate-swap spread, along with its PRC.





with : PRC1 = PRC of the government interest rate for USD spreads (swap interest rate for non-USD spreads)


PRC2 = PRC of the corporate-government spread for USD (corporate-swap spread for non-USD).

PVal2 = sensitivity to a 1 bp increase in the corporate-swap spread corresponding to PRC2.


Exposure to the corporate interest ratet, currency:


249 DEM CORPORATES 1M

5895 USD AAA CORPORATE BANK/FINANCE 1M


Exposure to the corporate-swap spreadt, currency:


7129 BEF A INDUSTRIAL SPREAD TO SWAP 1M

7130 BEF A INDUSTRIAL SPREAD TO SWAP 2M



572 CHF LIBOR 1M

573 CHF LIBOR 2M



III.3 BOND FUTURES

A bond futures position is treated like a position in the underlying bond (usually a government security) through its par yield

sensitivity. However, the position is not generated by a particular physical bond, but rather by one of the eligible bonds, the

Cheapest-to-Deliver, whose price must be corrected (divided by a conversion factor provided by the exchange) to take the

definition of the notional underlying into account.



III.4 SWAP

Overview

The swap is reported through its net par rate sensitivity (1 bp increase in the corresponding interest rate) and must be

included in the PVT file. Equally, currency swaps (CRS) report interest rate sensitivity and no FX exposure (since the

principals are exchanged at the start and at the end of the transaction at the same exchange rate).


Consider a swap:

this swap is reported through its par yield sensitivity along the pre-defined maturity buckets.

Par rate sensitivity is defined as follows:

Every rate on the yield curve is shifted separately by +1 bp in order to calculate a new set of discount factors. The

difference in present value (PV) of the portfolio due to this shift is an element of the sensitivity vector, i.e. the sensitivity

of the portfolio to a particular par rate (see also in references 1 and 2).

PRC corresponding to Libor interest rate are defined according to the currency and the maturity grid.







572 CHF LIBOR 1M

573 CHF LIBOR 2M

... ...

300 DEM LIBOR 1M

301 DEM LIBOR 2M

... ...



III.5 EMERGING MARKET BOND

Overview

For most of the emerging market bonds, the risk parameter chosen is not the volatility of the corresponding interest rate

but rather the volatility of either the specific bond or of the J.P.Morgan indices (EMBI+ , LEI, …). This mehtod has been

choosen in accordance with market practices. Therefore, VaR needs as input the market value of these positions and not

the yield sensitivity. However, as these markets become more mature, yield sensitivity will gradually become the

standard. VaR methodology will then follow the conventions.


Consider an emerging market bond. The market value of the position and the PRC of this specific bond must be included

in the PVT file. If the bond has not been defined in the VaR system, the PRC of the corresponding market index should

be used.





Exposure to specific Emerging Markets bonds:


6675 ARGENT-BEAR-FRB 0 03/31/05

6676 ARGENTINA - PAR 0 03/31/23 L-GP

6737 YABS BOSNIA 1/4 0 07/15/06 06H

... ...

Exposure to Emerging Market bond indices:


6755 ARGENTINA EUROBONDS

6756 ARGENTINA LOCAL MARKET

6757 BRAZIL EUROBONDS

6758 BRAZIL LOCAL MARKET

6759 BULGARIA EUROBONDS

6760 BULGARIA LOCAL MARKET

6761 ECUADOR EUROBONDS

6762 ECUADOR LOCAL MARKET

6763 MEXICO EUROBONDS

6764 MEXICO LOCAL MARKET

6765 MOROCCO EUROBONDS

6766 MOROCCO LOCAL MARKET

6767 NIGERIA EUROBONDS

6768 NIGERIA LOCAL MARKET

6769 PANAMA EUROBONDS

6770 PANAMA LOCAL MARKET

6771 PERU EUROBONDS

6772 PERU LOCAL MARKET

6773 PHILIPPINES EUROBONDS

6774 PHILIPPINES LOCAL MARKET

6775 POLAND EUROBONDS

6776 POLAND LOCAL MARKET

6777 RUSSIA EUROBONDS

6778 RUSSIA LOCAL MARKET

... ...



III.6 OPTION

III.6.1 CAP/FLOOR

Overview

A cap or a floor are reported through their interest rate sensitivity (1 bp increase in the corresponding interest rate), and

the sensitivity to a 1% absolute increase in the volatility of the cap/floor (yield volatility).






Where: Pval1 is the sensitivity of the position to a 1 bp increase in the corresponding interest rate expressed in currency1

Pval2 is the sensitivity to a 1% absolute increase in the volatility (vega).




572 CHF LIBOR 1M

573 CHF LIBOR 2M

... ...

300 DEM LIBOR 1M

301 DEM LIBOR 2M

... ...

Exposure to the cap volatility:


5684 USD 3M LIBOR IMPLIED VOL CAP 1Y

5685 USD 3M LIBOR IMPLIED VOL CAP 2Y

... ...



III.6.2 SWAPTION

Overview

A swaption is reported through its interest rate sensitivity (1 bp increase in the corresponding interest rate) and the

sensitivity to a 1% absolute increase in the volatility of the swaption (yield volatility).











572 CHF LIBOR 1M

573 CHF LIBOR 2M

... ...

300 DEM LIBOR 1M

301 DEM LIBOR 2M

... ...

Exposure to the swaption volatility:


5684 USD SWAPTION 3M OPT 2Y SWAP VOL

5685 USD SWAPTION 6M OPT 2Y SWAP VOL

... ...



III.6.3 OPTION ON GOVERNMENT BOND

Overview

An option on a government bond is reported trhough its par yield sensitivity (1 bp increase in the corresponding interest

rate), and the sensitivity to a 1% absolute increase in the volatility (price volatility).









Exposure to the government interest ratet, currency1:


453 CHF GOVT 1M

454 CHF GOVT 2M

... ...

181 DEM GOVT 1M

182 DEM GOVT 2M

... ...

Exposure to the government bond volatility:


6020 AUD GOVT BOND OPT 2Y VOL

6021 AUD GOVT BOND OPT 5Y VOL

... ...



III.7 MORTGAGE BACKED SECURITIES

Overview

The Mortgage Backed securities businesses in North America are broken into 5 major units. These are Adjustable Rate

Mortgages, Arbitrage Trading, Collateralized Mortgage Obligations and Mortgage Derivatives, Pass Throughs, and

Project Loans and Commercial Real Estate. Each of these businesses contain non-linear risk. As such, A PVT file

containing linear sensitivities as well as a MAT file containing non-linear matrices of PL effects for these businesses

must be constructed and delivered on a daily basis.

What needs to be included in the PVT

A mortgage-backed security contains interest rate, prepayment, and vega risk. Therefore, the PVT file for all of the

businesses should reflect these sensitivities. Therefore, the following sensitivities will be computed and delivered on a

daily basis:

Description Position Risk Name Position Risk Code

2 Year Treasury sensitivity USD GOVT 2Y 7



10 Year bond options implied volatility USD GOVT BOND OPT 10Y VOL 3018

2 Year Mortgage Backed Spread sensitivity USD MBS SPREAD RISK 2Y 4115



Here N Year Treasury sensitivity is defined as the net PL effect of bumping the N-maturity on the run treasury yield up

one basis point . The entire book is repriced to give this PL. The 10 Year bond option implied volatility sensitivity is the

defined as the net PL effect of bumping the implied volatility of 10 year bond futures options contracts by 1 percent. The

N Year MBS Mortgage Backed Spread sensitivity is defined as the net PL effect of bumping the N-maturity OAS spread.

Only purely mortgage securities and their derivatives are repriced in this scenario. This sensitivity is a measure of the

market’s view of prepayment risk.



25/06/1995 xxxxxx PRC1 xxxxxx Pval1 xx Curr1

In the case of Mortgages, the Report Ids and the corresponding businesses are as follows:

10044 Collateralized Mortgage Obligations and Mortgage Derivatives

10047 Mtg to be Announced; Passthroughs

21027 Project Loans and Commercial Real Estate

21028 Arbitrage Trading

10049 Adjust Rate Mortgages

In all cases the reporting currency is USD. The FeedId is NYMBlin, and the Capture Point is NY.



What needs to be included in the MAT

As stated before, all of the mortgage businesses contain non-linear risk. Therefore, the MAT file should contain full

(non-linear) matrices for each of the businesses. In addition, the file should contain an equation which will specify how to

construct the linear matrix from linear sensitivities. In the case of each business, the equation should be the following:

LinEqn1=(P7+P10+P15)*100

This allows for the clean and consistent construction of a linear matrix from the linear 2Y, 5Y, and 10Y treasury

sensitivities.

The matrices will be one dimensional and have 7 grid points corresponding to +-25,+-50, and +-100 basis point parallel

shocks to the US Treasury yield curve. In particular, matrix population is achieved through sequentially performing the

above shocks to the yield curve and then computing the PL effects of these shocks through full-blown revaluation of the entire

book.

The PL lookup during the Monte Carlo simulation will be performed by using the following axis equation in each case:

Axis1Eqn=+(L1+L2+L3+L4+L5+L6+L7+L8+L9+L10+L11+L12+L14+L13+L15+L16+L17)/1700

This specifies that the simulation engine take the average of absolute US Treasury yield changes over all points on the

yield curve for any given random scenario. The FeedId for the Mortgage MAT file is NYFINL3. The Capture point is NY,

the nonlinear interest rate risk PRC is 8002, and the interest rate ThetaPRC is 8006. Therefore, the MAT file should look like

the following:

[Header]

TradeDate=11/07/1997

FeedId=NYFINL3

CapturePoint=NY

[PLMat]

ReptID=21028

PRC=8002

NumberofAxes=1

Axis1Desc=Treasury Curve for Arb Trading

Axis1Size=7

Axis1Eqn=+(L1+L2+L3+L4+L5+L6+L7+L8+L9+L10+L11+L12+L14+L13+L15+L16+L17)/1700

LinEqn1=(P7+P10+P15)*100

Theta=0.000000

ThetaPRC=8006

Currency=USD

Fvalue=(1,-1264740)

Fvalue=(0.5,121454)

Fvalue=(0.25,263541)

Fvalue=(0,0)

Fvalue=(-0.25,-781186)

Fvalue=(-0.5,-2205830)

Fvalue=(-1,-6021380)



IV. EQUITY

Exposures related to an equity index and exposures due to risks associated with specific stocks are treated in different ways.

The exposure to the equity index must be captured in the PVT file with a PRC corresponding to the stock index and a

position correponding to the market value.

The exposure to a cash stock must be captured in the EQT file. The parameters requested to identify the stock and the

exposure are: the ISIN code of the stock, the number of shares held in the portfolio and the stock price.

Note that the Beta feed which contains Beta and Volatility for each ISIN code defined is under the reponsibility of the

location. If the total volatility corresponding to an ISIN code is not defined, it will be assumed to be equal to 5/3 of the

volatility of the underlying stock index.

IV.1 EQUITY BETAS The method used to capture equity risk in the VaR System is based on the Capital Asset Pricing Model (CAPM), a single

factor model based on the stock index volatility.

The Capital Asset Pricing Model asserts that the expected excess return on securities is proportional to their systematic

risk coefficient or Beta (); the market portfolio (diversified portfolio) being characterized by a Beta of unity.

Diversification reduces security-specific risk, but does not eliminate all risk because stocks tend to move up and down

with the market.

T o ta l R is k

Ris

k o

f P

ortf

oli

o

N um be r o f S to cks in P o rtfo lio

S ys tem a tic (M arke t R isk )

Re

sid

ua

l

Ris

k Ra

te o

f R

etu

rn

B e ta

1 20

R isk -F re e R a te

M a rke t P o rtfo lio

M a rke t R e tu rn

2 %

The CAPM implies that the total return on any security is:

Hence, returns for any stock or portfolio will be related to Beta, the exposure to undiversifiable systematic risk. The Beta is

defined as follows:

C o v r r

V a r ia n c e r

s to c k m a r k e t

m a r k e t

s to c k m a r k e t

s to c k

m a r k e t

(~

,~

)

(~

)/

where:

~r

s to ck = return on particular asset (security)

~r

m a rke t = return on market portfolio

stock/market = correlation between the stock and the market index

which is equivalent to the following definition:

(note: the latter definition only applies in the theoretical case where the numbers are based on an unweighted volatility for

the index and the stock).

The stock variance (2

stock) is therefore the sum of the market variance and the stock specific variance:

2 2 2 2 2 2

s to c k in d e x sp e c ific r is k m a rk e t r is k sp e c ific r is k _ _ _

Total Return = Risk Free Return + (Market Return - Risk Free Return) *

= slope of the regression line between the return on the stock and the return on the index



IV.1.1 Beta Source

The Beta should be calculated using the ‘exponential weighting method’ and weekly returns (average over 5 business days)

described in reference 3 in order to be consistent with the VaR methodology.

In the case this is not possible, the Predicted Beta computed by the Barra system for multi-factor models is also suitable.

However, inconsistencies may occur in the VaR calculation, since the stock specific risk will be calculated out of the total risk

(delivered together with the Beta) and the market risk (computed by the VaR team), and those estimators won’t be based on

the same premises.

IV.2 CASH PRODUCTS

IV.2.1 CASH EQUITY

Overview

An exposure to a stock is captured through its ISIN code, the number of shares held in the portfolio and the stock price.

This exposure is entered in the EQT file.


The records in the EQT file should look like:

TradeDate RepID ISINcode FeedID of shares MktPrice CaptPoint Currency (optional)

25/06/1995 xxxxxx xxxxxxxxx xxxxxx xxx xxx xx xxx

Table extract:

ISIN code Name

CH0012345565 UBS Bearer

NL3423544 Heineken

US0003330303 IBM

US003423003 Microsoft

...

Example

Long 1’000 UBS Nom. Shares ISIN Code : CH0001361010

Short 2’000 IBM Shares ISIN Code : US4592001014


TradeDate RepID ISINcode FeedID of shares MktPrice CaptPoint CCY (optional)

25/06/1995 xxxxxx CH0001361010 xxxxxx 1000 267 xx CHF

25/06/1995 xxxxxx US4595001014 xxxxxx -2000 107 xx USD

Particular cases

For the case where the equity position has no ISIN code defined, a “dummy” ISIN code has to be used. This “dummy”

ISIN code should be used only temporarily until an appropriate ISIN code is defined. The Beta for the stocks represented

by these ISIN is equal to 1 and the total stock volatility equals 5/3 (1.67) of the volatility of the corresponding market

index.

Example

Long 1’000 Alex SA Shares (France) Price 421 FRF ISIN Code : FRAAAAAAAA

TradeDate RepID ISINcode FeedID of shares MktPrice CaptPoint CCY (opt.)

25/06/1995 xxxxxx FRAAAAAAAA xxxxxx 1000 421 xx FRF



IV.2.2 SWISS CERTIFICATES, ADRs, GDRs

Introduction

The method to capture the Swiss certificates, ADRs and GDRs in VaR depends on the GCET country rating of the

underlying stock. For companies domiciled in a Country rated 1 or 2 according to this rating, the ADR/GDR/Certificate

is considered fungible with the underlying stock and a position in ADRs/GDRs can be fully netted against the stock.

Therefore, there is no need for a separate ISIN code for the ADR. However, since the ADR/GDR/Certificate is traded in

another currency than the underlying stock, a currency risk has to be reported.

In the other case, when the homecountry of the underlying stock is rated less than 2 (3-10), the ADR/GDR/Certificate has

to be treated as an asset on its own. In this case, the ADR is mapped on the market index of the respective exchange (e.g.

S&P500 for ADRs traded at the NY stock exchange) and the full specific risk with respect to this index is included in

VaR. This method ensures that where capital transfert or share ownership restrictions prevent arbitrage between ADR

and stock, the spread risk is properly captured.

See in chapter “IV.1CASH EQUITY” on how to build a record in the EQT file and “II 1. CURRENCY SPOT” on how

to report currency exposure.


GCET Country Rating >2

This method considers the ADR and the underlying stock as two separate assets, with their own specific risk and market

risk. Therefore, the VaR of a portfolio long ADR and short stock and with a currency hedge will not be equal to zero.

EQT file:

Report the ADR position with its own ISIN code, which is mapped to the stock index of the country

corresponding to the currency of the ADR.

Ex: Long 1 Swiss certificate Philip Morris quoted in CHF, funding in CHF with: Philip Morris Swiss certificate ISIN CH0009622215 Price = 151.8 CHF USD/CHF = 1.3678

US Stock ISIN US7181541076 Price = 111 USD

Send 1 file to VaR:

(EQT file)

Qty ISIN MktPrice Currency

1 CH0009622215 151.8 CHF



GCET Country Rating 1 or 2

This method should be used only when the ADR and the stock react as a same stock, simply linked with the FX exchange

rate. As the same ISIN code is used to capture both the stock and its ADR, the specific risk (and the market risk) will

offset when one is long one and short the other.

EQT file:

- map the ADR position to the ISIN code representing the stock (beware to adjust for quantity if the ADR and the

stock are not 1 to 1).

PVT file:

- report the currency exposure.

Ex: Long 1 Swiss certificate Philip Morris quoted in CHF, funding in CHF with: Philip Morris Swiss certificate ISIN CH0009622215 Price = 151.8 CHF USD/CHF = 1.3678

US Stock ISIN US7181541076 Price = 111 USD

Send 2 files to VaR:

EQT file

Qty ISIN MktPrice Currency

1 US7181541076 111.0 USD

PVT file

PVal PRC Currency (optional)

111.0 USD/USD Spot rate USD

-151.8 USD/CHF Spot rate CHF

As of November 1, 1997, the following countries had been assigned rating 1 or 2:

EU/EFTA, Finland

USA, Canada

Japan, Singapore, Taiwan, Australia, Hong Kong, New Zealand

For an up-to-date list of Country Ratings please call the VaR Business Suport.



IV.2.3 EQUITY INDEX SPOT

Overview

An exposure to a stock index must be captured in the PVT file in terms of market value, expressed in the currency of the

index.

Alternatively, it can be captured in the EQT file. In this case, an “artificial” ISIN code must be created, associated with

the Total Risk and the Beta. If the Total Risk defined for this ISIN equals the volatility of the stock index and the Beta is

set to 1.0, both method will lead to the same VaR exposure (no stock specific risk).


The parameters to send are the market value of the exposure to the stock index, along with the PRC corresponding to this

index.


TradeDate RepID PositionRiskCode FeedID PositionValue CapturePoint Currency (optional)


with: PVal1 = Market value of the position expressed in Curr1

Curr1 = Currency of the stock index

PRC1 = PRC representing the stock index


Exposure to the equity index:


3678 CHF SMI CASH EQUITY

2275 DEM DAX CASH EQUITY

2273 GBP FTSE 100 CASH EQUITY

2269 USDSP500 CASH EQUITY

... ...



IV.3 FORWARD/FUTURE

IV.3.1 STOCK FORWARD/FUTURE

Overview

An exposure to a stock forward/future must be captured:

in the EQT file: the cash stock exposure (in terms of equivalent number of shares)

in the PVT file: for the interest rate exposure.

What has to be included in the EQT/PVT

The exposure to the cash stock is captured through its ISIN code (ISIN1), the equivalent quantity of stock held in the

portfolio (Qty1) and the share price (Price1) . This exposure must be reported in the EQT file.

The interest rate exposure (1 bp increase in the interest rate) must be reported in the PVT file.



05/06/1995 xxxxxx ISIN1 xxxxxx Qty1 Price1 xx xxx











... ...



IV.3.2 STOCK INDEX FORWARD/FUTURE

Overview

An exposure to a stock index forward/future must be decomposed into a spot equity index exposure and a sensitivity to

the interest rate. This sensitivity must be captured in the PVT file.


The parameters to send are the market value of the exposure to the cash stock index, along with the PRC corresponding

to this index and the sensitivity of the position to an increase of 1 bp in the corresponding interest rate.





with: PVal1 = Exposure to the underlying stock index expressed in Curr1

Curr1 = Currency of the exposure

PRC1 = PRC representing the stock index

PVal2 = Sensitivity of the position to an increase of 1 bp in the corresponding interest rate.

Curr2 = Currency of the exposure

PRC2 = PRC representing the interest rate exposure








... ...



572 CHF LIBOR 1M

573 CHF LIBOR 2M

... ...

300 DEM LIBOR 1M

301 DEM LIBOR 2M

... ...



IV.4 OPTION

Options are captured in VaR through two parameters:

a sensitivity to the underlying stock or stock index

a sensitivity to an absolute increase in the implied volatility, with a term of 1%

When the underlying is a stock, the sensitivity must be expressed in an equivalent number of shares and included in the EQT

file.

When the underlying is a stock index, the sensitivity must be expressed in term of market value and included in the PVT file.

PRCs corresponding to volatility exposure are defined only for stock indices.

IV.4.1 STOCK OPTION

Overview

A option on a stock has to reported through its delta, the sensitivity to the underlying stock, and its vega, the sensitivity to

a 1% absolute increase in the market index volatility with a time horizon t.

What has to be included in the EQT/PVT

Consider an option on a stock:



25/06/1995 xxxxxx ISIN1 xxxxxx Qty1 Price1 xx xxx




Where: ISIN1, Qty1 and Price1 reflects the delta of the option

PVal1 is the sensitivity of the position to a 1% absolute increase in the volatility (vega), and PRC1 reflects the

volatility of the stock index with a time horizon t.

Extract of some ISIN codes:

ISIN code Name

CH0012345565 UBS Bearer

NL3423544 Heineken

US0003330303 IBM

US003423003 Microsoft

...


Exposure to the equity index volatility, t:


3725 CHF EQUITY VOLATILITY 1M


3888 USD EQUITY VOLATILITY 1M


... ...



IV.4.2 STOCK INDEX OPTION

Overview

An option on a stock index is reported through its delta, the sensitivity to the stock index, and its vega, the sensitivity to a

1% absolute increase in the market index volatility.


Consider an option on a stock index:





Where: PVal1 is the delta of the position, expressed in term of the market value of an equivalent position in the underlying

index

PVal2 is the sensitivity of the position to a 1% absolute increase in the volatility (vega).








... ...

Exposure to the equity index volatility, t:






... ...



IV.5 CONVERTIBLE Overview

The risk of a convertible has to be decomposed into: interest rate sensitivity, delta and vega risk. Interest rate sensitivity

and vega risk are entered in the PVT file, equity delta belongs to the EQT file.


The method to capture the market risk of a CB consists in the following parameters:

- Delta of the CB: expressed as an equivalent number of share

- Interest rate sensitivity: according to the currency and maturity buckets

- Vega of the CB: sensitivity to a 1% absolute increase in the implied volatility

Consider a convertible. This convertible must be decomposed into the following exposure:

Specific equity: NBShare = delta of the convertible expressed in equivalent number of shares

Libor interest ratecurrency1: PVal1 = par yield sensitivity (1 bp increase in the interest rate)

Vega risk: PVal2 = sensitivity to a 1% absolute increase in the implied volatility





The records in the EQT file (equity delta) should look like:

TradeDate RepID ISINcode FeedID of shares MarkPrice CapturePoint

25/06/1995 xxxxxx ISIN1 xxxxxx NBShare Price xx

A few ISINs are shown in the table below:

ISIN code Name

ch0012345565 UBS Bearer

nl3423544 Heineken

us0003330303 IBM


Exposure to the corporate interest ratet, currency1:


521 CHF CORPORATES 1M

522 CHF CORPORATES 2M



Exposure to the equity index volatility, t (no PRCs are currently defined for particular stock vega risks):






... ...

N.B. Reporting of vega has become mandatory. It can no longer be replaced by sentiment risk.



V. COMMODITY

The commodity business is handled the following way:

Precious Metal positions: the risk is decomposed into:

- precious metal spot sensitivity

- interest rate sensitivity (Libor, Lease rate).

Base Metal and Energy positions:

The methodology for estimating the market risk of a forward/future position on base metal or energy is based on the volatility

of the forward prices. The forward/future market is used instead of the spot market because it is more representative of the

business.

The risk factors covering the commodity exposures are associated with the volatility of time series expressed in the following

units: USD/ounce, USD/ton, USD/barrel, USD/gallon. This means that when the underlying commodity is expressed in a

currency other than USD, the position has to be decomposed into a commodity risk (related to the dollar price) and a currency

risk induced by the currency of the underlying (see the following examples in section V.2). In addition, interest rate risk

generated by the P&L in foreign currency has to be reported because it is not transferred to the Money Market desk.

Generally speaking, what has to be sent to the VaR system are the partial derivatives of the P/L function with respect to each

of the risks identified by a PRC.

For instance, consider a long WTI Forward contract position (forward quoted in CAD):

Q Quantity of barrels of WTI

QF “Future equivalent quantity” of barrels. It corresponds to Q for

future contracts and to Q*DFUSD,T-t for forward contracts.

t, T current date, contract maturity date

FCAD/WTI, t= 0 the forward price at transaction time in CAD/bbl

FCAD/WTI, t the current forward price in CAD/bbl

FUSD/CAD, t the current forward FX rate in USD/CAD

SUSD/CAD, t the current spot FX rate in USD/CAD

FUSD/WTI, t the current forward price in USD/bbl

DFCAD,T-t the current discount factor for CAD

DFUSD,T-t the current discount factor for USD

The current P&L (in USD) is expressed as:

or:

Hence, the sensitivity figures to be sent to the VaR system are the following partial derivatives:

Commodity price sensitivity:

FX rate sensitivity:

Interest rate sensitivity (due to unrealized P/L in case of a Forward contract):

P&L(USD)= QF(FCAD/WTI,t - FCAD/WTI,t= 0)SUSD/CAD,t

P&L(USD)= QFFUSD/WTI,t - QFFCAD/WTI,t= 0SUSD/CAD,t

( & )

( )/ ,

P L

FQ

U S D W T I t

F

( & )

( )/

/ ,

P L

SQ F

U S D C A D

F C A D W T I t

0

( & )

( )( )

( )

( )/ / ,

,P L

rQ F F

D F

rU S D

U S D W T I U S D W T I t

U S D T t

U S D

0



V.1 PRECIOUS METAL

V.1.1 PRECIOUS METAL SPOT

Overview

Five precious metals have been defined: Gold, Silver, Platinum Palladium and Rhodium. Any PM spot exposure have to

be entered in the PVT in terms of quantity (ounces).


Consider a precious metal spot position of X ounces. The amount X (in ounces) of precious metal held should be input in

the “PositionValue” field. A PRC identifying the precious metal must be included as well.



25/06/1995 xxxxxx PRC1 xxxxxx Pval1 xx

The table representing these PRCs is shown in the table below:

Exposure to the precious metal spot price:


2294 GOLD SPOT

3957 PALLADIUM SPOT

2316 PLATINUM SPOT

3958 RHODIUM SPOT

2305 SILVER SPOT

Example

Ex 1: Long 1000 oz USD Gold spot

The quantity of gold expressed in ounces is reported. Therefore 1 records in the PVT file must be generated:


GOLD SPOT 2294 Quantity of gold = 1’000



25/06/1995 xxxxxx 2294 xxxxxx 1000 xx



V.1.2 PRECIOUS METAL FORWARD / FUTURE

Overview

Precious metal spot sensitivity, Libor sensitivity and a lease rate sensitivity have to be reported. If the forward/future is

not denominated in USD term, the FX spot sensitivity and the FX interest rate sensitivity have to be reported as well.


Consider a precious metal forward position on precious metal, with maturity t. This forward position must be

decomposed into the following exposures:

Exposure to precious metal spot price: PVal1 = D F C Ft P M lea sera te P M

t

,* [in oz]

Exposure to precious metal lease rate: PVal2 = P V B P C FP M

t( )

Exposure to Libor Interest ratecurrency: PVal3 = P V B P C Fc u r r

t( )

Exposure to FX spot rate (in case where the position is not expressed in USD):

PVal4 = D F C Ft L ib o rcu rr cu rr

t

,*



25/06/1995 xxxxxx PRC1 xxxxxx PVal1 xx

25/06/1995 xxxxxx PRC2 xxxxxx PVal2 xx USD

25/06/1995 xxxxxx PRC3 xxxxxx PVal3 xx USD


Note: If the sensitivity to the lease rate is expressed in oz. of precious metal (instead of USD), the ISO code of the precious

metal (XAU, XAG, XPT, XPD) has to be entered in the ‘currency’ field.

A PRC identifying the exposure must be included. A few PRCs are shown in the tables below:



2294 GOLD SPOT

3957 PALLADIUM SPOT

2316 PLATINUM SPOT

3958 RHODIUM SPOT

2305 SILVER SPOT

Exposure to the precious metal lease rate:


2327 GOLD 1M LEASE RT

2328 GOLD 2M LEASE RT

3970 SILVER 1M LEASE RT

3971 SILVER 2M LEASE RT



2225 USD/CHF SPOT

2226 USD/DEM SPOT

2230 USD/FRF SPOT

3029 USD/USD SPOT



Exposure to the Libor interest ratecurrency:


572 CHF LIBOR 1M

573 CHF LIBOR 2M

300 DEM LIBOR 1M

301 DEM LIBOR 2M

2458 USD LIBOR 6M

Example

Ex 1: Long 1000 oz gold 6 months forward

with: gold spot = 380 USD

6 mth USD Libor = 3.59% DF(6mth) = 0.98

6 mth gold lease rate = 1.25%

gold 6 mth forward = 383 USD



Gold spot 2294 Delta expressed as an equivalent position in gold spot (ounces)

Gold lease rate 6M 2332 Sensitivity to a 1 bp increase in gold lease rate

USD LIBOR 6M 2458 Sensitivity to a 1 bp increase in Libor rate



25/06/1995 xxxxxx 2294 xxxxxx 980 xx

25/06/1995 xxxxxx 2332 xxxxxx -18 xx USD




V.1.3 PRECIOUS METAL OPTION

Overview

An option on precious metal has to be reported through its delta, the sensitivity of the option to a change in the precious

metal price, and its vega, the sensitivity to a 1% absolute increase in the volatility.


Consider an option on a precious metal:





Where: PVal1 is the delta of the position expressed in ounces of an equivalent precious metal spot position

PVal2 is the sensitivity to a 1% absolute increase in the volatility (vega).

A PRC identifying the exposure must be included. A few PRCs are shown in the tables below:



2294 GOLD SPOT

3957 PALLADIUM SPOT

2316 PLATINUM SPOT

3958 RHODIUM SPOT

2305 SILVER SPOT

Exposure to the precious metal implied volatility, t:


2295 GOLD 1M VOLATILITY

2296 GOLD 2M VOLATILITY

2306 SILVER 1M VOLATILITY

2307 SILVER 2M VOLATILITY

... ...



V.2 BASE METAL AND ENERGY

V.2.1 BASE METAL AND ENERGY FORWARD / FUTURE

Overview

The methodology for estimating the market risk of a forward/future position on base metal or energy is based on the

volatility of the forward prices. The risk is not decomposed into a spot and an interest rate risk as it is the case for a

currency or precious metal forward contract.

The sensitivity must be expressed in term of quantity: metric tons for base metal, barrels for crude oil, gallons for refined

products according to the usage in the market.

ex: What is VaR of a long position of 1000 bbl WTI forward 3mth, in USD ?

with:

WTI forward 3mth = 22 USD

DF (USD, 3 mth) = 0.98

Vol (WTI) = 0.36 USD/bbl

The sensitivity required by VaR is the ‘PV’ of the position: 10000.98 = 980

VaR = SensitivityVolatility(WTI forward 3mth, in USD)2

= 9800.362 = 705 USD

Interest rate risk on the unrealized P/L in case of a forward must be taken into account as mentionned in the

example (see V).

The risk factors covering the commodity exposures are associated with the volatility of time series expressed in the

following units: USD/ounce, USD/ton, USD/barrel, USD/gallon. This means that when the underlying commodity is

expressed in a currency other than USD, the position has to be decomposed into the risk related to the dollar price of the

commodity and the risk of a FX forward (see example given in V.Commodity).


Consider a Base metal or energy forwards/futures position, with maturity t. This forward position must be decomposed

into the following exposures:

Exposure to Base metal/Energy: PVal1 = Quantity of product (expressed in standard unit). The quantity must be

discounted (using the domestic yield curve) in case of a Forward contract and not in case of a future.

The standard units are: base metal: tons

crude oil: barrels

oil products: according to the conventions (tons, gallons, barrels)

natural gas: MMBtu

In the case the underlying commodity is not denominated in USD, add a FX forward exposure (see example 2).







Exposure to the base metal/energy price:


4650 COPPER 3M

4651 COPPER 4M

3958 TAPIS CRUDE OIL 4M

2305 SINGAPORE UNLEADED GASOLINE 2Y

Exposure to spot FX rate:


2225 USD/CHF SPOT

2226 USD/DEM SPOT

2230 USD/FRF SPOT

3029 USD/USD SPOT

Exposure to the Libor interest ratecurrency:


572 CHF LIBOR 1M

573 CHF LIBOR 2M

300 DEM LIBOR 1M

301 DEM LIBOR 2M

2458 USD LIBOR 6M

Example 1: Commodity Forward WTI in USD

Long 100’000 barrels WTI, 3 months forward, for 20 USD/bbl, forward price is now 21 USD/bbl

DF(USD,3mth) = 0.985, USD 3mth interest rate = 6%

Q (quantity in bbl): 100’000 bbl

FUSD/WTI, t=0 (forward price WTI in USD at transaction time): 20 USD

DF3m (3months discount factor): 0.985

Generate 1 record in the PVT file with:


WTI Crude Oil 3M 4200 of barrels of WTI crude oil: 1000000.985 = 98500

Note that if the contract is a future, the sensitivity should not be discounted (in our example: 100000).



25/06/1995 xxxxxx 4200 xxxxxx 98500 xx



Example 2: Commodity Forward WTI in CAD

Long 100’000 barrels WTI, 3 months forward price (t = 0) 25 CAD/bbl, current forward price is 24 CAD/bbl

DFUSD = 0.985, USD 3months interest rate = 6%, CAD 3months interest rate = 4%.

USD/CAD 3 months forward = 1.25

Q (quantity of WTI crude oil in bbl): 100’000 bbl

QF (“Future equivalent quantity): 100’000 bbl* DFUSD = 98’500 bbl

FCAD/WTI,t=0 (forward price WTI in CAD at transaction time): 25 CAD/bbl

FCAD/WTI,t (current forward price WTI in CAD): 24 CAD/bbl

FUSD/CAD,t (current forward USD/CAD FX rate): 0.8 USD/CAD

SUSD/CAD,t (current spot USD/CAD FX rate): 0.796 USD/CAD

FUSD/WTI,t (current forward price WTI in USD): FCAD/WTI,t SUSD/CAD,t = 19.2 USD/bbl

DFUSD (current USD discount factor): 0.985

leading to:

Sensitivity to the WTI USD 3months price: QF = 98’500 bbl

FX sensitivity: USD/CAD FX Spot: -QFFCAD/WTI, t=0 = -98’50025= -2’462’000 CAD

Interest rate sensitivity: USD PVBP: QF(FUSD/WTI, t - FUSD/WTI, t=0 )(DFUSD)/(rUSD)

100’000(24*0.796-25*0.796)(-0.0001)0.25 = 2 USD



WTI Crude Oil 3M 4200 of barrels of WTI crude oil: 100’0000.985 = 98’500

FX/interest rate exposures:

USD/CAD SPOT 2224 -2’462’000 CAD

USD LIBOR 3M 2457 2 USD



25/06/1995 xxxxxx 4200 xxxxxx 98500 xx

25/06/1995 xxxxxx 2224 xxxxxx -2462000 xx CAD




V.2.2 BASE METAL and ENERGY OPTION

Overview

An option on base metal or energy product is reported through its delta, the sensitivity of the option to a change in the

commodity price, and its vega, the sensitivity to a 1% absolute increase in the volatility.


Consider an option on a commodity:





Where: PVal1 is the delta of the position expressed in “standard” units of the equivalent position in the commodity, according

to the currency of the time series where the PRC is mapped to.

PVal2 is the sensitivity of the position to a 1% absolute increase in the volatility (vega).

A few PRCs are shown in the tables below:

Exposure to the base metal/energy price:


4650 COPPER 3M

4651 COPPER 4M

3958 TAPIS CRUDE OIL 4M

2305 SINGAPORE UNLEADED GASOLINE 2Y

... ...

Exposure to the base metal/energy price implied volatility

:


5262 COPPER 1M VOLATILITY

5263 COPPER 2M VOLATILITY

4812 WTI CRUDE OIL 1M VOLATILITY

4813 WTI CRUDE OIL 2M VOLATILITY

... ...

Example Commodity Option WTI in USD

Short Call option, WTI in USD, 3 month

Quantity = -100’000 bbl, delta = 0.4. vega = 0.1 USD/bbl.



WTI Crude Oil 3M 4200 Sensitivity in barrels: -1000000.4 = -40000 bbl

WTI CRUDE OIL 2M VOLATILITY 4814 Vega in USD: -1000000.1 = -10000 USD

If the premium is deferred by one month, the interest rate sensitivity on that amount and the premium amount should

be sent as well.



25/06/1995 xxxxxx 4200 xxxxxx -40000 xx

25/06/1995 xxxxxx 4814 xxxxxx -10000 xx USD



VI. SIMULATION BASED VALUE-AT-RISK AND NON-LINEAR RISK

Linear VaR is a statistical approach based on an assumed distribution of market movements- in this case, a normal probability

distribution- from which certain confidence bands are derived. Here, standard trading VaR is defined as the value that can be

lost over a one day horizon such that there is only a 2.3% probability of losing an even larger amount in that same period (a 2

standard deviation move). Calculating VaR requires an estimate of the risk present in each market, and of the linear

sensitivities of trading portfolios to the risk parameters. Estimation of the risk present in each market requires detailed

analysis of time series of market data. The result of this analysis is a set of volatilities and correlations of approximately 1000

time series. Linear risks consist of positions in underlying assets, as well as deltas and volatility risks of option books; e.g.

positions in foreign exchange, sensitivities expressed as a present value of one basis point (henceforth PVBP) rise in interest

rates, option vegas, etc. The volatility (or standard deviation) of the market and the sensitivity of the position to the market

together give linear VaR of a single position. Correlations between markets account for diversification. Thus far, the

methodology for linear risks has required relatively simple computations based on matrix algebra.

When the relationship between return on portfolios and changes in market rates is not constant, for instance in option

portfolios because of the convexity of the return profile, one can no more estimate exposures by multipling sensitivities with

risk factors. The so-called ‘closed form’ method (assuming a given level of confidence for each number of standard

deviations) does not apply. Simulation methods (reproducing by numerical methods a distribution of the market underlyings

and obtaining the actual change in P&L of the portfolios) must be used instead. The following example (taken from a study

written by Lukas Gubler) illustrates this fact:

Long straddle position (long call , long put, same strike):

-0.1

-0.0

8

-0.0

6

-0.0

4

-0.0

2 0

0.0

2

0.0

4

0.0

6

0.0

8

0.1

- 0 .1 6

- 0 .1 2

- 0 .0 8

- 0 .0 4

0

0 .0 4

0 .0 8

0 .1 2

0 .1 6

- 3

- 2

- 1

0

1

2

3

4

P & L

Un d e r ly in g

Im p lie d V o la t ilit y

P & L S u rfa c e

Linear VaR (max. daily loss with 97.7% confidence) gives a loss of 1.2, whereas the simulated distribution of exposures

leads to a value of -0.95:

H isto g ra m

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

-1.4

-1.1

-0.8

-0.5

-0.2

0.1

0.4

0.7 1

1.3

1.6

1.9

2.2

2.5

2.8

Mo

r

e

Ex p o s u r e

Fre

qu

en

cy

Fr e q u e n c y



VI.1 REPORTING P&L MATRICES FOR VALUE-AT-RISK CALCULATION

VI.1.1 WHO REPORTS P&L MATRICES ?

Portfolios which carry non-linear risk and which currently report the linear sensitivities to the VaR system are required to

report in addition a P&L lookup table to the simulation based calculator. The linear part of their risk will still be captured

through the PVT/EQT interface and the P&L lookup table will only serve to calculate the non-linear add-on only. Therefore,

term-structure risk of yield curves and volatilities are captured through the linear VaR, same as the specific risk of equities.

VI.1.2 AVOIDING DOUBLE COUNTING OF LINEAR POSITIONS

In order to avoid double counting of linear positions, there is additional information needed, either

a) an additional linear matrix which corresponds to the positions fed through the PVT/EQT interface, or

b) a description (Linear Equation) in the matrix interface file which allows the construction of the linear matrix.

Solution a) is preferred, but whatever is implemented, it is of utmost importance that the feeds for linear and non-linear VaR

are consistent.

In order to calculate the overall VaR one needs to combine the non-linear matrix measures with the existing linear exposure

values and aggregate the two measures together without double counting exposure. Since the matrix P/L computation contains

linear as well as the non-linear effects of the defined shocks, this matrix has to be decomposed into a linear matrix and a

delta/vega neutral non-linear matrix from which the non-linear effects are segregated. Businesses should therefore provide

both a full matrix and a linear matrix for each book. A delta/vega neutral matrix, which focuses on the incremental risk due to

the convexity or gamma in the portfolio, is then derived from the two matrices and used for the non-linear VaR evaluations.

Alternatively, instead of providing the linear P&L matrix elements, a second set of equations for each axis can be provided to

indicate how a linear matrix can be calculated from the existing linear PVT sensitivities. This functionality requires that

the ReptID used for the full P&L matrix and the corresponding PVT data are the same. The linear matrix is generated

with the same grid points as used for the full matrix.

VI.1.3 LEVEL OF CALCULATION/ORGANIZATION

Each P&L lookup table should correspond to a unique ReptID. If hedges are not included in the P&L lookup table, they

should be referenced by a distinct ReptID. All linear positions which are already included in a lookup table must have the

same ReptID as this lookup table if a linear matrix is to be constructed via the linear equations. This allows to prevent double-

counting.

VI.1.4 THETA (TIME DECAY)

In option books, theta effect has to be taken into account. Since all positions are revalued as of the Trade Date, risk induced

by the time decay (depending on the holding period of the portfolio) must be calculated. Theta is delivered either as an entry

in the P&L matrix file or through the PVT feed (in both cases, associated with a corresponding PRC).

VI.1.5 GUIDELINES FOR MARKET SHOCKS (GRID SPACING)

Grid spacing are specified as percentage of the current level except for interest rates and implied volatility where

absolute shifts are specified. Shifts are not defined in terms of standard deviation. Shifts that would produce negative

underlying values should be provided with the same P&L as the nearest real point.

VI.1.6 TERM STRUCTURE OF IMPLIED VOLATILITY

A volatility weighting scheme takes the decreasing volatility of implied volatility into account. It should be calculated based

on a Principal Component Analysis (i.e. transforming the statistical data to get a diagonal covariance matrix ordered from

largest variance to the smallest). The weighting scheme has to be consistent with the reporting of the linear exposures.

In particular, if linear implied volatility exposures (vega) are reported in the PVT file split by the volatility ladder and

mapped to time series built according to a maturity weighting scheme, the same volatility weights have to be used for the

construction of the P&L lookup table.



VI.1.7 SPECIFICATION OF THE LOOKUP TABLE BY PRODUCT GROUP

The Lookup table (P&L Matrix) shows the profit or loss as of the current TradeDate (today) for different shocks defined by

the risk manager of the affected business. Here some highlights for the 4 Risk Classes:

Equities:

Calculation of P&L lookup table should be done on index level. Single stock options have to be translated into index

equivalents using (VaR-) Betas, and the reporting of stock deltas through the EQT is mandatory. Specific risk is captured

through the linear PVT/EQT reporting. Non-linear P&L tables of stock positions are aggregated using Beta-weighting. This

weighting should be applied along the axis of the underlying index.

Linear PVT and EQT: the corresponding index-delta position, the vega exposure as well as stock specific data as required by

the linear VaR System (EQT-file) have still to be provided. Vega positions may not be weighted, as before. Term structure of

volatility is captured through the linear Vega positions in the PVT.

The underlying axis of the P&L Matrix may be :

the level of the index (.900,1000,1100..)

the change in the level (-100,0,100..)

a proportional change in the level of the index (-0.1,0,0.1 -10%,0,+10%).

Note: changes in the level are not recommended for equities because the volatility is defined in proportional terms (returns)

making a conversion (using adjustment factors) necessary before the simulation run.

Currencies:

For Foreign Exchange products, calculations have to be done at currency pair level (currency versus USD or cross-currency

exchange rates). Volatility and correlation information for the exchange rate of the main currency pairs is available in the

VaR system (since Market Hierarchy release 2.3).

The underlying axis of the P&L Matrix may be:

the level of the FX rate (..1.9,2.0,2.1..)

the change in the level of the FX rate (..-0.1,0,0.1 ..)

a proportional change in the level of the FX rate (..-0.1,0,0.1.-10%,0,+10%).

Note: changes in the level are not recommended for FX rates because the volatility is defined in proportional terms (returns).

Fixed Income:

Calculations should be done for each currency and within the currency for each of the groups defined by the CommodityCode

in the VaR market hierarchy, for instance:

1. Corporate (e.g. Corporate Bond Options)

2. Government (e.g. Government Bond Options)

3. Libor (e.g. Swaptions and Cap/Floors, Exotics).

Term structure risk is captured through the existing linear reporting. The yield curve is shocked with absolute basis points as a

deviation from the current level. Lookup-tables are generated using parallel shift of the whole yield curve.


the level of the interest rate, expressed in bp, % or in decimal (..1.8,2.0,2.2. 1.8%,2%,2.2% ), the representation

being defined in the axis equation

the change in the level of the interest rate, expressed in bp, % or in decimal (..-20,0,20...-20bp,0,+20bp..)

a proportional change in the level of the interest rate (..-0.1,0,0.1.-10%,0,+10% proportional change).

Note: proportional changes are not recommended for interest rates because the volatility is defined in absolute terms (bp).

Commodities:

The reporting of P&L lookup tables should be done at the level of each underlying product:

1. Precious Metal Gold, Silver, Platinum

2. Base Metal Aluminum, Copper, Lead, Zinc

3. Energy Crude Oil: WTI crude, Brent crude, Tapis crude, Dubai crude, Oil Products: Naphta, etc.

The P/L Lookup table is calculated as of today. Gold has to be reported like a currency. The P&L lookup table will aggregate

P/L resulting from options covering different maturities and strikes for a specific product.


the price of the commodity

the change in the price of the commodity

a proportional change in the price of the commodity

Note: changes in the price are not recommended for commodities because the volatility is defined in proportional terms

(return).



VII. GENERATING THE FEEDER FILE

VII.1 USING THE STATIC DATA EXTRACTION UTILITY

Programmers and Feeder Contacts who maintain mapping programs can use the Static Data Extraction Utility to synchronize

other databases with VaR or to obtain information required by their interface. The tab-delimited file format facilitates

importing the data into applications such as MS Access, MS Excel or Oracle. The following objects, which are tables, views,

or the result of database queries, are included in the daily extracts (in the varextr HOME directory):

Object File Name Comments

Currencies Currencies.bcp All columns of the underlying table

FXSpotRates FXSpotRates.YYYYMMDD.bcp All columns of the underlying table for TradeDate YYYYMMDD

RiskDelegationHier RiskDelegationHier.bcp All codes and descriptions, from function to ReportID

MajorMinorHier MajorMinorHier.bcp All codes and descriptions, from function to ReportID

MktHier MktHier.bcp Risk Class, Broad Risk, Commodity, PRC, Risk Sensitivity Type

PositionCodes PositionCodes.bcp PRC, PRC Name, Risk Sensitivity Type, Currency of TS, Maturity Code

ReportID ReportID.bcp ReportID, Description

Employees Employees.bcp EmployeeCode, Location Code, First & Last Name, Phone, E-mail, Comments

VaRFeeds VaRFeeds.bcp FeedID, LocationCode, Description, ContactCode

TimeSeriesCodes TimeSeriesCodes.bcp All columns of the underlying table

Extended PRC Attributes PRCattr.bcp All the information about PRCs, including new extended attributes

To facilitate searching for PRCs, for instance, in datafeed preparation programs, a PRC file named PRCattr.bcp is made

available in the varextr HOME directory. This tab-delimited file provides the following original and derived attributes:

1. Position Risk Code (from the database)

2. Position Risk Name (from the database)

3. Risk Sensitivity Type (from the database)

4. Currency of the Time Series it is mapped to (from the database)

5. Maturity Code (from the database)

6. Product (derived from the PRC description)

7. Currency to which the PRC pertains (derived from the PRC description)

8. Maturity (in months)

9. Rating of the corporate which issued the bond (when applicable)

10. Option Expiration (when applicable)

11 Reference Currency of the FX ccy pair (when applicable)

(note that no attributes are assigned for PRCs which are recommended to not be used anymore).

PRC Position Risk Name Risk Sensitivity Currency of TS Maturity Product Currency of PRC Mat. in months Rating Option Expir.

1 USD GOVT 1M USDVBP USD 1M GOVT USD 1

69 USD A CORPORATES 1M USDVBP USD 1M CORP USD 1 A

2225 USD/CHF SPOT PRINCPL CHF 0M SPOT CHF 0

6062 DEM SWAPTION 3M OPT 2Y SWAP VOL VEGA1% DEM 2Y SWAPTION DEM 24 3M



VII.1.1 POSITION RISK CODES NAMING CONVENTIONS

In the Position Risk Name field:

the first descriptor is generally a currency or a currency pair (e.g. USD, USD/DEM)

the second descriptor defines the product (e.g. GOVT, CORPORATES, GOVT OPTIONS)

finally, the third descriptor is the Maturity of the risk.

In the Market Hierarchy, all the Position Risk Names systematically follow a set of naming conventions. The table below

shows those conventions for the 4 Risk Classes (Commodity, Equity, Foreign Exchange, Interest Rate).

Position Risk Name conventions for Commodities:

RiskClass Product Product Description RiskSens.Type Position Risk Name Convention Commodity ALUMINIUM Aluminium NOTIONAL <ProductCode> <Maturity>

Commodity ALUMINIUM Aluminium VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity COPPER Copper NOTIONAL <ProductCode> <Maturity>

Commodity COPPER Copper VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity NGS Natural Gas NOTIONAL <Name> <ProductCode> <Maturity>

Commodity NGS Natural Gas VEGA1% <Name> <ProductCode> <Maturity> VOL

Commodity GASOIL Gasoil NOTIONAL <Name> <Maturity>

Commodity GASOIL Gasoil VEGA1% <Name> <Maturity> VOL

Commodity GASOLINE Gasoline NOTIONAL <Name> <Maturity>

Commodity GASOLINE Gasoline VEGA1% <Name> <Maturity> VOL

Commodity GOLD Gold OUNCES <ProductCode> SPOT

Commodity GOLD Gold VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity GOLD Gold USDVBP <ProductCode> <Maturity> LEASE RT

Commodity HSFO High Sulfur Oil NOTIONAL <Name> <Maturity>

Commodity HSFO High Sulfur Oil VEGA1% <Name> <Maturity> VOLATILITY

Commodity JETFUEL Jet Fuel NOTIONAL <Name> <Maturity>

Commodity JETFUEL Jet Fuel VEGA1% <Name> <Maturity> VOL

Commodity LEAD Lead NOTIONAL <ProductCode> <Maturity>

Commodity LEAD Lead VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity LSFO Low Sulfur Oil NOTIONAL <Name> <Maturity>

Commodity LSFO Low Sulfur Oil VEGA1% <Name> <Maturity> VOLATILITY

Commodity NAPHTA Naphta NOTIONAL <Name> <Maturity>

Commodity NAPHTA Naphta VEGA1% <Name> <Maturity> VOLATILITY

Commodity NICKEL Nickel NOTIONAL <ProductCode> <Maturity>

Commodity NICKEL Nickel VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity OIL Crude Oil NOTIONAL <Name> <Maturity>

Commodity OIL Crude Oil VEGA1% <Name> <Maturity> VOLATILITY

Commodity PALLADIUM Palladium OUNCES <ProductCode> SPOT

Commodity PALLADIUM Palladium VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity PALLADIUM Palladium USDVBP <ProductCode> <Maturity> LEASE RT

Commodity PLATINUM Platinum OUNCES <ProductCode> SPOT

Commodity PLATINUM Platinum VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity PLATINUM Platinum USDVBP <ProductCode> <Maturity> LEASE RT

Commodity RHODIUM Rhodium OUNCES <ProductCode> SPOT

Commodity RHODIUM Rhodium VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity RHODIUM Rhodium USDVBP <ProductCode> <Maturity> LEASE RT

Commodity SILVER Silver OUNCES <ProductCode> SPOT

Commodity SILVER Silver VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity SILVER Silver USDVBP <ProductCode> <Maturity> LEASE RT

Commodity TIN Tin NOTIONAL <ProductCode> <Maturity>

Commodity TIN Tin VEGA1% <ProductCode> <Maturity> VOLATILITY

Commodity ZINC Zinc NOTIONAL <ProductCode> <Maturity>

Commodity ZINC Zinc VEGA1% <ProductCode> <Maturity> VOLATILITY



Position Risk Name conventions for Equity, FX and Interest Rate

RiskClass Product Product Description RiskSens.Type Position Risk Name Convention

Equity CONVSENT Convertible Sentiment Risk RSKCAP CONV SENT RISK- <CCY>

Equity EQUITYINDEX Equity Index NOTIONAL <Index Name> FUTURE

Equity EQUITYINDEX Equity Index PRINCPL <Index Name> EQUITY

Equity EQUITYINDEX Equity Index VEGA1% <CCY> EQUITY VOLATILITY <Maturity>

FX SPOT FX Spot PRINCPL USD/<CCY> SPOT

FX FXOPT FX Option VEGA1% USD/<CCY> FX OPT <Maturity> VOL

Interest Rate ABS Asset Backed Security ccyVBP <CCY> ASSET BACKED <Maturity>

Interest Rate ABSSPR ABS Spread USDVBP USD ASSET-BACKED SPREAD <Maturity>

Interest Rate AGY Agency Bond ccyVBP <CCY> AGENCY <Maturity>

Interest Rate AGYSPR Agency Spread USDVBP USD AGENCY SPREAD <Maturity>

Interest Rate BRADY Brady Bond PRINCPL <Name>

Interest Rate CORP Corporate Bond ccyVBP <CCY> CORPORATES <Maturity>

Interest Rate CORP Corporate Bond USDVBP USD <Rating> <CORPORATES> <Maturity>

Interest Rate CORPBANK Corporate Bank/Finance USDVBP USD <Rating> CORPORATE BANK/FINANCE <Maturity>

Interest Rate CORPINDUST Corporate Industrial USDVBP USD <Rating> CORPORATE INDUSTRIALS <Maturity>

Interest Rate CORPMBS Corporate Based MBS USDVBP USD CORP BASED MORTGAGE BACKED <Maturity>

Interest Rate CORPTELECOM Corporate Telecom/Utils USDVBP USD <Rating> CORPORATE TELECOM/UTILS <Maturity>

Interest Rate CORPYANKEE Corporate Yankee/Canada USDVBP USD <Rating> CORPORATE YANKEE/CANADA <Maturity>

Interest Rate GOVT Government Bond ccyVBP <CCY> GOVT <Maturity>

Interest Rate GOVTFUT Government Future ccyVBP <CCY> <Name> FUTURES <Maturity>

Interest Rate GOVTOPT Government Option ccyVBP <CCY> GOVT OPTIONS <Maturity>

Interest Rate GOVTOPT Government Option VEGA1% <CCY> GOVT BOND OPT <Maturity> VOL

Interest Rate GOVTREPO Government Repo USDVBP USD GOVT REPO <Maturity>

Interest Rate HYIELD High Yield USDVBP USD HIGH YIELD <Maturity>

Interest Rate HYIELD High Yield Sentiment PRINCPL USD HIGH-YIELD SENTIMENT <Maturity>

Interest Rate INDUSTSPR Industrial Spread USDVBP USD <Rating> INDUSTRIAL SPREAD <Maturity>

Interest Rate INDUSTSPR Industrial Spread ccyVBP <CCY> <Rating> INDUSTRIAL SPREAD TO SWAP<Maturity>

Interest Rate LIBOR Libor ccyVBP <CCY> LIBOR <Maturity>

Interest Rate LIBORCAP Libor Cap VEGA1% <CCY> 3M (LIBOR|PIBOR) IMPLIED VOL CAP <Maturity>

Interest Rate LIBORFUT Libor Future USDVBP USD LIBOR FUTURES (<Maturity>|STUB)

Interest Rate LIBORLOCAL Libor Local VEGA1% <CCY> <Maturity> LIBOR LOCAL VOL

Interest Rate LIBORMBS Libor Based MBS USDVBP USD LIBOR BASED MORTGAGE BACKED <Maturity>

Interest Rate LIBOROPT Libor Option USDVBP USD LIBOR OPTIONS <Maturity>

Interest Rate MBS Mortgage Backed Security USDVBP USD MORTGAGE BACKED <Maturity>

Interest Rate MBSSPR MBS Spread USDVBP USD MBS SPREAD RISK <Maturity>

Interest Rate OASMBS Option Adjusted Spread MBS USDVBP USD OAS MORTGAGE BACKED <Maturity>

Interest Rate OTHERREPO Other Repo USDVBP USD (OTHER REPO <Maturity>|REPO SPECIAL)

Interest Rate SWAPGOVT Swap-Government Spread USDVBP USD SWAP-GOVT SPREAD <Maturity>

Interest Rate SWAPGOVT Swap-Government Spread ccyVBP <CCY> GOVT SPREAD TO SWAP<Maturity>

Interest Rate SWAPTION Swaption VEGA1% <CCY> SWAPTION <Expiration> OPT <Maturity> SWAP VOL



VII.1.2 RISK SENSITIVITY TYPE

Precious Metal risks are given in OUNCES.

Interest Rate risks are defined as the value of a basis point ccyVBP.

FX Spot and Equity Index risks are indentified as PRINCPL (principal amounts).

Vega risks are defined as VEGA1% (change in value of the portfolio for a 1% move in volatility).

Future Contracts risks are defined as NOTIONAL (futures on commodities or equity indices).

Convertible sentiment risks have a Risk Sensitivity Type of RSKCAP (estimated risk taken as an add-on).

VII.1.3 CURRENCY OF THE TIME SERIES

This field is not always equivalent to the currency to which the Position Risk Code pertains. Indeed, many Position Risk

Codes are mapped to Time Series of other currencies due to the lack of historical market information (for instance for FX

OPT volatility). The VaR Loader will convert these positions from the native currency to the currency of the Time Series.

VII.1.4 MATURITY OF THE POSITION RISK CODE

The Maturity is defined according to the standard GTRM Ladder (17 grid points):

MaturityCode ShortCode LongDesc

1 1m 1 month

2 2m 2 month

3 3m 3 month

6 6m 6 month

9 9m 9 month

12 12m 12 month

24 2y 2 year

36 3y 3 year

48 4y 4 year

60 5y 5 year

72 6y 6 year

84 7y 7 year

96 8y 8 year

108 9y 9 year

120 10y 10 year

240 20y 20 year

360 30y 30 year



VII.1.5 PRODUCT

33 Product Codes are currently defined in the Market Hierarchy:

RiskClass ProductCode Product Description

Commodity ALUMINIUM Aluminium

Commodity BM Base Metal

Commodity COPPER Copper

Commodity CRUDE Crude Oil

Commodity GASOIL Gasoil

Commodity GASOLINE Gasoline

Commodity GOLD Gold

Commodity JETFUEL Jet Fuel

Commodity LEAD Lead

Commodity LGTPROD Light Crude

Commodity NGAS Natural Gas

Commodity NICKEL Nickel

Commodity PALLADIUM Palladium

Commodity PLATINUM Platinum

Commodity PM Precious Metal

Commodity RHODIUM Rhodium

Commodity SILVER Silver

Commodity TIN Tin

Commodity ZINC Zinc

Equity EQT Equity

Foreign Exchange FX FX

Interest Rate ABS Asset Backed Security

Interest Rate AGY Agency

Interest Rate CAPFLOOR Cap&Floor

Interest Rate CMO Collateralized Mortgage Obligation

Interest Rate CORP Corporate Bond

interest Rate CORPCVT Convertible

Interest Rate FUT Interest Rate Future/Option

Interest Rate GOVT Government Bond

Interest Rate MOR Mortgage Backed Security

Interest Rate REPO Repo Interest Rate

Interest Rate SWAP Interbank Interest Rate

Interest Rate SWAPTION Interbank Interest Rate Option



However, in order to facilitate the mapping between feeder systems and VaR more detailed product definitions (53) are

included in the PRCattr.bcp file

RiskClass Product Product Description

Commodity ALUMINIUM Aluminium

Commodity COPPER Copper

Commodity NGS Natural Gas

Commodity GASOIL Gasoil

Commodity GASOLINE Gasoline

Commodity GOLD Gold

Commodity HSFO High Sulfur Oil

Commodity JETFUEL Jet Fuel

Commodity LEAD Lead

Commodity LSFO Low Sulfur Oil

Commodity NAPHTA Naphta

Commodity OIL Crude Oil

Commodity PALLADIUM Palladium

Commodity PLATINUM Platinum

Commodity RHODIUM Rhodium

Commodity SILVER Silver

Commodity TIN Tin

Commodity ZINC Zinc

Equity EQUITYINDEX Equity Index

Equity CONVSENT Convertible Sentiment Risk

Foreign Exchange SPOT FX Spot

Foreign Exchange FXOPT FX Option

Interest Rate ABS Asset Backed Security

Interest Rate ABSSPR Asset Backed Security Spread

Interest Rate AGY Agency Bond

Interest Rate AGYSPR Agency Spread

Interest Rate BRADY Brady Bond

Interest Rate CORP Corporate Bond

Interest Rate CORPBANK Corporate Bank/Finance Bond

Interest Rate CORPINDUST Corporate Industrial Bond

Interest Rate CORPMBS Corporate Based Mortgage Backed Security

Interest Rate CORPTELECOM Corporate Telecom/Utils Bond

Interest Rate CORPYANKEE Corporate Yankee/Canada Bond

Interest Rate EMKTIND Emerging Market Bond Index

Interest Rate GOVT Government Bond

Interest Rate GOVTFUT Government Future

Interest Rate GOVTOPT Government Option

Interest Rate GOVTREPO Government Repo

Interest Rate HYIELD High Yield

Interest Rate INDUSTSPR Industrial Spread

Interest Rate LIBOR Libor

Interest Rate LIBORCAP Libor Cap

Interest Rate LIBORFUT Libor Future

Interest Rate LIBORLOCAL Libor Local

Interest Rate LIBORMBS Libor Based Mortgage Backed Security

Interest Rate LIBOROPT Libor Option

Interest Rate MBS Mortgage Backed Security

Interest Rate MBSSPR Mortgage Backed Security Spread

Interest Rate OASMBS Option Adjusted Spread Mortgage Backed Security

Interest Rate OTHERREPO Other Repo

Interest Rate SWAPGOVT Swap-Government Spread

Interest Rate SWAPTION Swaption

Non Linear NONLINEAR Special Code for Non-Linear Risk



VII.1.6 CURRENCY TO WHICH THE POSITION RISK CODE PERTAINS

A Position Risk Code is always associated with a currency (except for the Precious Metals which are expressed in Ounces).

For instance, ‘USD/ATS SPOT’ is clearly associated with the Austrian Shilling. In many, but not all cases, the currency of the

Time Series to which the Position Risk Code is mapped is equal to the currency to which the PRC pertains. In other cases,

PRCs are mapped to Time Series with a currency which is different from the original one, due to the lack of historical market

information. In particular, historical volatility for vega risk is not available for many currencies so that the corresponding risks

have to be mapped either to one of the main currencies or to a default Time Series expressed in USD.

Recall that datafeeds must express the sensitivity in the currency of the underlying Time Series unless an additional field

specifying the currency of the position is defined in the PVT or the EQT record (which enables a proper conversion of the

amount by the Loader).

VII.1.7 MATURITY IN MONTHS

Contains the same information as the Maturity field, just expressed in months.

VII.1.8 RATING OF THE CORPORATE ISSUING THE BOND

The credit quality of the corporate issuing the bond (AAA, AA, A, BBB); used only in the USD market.

VII.1.9 TIME TO EXPIRATION OF THE OPTION

Applies only for swaptions where the Position Risk Codes are classed by the Maturity of the underlying swap (2Y, 5Y, 10Y)

and Time to Expiration of the option (3M, 6M, 1Y).

VII.1.10 REFERENCE CURRENCY IN CCY PAIR

For cross-currency vega risk: defines the reference currency addressed by the PRC.



VIII. GENERAL PRINCIPLES OF THE DATA FEED LOADERS

The schematic overview of the VaR system suggested that Daily Position Data are fed into the system and processed by

loaders. To facilitate the interfaces, three standard file formats have been specified, namely, one for PVT data, one for EQT

data, and one for Foreign Currency Exchange rates (FX Rates). By having standard file formats, the loaders can enforce

integrity rules on the target tables in the database. The next sections specify the file formats for the three types of daily data.

It is up to the local sites to generate these files and ensure that all required data is present prior to running the calculator.

Utilities, such as fdm, are available to the system manager to check data feeds without having to delve into the database.

To understand the general principles of the loaders, first an overview.

1. PVT, EQT, and FX data are delivered to the VaR system in a designated UNIX account (datafeed) via file transfer (ftp).

2. Each data feed is identified by a FeedID code, which consists of a location code followed by additional alphanumeric

characters. Only one FeedID per data file is allowed. The FeedID also serves to tie delivery of a file to a “person” with

an e-mail address for diagnostic messages.

3. Each data feed file has a “Trade Date” (also known as “Value Date”) in each record. Only data for a single Trade Date

is allowed per file.

4. The Consolidation system accepts only FX feeds. All PVT and EQT data are delivered to the Consolidation system via

replication from the “local” sites.

5. A process on the local VaR system (move_feeds) copies the files from the datafeed account to a secure directory

structure under the feedmstr account. All files with the same FeedID go into a directory with the same name as the

FeedID (these directories are automatically created when the first FeedID is encountered). The suggested file name

convention for the files coming to the datafeed account is:

PVT file: FeedIDYYYYMMDD.pvt

EQT file: FeedIDYYYYMMDD.eqt

FX rate file: FeedIDYYYYMMDD.fx

however, shorter file names due to MS-DOS restrictions are also accepted by the system as long as they are unique and

use the right file extension.

These files are renamed according to a standard naming convention, consisting of a prefix that consists of the FeedID and

a date suffix in the format YYYYMMDD, reflecting the Trade Date (not the delivery date) of the file.

PVT file: FeedID_YYYYMMDD.pvt

EQT file: FeedID_YYYYMMDD.eqt

FX rate file: FeedID_YYYYMMDD.fx

6. Another process (process_feeds) scans the FeedID-specific directory structure for new files and performs input checking

and loading into the database. Successfully loaded files are compressed and archived in the “Used” directory that is

present under each FeedID-specific directory.

7. Only if the entire file is valid are data loaded into the database. The senders of data files are notified of the loading status

via e-mail. E-mail concerning successful loads may be turned off on a system-wide basis, though a log entry is always

made into a file. Errors in the file are reported with as much detail as available to help the senders debug their programs.

8. Prior to a successful load, the loader erases all rows with the same TradeDate and the same FeedID. This mechanism

allows a new file to overwrite a previous file containing incorrect or incomplete values. Because the delete and the insert

operations are replicated to the Consolidation system, the PVT or EQT tables stay automatically in synch.

VIII.1 ENFORCING UNIQUENESS OF THE PVT/EQT POSITION

The index of the PVT table is based on the composite key: TradeDate, ReptID, PositionRiskCode, FeedID, (TradeDate,

ReptID, ISINCode, FeedID for the EQTs). Consequently, the VaR Loader will enforce uniqueness of the rows by aggregating

duplicate position entries (same value for ReptID, PositionRiskCode, Trade Date, FeedID or for EQTs: ReptID, ISINCode,

Trade Date, FeedID).



IX. SPECIFICATION FOR LOADING DATA INTO THE PVT TABLE

The PVT holds all interest rate, foreign exchange, commodity and volatility risk sensitivities at a level of aggregation

determined by the organization structure and by the granularity of the GTRM reporting ladders. The current PVT holds

linear sensitivities, below we will explain this in more detail. First the layout.

Column Sybase DataType Comments

TradeDate SYBDATETIME “time” field currently ignored

ReptID SYBINT4 Organization Structure Identifier

PositionRiskCode SYBINT4 Refers to the position in the market hierarchy

FeedID SYBCHAR 8 <Location><System><suffix>

PositionValue SYBFLT8 Sensitivity

CapturePoint SYBCHAR 2 LO, NY, ZH, SI, TO

In addition to these six fields defined in the PVT table, a seventh field is accepted in the data file by the loader, indicating the

Currency in which the Position Value is expressed.

The loader performs an automatic conversion prior to loading. Once loaded into the PVT, the PositionValue’s currency is

determined by the rule stating that this is the currency of the underlying time series. A unique index for this table is based on

the composite key (TradeDate, ReptID, PositionRiskCode, FeedID). The PVT loader enforces uniqueness of the rows by

aggregating if necessary. All columns must be filled with values, that is, no NULL values are allowed in the table or in the

data files. PVT data are delivered in an ASCII file consisting of tab-delimited values (TDV) for the six fields defined above

in the order given above. Character-valued fields should not be quoted with single (‘) or double (“) quotes. Such quotes are

not necessary, since the tab-character cannot legally occur in any of these fields.

IX.1 DETAILED INFORMATION ABOUT THE PVT FILE 1. TradeDate refers to the Business Date to which the Position Value refers (“Value Date”), not the date of data delivery.

The date should be in a format acceptable to Sybase for conversion from character into the internal type “datetime”. See

the section on “Datatypes” in the “Sybase SQLserver Commands Reference Manual” for valid Sybase date formats.

Examples include:

“Mon dd yyyy”

“mm/dd/yyyy”

“mm.dd.yyyy”

“dd-mon-yyyy”.

With the year 2000 being less than five years away, the two century digits are very strongly recommended. The Trade

Date is stored in Sybase as a date/time field, with the time not currently filled in. This allows intra-day positions to be

added in the future.

2. ReptID is a numeric code to tie a position into the organization structure. A unique ReptID code may be assigned to

each individual trading book or to a “desk”, depending on what is locally acceptable. The VaR calculator does not break

Value-at-Risk out by ReptID, so it does not make a difference in reporting whether different ReptID codes are used for

different trading books mapping to the same Business Unit, or whether the same ReptID is used for these trading books.

3. PositionRiskCodes constitute the lowest level of the market structure hierarchy. The actual Position Codes are

maintained as part of the Market Structure by the “Clearing House”. For instance, Position Codes map to “Commodity

Codes”, and so on. Position Risk Codes map also (many-to-one) to time series, which determine correlations and

volatilities. If “Currency” is an appropriate dimension for a given Time Series, that currency is recorded in the table that

is part of the market structure.

4. FeedID is an identifier with a minimum length of four and a maximum length of eight, assigned to data sources. The

FeedID codes are structured so that they are globally unique as long as the third to the last character are locally unique.

The first two characters specify the location (LO, ZH, NY, TO, SI), the next two specify the type of system (for example,

“BN” for a bond-related system), and the final four optional characters specify more detail about the data feed. The

FeedID column serves to identify the source system generating the Position Value.

5. PositionValue is the actual sensitivity, which can be an interest rate delta, a net delta position in either a currency, a

commodity, or a stock index future. The PVT entry can also be a vega.



6. CapturePoint must be equal to the first two characters of the FeedID column, indicating the originating location of the

data feed, such as LO, TO, SI, NY, FM, GE, HK, LU, PS, SY, TP, TN, or ZH. Capture Point determines the Base

Currency of the location originating the position (used in the generation of synthetic Base Currency positions

offsetting the FX exposures). 7. (Optional/Mandatory) Currency in which the Position Value (sensitivity) is expressed. Must be a valid (ISO) currency

code. The reason for requiring a source currency field is that due to lack of a better time series for these classes of

positions the “underlying” currency of the time series is not the currency expected for the position code, but the currency

of the time series into which these position codes were mapped.

An example of a PVT file: the symbol indicates the TAB character.

3/31/1995100102270ZHBN01-37853.7ZH

IX.2 POSITION VALUE CURRENCY CONVENTIONS A Position Value must be expressed in the currency of the underlying time series. The “underlying” time series is the time

series to which the Position Code is mapped via the mapping table “Mkt_TimeSeries_PosRisk “. As the currency conversion

may impose extra work on the local data feed providers, an extra field may be used on the input record, containing the

currency that the PVT record is expressed in. If the PVT loader detects a discrepancy between the supplied currency and the

currency of the underlying time series, a conversion at the day’s spot rate is automatically performed.

In order to more effectively accommodate a multi-currency application in which positions are aggregated globally into CHF,

the following guidelines must be followed.

1. Interest rate deltas are to be expressed in their original currency, not the location’s local currency. Thus, a DEM bond

traded in LO will have a delta entered into the PVT as DEM, and the same bond traded in TO will also have a delta in

DEM.

2. The interest rate Vegas for the same instrument must follow the same currency convention.

3. All commodity Vegas are to be expressed in USD since the price of most commodities is given in USD.

4. Although equity positions are contained in the Equities table, their Vegas will be contained in the PVT. Equity Vegas

are to be quoted in the currency of the underlying index; thus the vega of a UK stock linked to the FTSE250 will be

quoted in GBP, and that of a Japanese stock will be quoted in JPY.

5. Also contained in the PVT are delta equivalents of equity index futures and options. Because the corresponding time

series consists of the underlying equity index, it is easiest to put these positions directly into the PVT, mapping to a

position code corresponding to this index.

6. For FX businesses, each location needs to produce a “synthetic net position in its local currency”.

The procedure that runs the position Loader in the daily production mode automatically generates

such synthetic FX positions without requiring any effort from the local datafeed operations.



X. SPECIFICATION FOR LOADING DATA INTO THE EQT TABLE

The EquityPositions (EQT) table is designed to store equity positions and delta-equivalents for options, convertibles, etc., on

a day-to-day basis. A row in this table corresponds to the end-of-day inventory (number of shares) for a given equity, as

indicated by its ISIN code, by ReptID, which can be a trading account or a desk. The following figure shows this table’s

structure.

Column DataType Comments

TradeDate SYBDATETIME “time” field currently ignored

ReptID SYBINT4 Organization Structure Identifier

ISINcode SYBCHAR(12) Universal Equity Code

FeedID SYBCHAR(8) <Location><System><Suffix>

NumberofShares SYBFLT8 Fractional value if delta-equivalent

MarkPrice SYBFLT8

CapturePoint SYBCHAR(2) LO, NY, ZH, SI, TO,...

In addition to these seven fields defined in the EquityPositions table, an eighth field is accepted in the data file by the loader,

indicating the Currency in which the Mark Price is expressed. The loader performs an automatic conversion prior to

loading. Once loaded into the EQT, the Mark Price’s currency is determined by the rule stating that this is the currency of the

underlying equity index.

A unique index for this table is based on the composite key (TradeDate, ReptID, ISINcode, FeedID). In the table itself, all

fields are populated, that is, no null values are allowed



X.1 DUMMY ISIN CODES In the data delivered to the EQT interface, a “NULL” (empty) ISIN code is allowed, causing the loader to use a location-

specific “dummy” ISIN Code. This behavior may not always be desirable. For instance, when Paris sends an EQT file to

London for loading, a “NULL” ISIN Code field causes the London default ISIN code to be used! Thus, every effort should

be made to find the correct ISIN code, and if one cannot be found, the datafeed generating program should impute a well-

defined dummy code from the list below (up to 70 codes allocated to an index).

CountryName Country

Code

Equity Index Description PRC Start Dummy ISIN End Dummy ISIN Argentina AR ARS GENL EQT 4765 ARDI00000001 ARDI00000070 Australia AU AUD ALL ORD 3673 AUDI00000001 AUDI00000010 Austria AT ATS TRADED 4766 ATDI00000001 ATDI00000070 Bangladesh BD BANGLADESH 4778 BDDI00000001 BDDI00000070 Belgium BE BEF BEL-20 3676 BEDI00000001 BEDI00000010 Brazil BR BRZL BOVESPA 4767 BRDI00000001 BRDI00000070 Canada CA CAD TSE INDX 3677 CADI00000001 CADI00000010 Chile CL CHILE GENL 4768 CLDI00000001 CLDI00000070 China CN CHINA 4780 CNDI00000001 CNDI00000070 Croatia HR HRK CROATIA 7457 HRDI00000001 HRDI00000010 Czech Republic CZ CZECH PX50 4769 CZDI00000001 CZDI00000070 Denmark DK DNMRK KFX20 3679 DKDI00000001 DKDI00000010 Egypt EG EGP EGYPT 7462 EGDI00000001 EGDI00000010 Finland FI FIM FOX25 3680 FIDI000000001 FIDI000000010 France FR FRF CAC40 2277 FRDI00000001 FRDI00000010 Germany DE DEM DAX EQTY 2275 DEDI00000001 DEDI00000010 Greece GR GREECE ASE 4770 GRDI00000001 GRDI00000070 Hong Kong HK HKD HANG SNG 3681 HKDI00000001 HKDI00000070 Hungary HU HUF HUNGARY 7460 HUDI00000001 HUDI00000010 India IN INR BOMBAY 4771 INDI00000001 INDI00000070 Indonesia ID IDR JAKARTA 4779 IDDI00000001 IDDI00000070 Ireland IE IEP IRELAND 7507 IEDI00000001 IEDI00000010 Israel IL ISRL MAOF25 4772 ILDI00000001 ILDI00000070 Italy IT ITL MIB 30 3682 ITDI00000001 ITDI00000010 Japan JP JPY TOPIX 4023 JPTO00000001 JPTO00000070 Japan JP NIKKEI 225 2271 JPNI00000001 JPNI00000001 Jordan JO JOD JORDAN 7458 JODI00000001 JODI00000010 Korea, Republic of KR S KOREA COMP 4773 KRDI00000001 KRDI00000070 Lebanon LB LBP LEBANON 7464 LBDI00000001 LBDI00000010 Malaysia MY MLYSIA INDX 3683 MYDI00000001 MYDI00000070 Mexico MX MEXICO BOLSA 3684 MXDI00000001 MXDI00000070 Morocco MA MAD MOROCCO 7463 MADI00000001 MADI00000010 Netherlands NL NLG AEX 25 3685 NLDI00000001 NLDI00000010 New Zealand NZ NZD SE 40 4774 NZDI00000001 NZDI00000070 Norway NO NOK OSLO OBX 3686 NODI00000001 NODI00000010 Pakistan PK PAKISTAN 4781 PKDI00000001 PKDI00000070 Peru PE PERUVIAN SOL 6933 PEDI00000001 PEDI00000010 Philippines PH PHILIPPINES 4782 PHDI00000001 PHDI00000070 Poland PL PLZ POLAND 7461 PLDI00000001 PLDI00000010 Portugal PT PORTUGAL 4783 PTDI00000001 PTDI00000070 Singapore SG SGD STRAITS 3689 SGDI00000001 SGDI00000070 Slovenia SI SIT SOLVENIA 7459 SIDI00000001 SIDI00000010 South Africa ZA S AFR ALLMKT 4775 ZADI00000001 ZADI00000070 Spain ES ESP IBEX35 3687 ESDI00000001 ESDI00000010 Sweden SE SWEDEN OMX 3688 SEDI00000001 SEDI00000010 Switzerland CH CHF CS GENL 2276 CHCS00000001 CHCS00000001 Switzerland CH CHF SMI 3678 CHSM00000001 CHSM00000010 Taiwan, Republic of China TW TWD WEIGHTED 3690 TWDI00000001 TWDI00000070 Thailand TH THB BKOK SET 3691 THDI00000001 THDI00000070 Turkey TR TURKEY COMP 4776 TRDI00000001 TRDI00000070 United Kingdom GB GBP ALL SHR 3675 GBAL00000001 GBAL00000070 United Kingdom GB GBP FTSE100 2273 GBF100000001 GBF100000010 United Kingdom GB GBP FTSE250 3674 GBF200000001 GBF200000010 United States US USD S&P 500 2269 USDI00000001 USDI00000060 XEU DE XEU 7508 XEDI00000001 XEDI00000010

The betas for such “default” ISIN codes are generally agreed to be equal to one. The total risk for the equity in such cases

was agreed upon to be 5/3 times the volatility of the index. Since that index’s volatility varies from one MatrixID to the next,

the total risk for such codes cannot be stored and is instead obtained by the calculator from the “StandardDeviations” table at

run-time.



X.2 DEFAULT ISIN CODES FOR THE LOCATIONS

The default ISIN codes are defined in the Locations table as part of the static data maintained by GTCO. They are allocated

by the system in the case of a missing ISIN in the EQT feed according to the list below:

Location Code

Region Name Location Type

Datafeed Location

Base Currency Rept ID lower bound

Rept ID upper bound

Default ISIN

GZ G GTCO Primary N/A CHF 0 999,999 n/a

SI A Singapore Primary SI SGD 150,001 200,000 SGDI00000001

HK A Hong Kong Secondary SI HKD 325,001 350,000 HKDI00000001

SY A Sydney Secondary SI AUD 350,001 375,000 AUDI00000001

TP A Taipei Secondary SI TWD 375,001 400,000 TWDI00000001

LO E London Primary LO GBP 50,001 80,000 GBAL00000001

PS E Paris Secondary LO FRF 80,001 85,000 FRDI00000001

JE E Jersey Secondary LO CHF 85,001 90,000 n/a

LU E Luxembourg Secondary LO CHF 90,001 95,000 BEDI00000001

FM E Frankfurt Secondary LO DEM 95,001 100,000 DEDI00000001

ZH E Zurich Primary ZH CHF 100,001 120,000 CHSM00000001

LG S Lugano Secondary ZH CHF 120,001 125,000 CHSM00000001

BS S Basel Secondary ZH CHF 125,001 130,000 CHSM00000001

CT S B. Cantrade Secondary ZH CHF 130,001 135,000 CHSM00000001

BL S B. di Lugano Secondary ZH CHF 135,001 140,000 CHSM00000001

HY S Hyposwiss Secondary ZH CHF 140,001 145,000 CHSM00000001

GE S Geneva Secondary ZH CHF 300,001 325,000 CHSM00000001

TO J Tokyo Primary TO JPY 250,001 300,000 JPTO00000001

NY N New York Primary NY USD 10,001 40,000 USDI00000001

TN N Toronto Secondary NY CAD 40,001 50,000 CADI00000001

F_ F GFDE Virtual LO USD 200,001 210,000 n/a

Q_ Q GEDE Virtual NY USD 210,001 220,000 n/a

X_ X GXDE Virtual ZH USD 220,001 230,000 n/a

C_ C GBCD/GECD Virtual ZH CHF 240,001 250,000 n/a



X.3 DETAILED INFORMATION ABOUT THE EQUITY POSITIONS FILE The data feeder systems supplying equities information are doing so by delivering an ASCII file at the “EQT-interface”. This

file consists of a set of tab-delimited values (TDV) for these seven (or eight) fields in the order given above (EQT table

spec).

TradeDate refers to the business date on which this position is held, not the capture date. For this date, any date in a

format acceptable to Sybase may be presented at the EQT interface (See the PVT specification above).

ReptID is a location-specific numeric code to tie a position into the organization structure.

ISINcode is a globally acceptable way to identify an equity. Since ISIN Codes are not universally used, those producing

an EQT file from “local” equity books may require a mapping from the local code (e.g., CUSIP in the U.S.) to ISIN

code. Equity specialists within GTCO can assist in obtaining files to map “local” Equity codes to ISIN codes. Special

“dummy” ISIN Codes (see previous list) must be used to capture the beta and total risk for equities with unknown ISIN

codes. These ISIN Codes map to a table with Betas and Total Risk values for a large number of securities

FeedID is an eight-character code, consisting of the two-character location code (LO, ZH, NY, SI, TO), a two-character

feeder system identifier (for example, “OP” for OPTAS, “QV” for QV in NY), and the remaining four characters

available to subclassify a source within the feeder system. FeedID values can be locally assigned, because the first two

characters make the code globally unique. Each file delivered to the EQT interface should have the same value for

FeedID.

NumberofShares (the number of shares held of that security) has a double precision data type, because some systems,

such as equity Options, provide a “delta-equivalent” which is a fractional value.

MarkPrice is the current price of the equity security as of the Trade Date. The calculator itself is only concerned with

the Market Value = (NumberofShares * MarkPrice). The MarkPrice must be in the currency of the equity index time

series. Thus, UK stocks will have a MarkPrice in GBP, German stocks will have a MarkPrice in DEM, and so on.

CapturePoint plays a role in identifying the equity data from each location in the global system. The value generally

corresponds to the first two characters of FeedID (see the Note about “CapturePoint” in the PVT section)

(Optional/Mandatory) Currency. The MarkPrice of each EQT record is assumed to be expressed in the currency of the

underlying time series. Thus, German stocks are quoted in DEM, UK stocks in GBP, and so on. To find out what that

currency is, the ISIN code of a record in an EQT file is used to search the EquityBetas table for the corresponding

EquityIndex. That index, which is a Position Risk Code, maps to a Time Series, characterized by a currency code.

If a currency code is specified in the EQT file, the loader performs an automatic currency conversion from the user-

specified currency to the “underlying” currency.

The following positions, for instance, require a Source Currency field to be specified as the (last) field in a PVT record:

all volatility risk

the following interest rate deltas: AED, CZK, KRW, TWD, CYP, THB

in general, equities from emerging markets

The reason for requiring a source currency field is that due to lack of a better time series for these classes of positions the

“underlying” currency of the time series is not the currency expected for the position code, but the currency of the time

series into which these position codes were mapped.

X.4 AGGREGATION OF INPUT RECORDS In the process of maintaining the Equity Positions table, the EQT loader may have to perform aggregation. Aggregation is

performed to make each row for a given TradeDate and FeedID unique with respect to ReptID and ISINcode. Thus, even if

the same ReptID is used to classify a number of different records, they’ll end up as one aggregated EquityPositions record.

Aggregation is such that aggregate Market Value is preserved. Two positions, one 20 long and one 5 short (with the same

MarkPrice) are aggregated (netted) into one record with NumberofShares equal to 15. In the unlikely event (unlikely for cash

equity positions) that the MarkPrice differs for the same ISIN code and the same ReptID, the weighted average mark price

will be used, preserving the aggregate market value. If netting is for some reason not desirable, the local Interface Systems

should ensure uniqueness by choosing key combinations that make the rows unique, for instance, by using more detailed

ReptID codes, or do their own netting.

X.5 EQUITYBETAS AND EQUITY INDICES The Value at Risk Calculator uses the Capital Assets Pricing Model (CAPM) to assess the risk associated with equities

portfolios, using i for the ith

stock, and its associated specific risk,

i

2. The “EquityBetas” table stores the betas and total

risk numbers for a large number of equities (see also Chapter XI: Collection of Equity Betas).



XI. THE FX RATES FILE

In order to accommodate multi-currency reporting in the VaR application, individual exposures in the Equities (EQT) and

Position Values (PVT) data files must be reported in (or converted into) the “underlying” currency. If instructed to do so by

adding an optional “currency” field to the PVT or EQT records, the respective loaders perform the conversions automatically.

The VaR calculator converts these exposures to USD, computes value at risk, and then translates the result to the user’s

choice of currency. Because of this design, each VaR site needs to maintain its own set of foreign currency exchange rates.

XI.1 FILE LAYOUT The Currency Exchange Rate Loader expects the following fields:

TradeDate Date to which this exchange rate applies

Currency Three-letter ISO code for foreign currency (See list below)

SpotRate The exchange rate in amount of foreign currency per US dollar (USD)

Please note the following rules.

The file format is ASCII text with Comma-Separated Values. Please refer to the PVT or EQT specification for valid

formats of “TradeDate”.

The FX file must be loaded into the local systems and the Consolidation system. This is the only file type that the loader

will process at the the Consolidation system site.

The file must be delivered to the same UNIX account on the local VaR system as is used for delivery of PVT and EQT

files (datafeed). The file name must end with “.fx”. The recommended syntax of the file name is

fxspotCCYYMMDD.fx (for example, fxspot19950501.fx).

Each business day, the PVT/EQT Loader and the Calculator expect a table to be present with spot exchange rates for the

following currencies:

Currencies in which Time Series, and, consequently, Volatilities are expressed

Currencies occurring in the optional extra column in files processed by the EQT/PVT loaders

A sample record of an FX file is shown next. Suppose the rate for the French Franc is 5.23 FFR per USD on May 1, 1995.

1-May-1995,FFR,5.23

XI.2 ADDITIONAL SOURCE FOR EXOTIC FX RATES IN ZURICH FX rates for exotic currencies which are not defined in the Core system (and therefore not delivered with the FXRT feed) are

downloaded from the Bloomberg PC at GTCO onto an Excel spreadsheet (NOSYRATE.XLS) and exported in a tab-delimited

text file (NOSYRATE.TXT) to the ZHGTCO3 server. A special script located in the feedmaster home directory

(get_nosyrate.sh) fetches the file from the Novell server using the vmatdist account, whilst another procedure (clubmed.sh)

inserts the rates directly into the FXSpotRates table (these steps are logged in a file called nosyrate.log).

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XI.3 SUMMARY OF THE “UNDERLYING CURRENCY” CONCEPT Recall from the PVT and EQT specifications that the PositionValue in PVT files must be specified in the currency of the

underlying time series and that the MarkPrice (EQT) must be expressed in the currency of the underlying Equity Index. The

target currency in the case of the PVT entry is found by mapping the position code to the corresponding time series. For

equities, the ISIN code corresponding to the entry is mapped to the EquityBetas table, and the latter table’s EquityIndex

(which is really a type of Position Code) is mapped to the Time Series table via the PositionCode-to-TimeSeries table. In

short, these are the mappings required:

PVT: PositionCode MapPositionCodeToTimeSeries TimeSeries’ Currency

EQT: ISINCode EquityBetas’ EquityIndex MapPositionCodeToTimeSeries TimeSeries’ CCY

In practice, one would use the PC Calculator, to display the currency of the PRCe via the Times Series it is mapped to.



XII. COLLECTION OF EQUITY BETAS

XII.1 DELIVERING EQUITY INFORMATION TO THE VAR SYSTEM Equity controllers have often expressed the need to enter equity information quickly for new stocks. Starting with VaR

Release 3.0, local sites are able to send small (low-volume) eqtinfo files, containing information about new stocks and urgent

updates of parameters of existing stocks.

An insert can be performed on a "live" system without affecting other VaR programs (Loaders, Calculators), because by

definition, such an operation implies that no record with this ISIN code previously existed. Therefore, an insert will not

disrupt a running calculator or someone viewing VaR reports or using the PC-based VaR calculator. Replication of inserts

from the Consolidation System to all local systems will ensure a quick turn-around time.

Updates are another matter. An incoming update to equity information during a Calculator run will yield inconsistent results

if the Calculator uses equity positions with the updated ISIN code. For that reason, updates must be filtered out of the

eqtinfo files and transferred to a holding area for processing during "quiet times". In particular monthly, high-volume updates

must be postponed until a time during which no interruption of other applications is likely.

Differences between inserts and updates are summarized in the table below.

Insert Update

Nature of transactions Equity information inserted into the

EquityBetas table with new ISIN

codes.

Replace values for beta, total risk, or equity

index in the EquityBetas table

Impact on the VaR systems None, except that the sender of the

inserts is able to load new equity

positions using the new ISIN codes.

Potentially disruptive at all VaR sites

When executed Continuously and automatic Scheduled weekly on Sunday evening

Note: high volumes of Beta inserts (> 2500) are also treated in deferred mode (on Sunday evening).

XII.2 MAINTAINING THE LIST OF ISINS AND DUMMY CODES In addition to the updates described above, GTCO personnel will also be able to schedule deletions of obsolete or incorrect

equity records, as long as the codes are not used in the EquityPositions table. Similarly, the dummy equity codes and their

associated parameters are maintained by GTCO only. This conforms to a practice in the past of rejecting dummy codes when

sent by local sites in equity files.

XII.3 HOW EQUITY INFORMATION IS DELIVERED The following diagram shows how equity information is maintained.

C o n s o l id a tio n

s y s te m V a R

d a ta b a s e

V a l id a tio n

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S ta n d a rd " e q tin fo " fi le lo c a l V a R

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.

.

.

As the diagram shows, a standard equity information file (eqtinfo) is sent to the Consolidation system, where it is processed.

Processing includes an elaborate validation process, in which the supplied values for equity parameters are verified against

reference data and rules. Examples of such rules are

Ensure that the combination of Equity Index and Country code (first two characters of the ISIN) is valid

Whether a sending location ("Beta Source") is allowed to modify the data, i.e., whether it is the "Authority" on the equity

information

Enforce valid ranges for beta and total risk.



XII.4 FILE FORMAT FOR NEW RECORDS OR UPDATES The eqtinfo file format is backward-compatible with the previously used "EquityBetas File Specification". An alternate

format is now used for consistency with other VaR loaders. It differs as follows:

Tab-delimited values format is now supported in addition to the previously used comma-separated values format

The header is optional. Absence of the header implies the tab-delimited values format.

Files written in the old format (comma separated with a title) must be converted through the ‘cvt_eqtinfo.sh’ filter on the

Consolidation System (in the betafeed account; syntax: cvt_eqtinfo.sh <old_file> <new_file>).

The following fields are included in the eqtinfo file. For each of the six fields, the table below shows the data type and

validation rules. Each record must contain six fields, though an empty (NULL) field is allowed for the TotalRisk column.

Column DataType Rules

ISINcode 12 characters Exactly twelve alpha-numeric characters, starting with two letters. The first two letters

must be a valid Country Code. ISIN codes are unique.

Beta Floating point number Cannot be zero or NULL. Initially, the range is -3 to +3. Valid range may be modified by

changing a parameter..

EquityIndex Integer PositionRiskCode (PRC) of the equity index. Must be a PRC with RiskSensType equal to

"PRINCPL", and mapping to a Time Series with FinancialElementCode equal to

"EQTSPT"

TotalRisk double precision floating point

number

Expressed as a percentage. May be NULL, in which case it is assumed to be equal to 5/3

times the volatility of the Equity Index. The range is 5 to 100. Valid range may be

modified by changing a parameter

SecurityName 50 characters Description (any text, but no tab character). If the old comma-delimited file format is

used and the description contains a comma, the text must be enclosed in double quotes (").

BetaSource 3 characters To indicate the provider of equity information. Each location may have one or more

BetaSource codes. The codes, which are globally unique, are allocated by GTCO. The

BetaSource code must be unique within each file.

XII.5 FILE NAME SPECIFICATIONS All eqtinfo files, copied by the local sites to the HOME directory of the betafeed account, must use the following file name

syntax:

LLYYYYMMDD.bet

where:

LL is the location code

YYYY the year

MM the month

DD the day

and for deletions:

This file lists simply the ISIN codes of the stocks for which information should be retired. The BetaSource column serves to

identify the origin of the request. Both fields are required.

Column Data Type Rules

ISINcode 12 characters Must be in the database.

BetaSource 3 characters Location Code (see table)

The equityinfo deletion file has the following file name syntax:

LLYYYYMMDD.del



XII.6 BETA SOURCE CODES BetaSource is a globally unique identifier maintained by GTCO and intended to identify the Location, and within location,

the source supplying the Betas. A table (BetaSourceLocation) is maintained for this purpose. The currently assigned codes

are shown below.

BetaSource Description Location

BAN Barra NY NY

BLN Bloomberg NY NY

CNN Controllers NY NY

BAL Barra LO LO

BAS Singapore SI

BAT Tokyo TO

ZHO Zurich ZH

UBS GTCO (dummy ISIN codes) GZ

XII.7 VALIDATION RULES

The Location code imbedded in the file name ‘LL’ must correspond to the Location implied by the BetaSource field,

this, in order to identify the Owner of the equity record as the Authority.

The sender is recognized as being the Authority for an equity Beta if the Location code ‘LL’ imbedded in the file name is

the same as the Location code implied by the LocationCountryAuth table for the affected ISIN.

Locations may send Betas for countries they have no authority on, providing that this is a new record (insert) in the Beta

table, they become consequently the Owner of the information.

A Location may send Betas only with the BetaSource codes allocated to it.

All records in the eqtinfo file must have the same BetaSource code.

Only the Owner of an equity information record may delete it (if the Authority wants to do it, it must first become the

Owner through an update of the record).

Only the Location who is the Authority for a specific equity may override the Beta information.

A check is made whether the specific risk is negative, given the values for Total Risk and volatility implied by the Equity

Index for the applicable MatrixID, that is, the one that the calculator would use for today (default matrix type is read

from the loader's parameter file). Values that cause the specific risk to be negative are accepted but logged. Accepting

these is no problem, because the calculator and other applications set the specific risk to zero when negative. However,

further action may be taken to update the equity index volatility and/or total risk to avoid this condition.

Example:

New York (‘LL’ code = NY) sends a Beta record with BetaSource BAN for a NA equity

New York is the Authority over this Beta: inserts and updates are allowed in any case

New York (‘LL’ code = NY) sends a Beta record with BetaSource BAN for a European equity

New York is the Owner of this Beta: inserts are allowed, updates only if it was not

previously changed by London.

XII.8 BETA UPDATE FREQUENCY

Recall that the Betas provided by the Barra system are the predicted systematic risk coefficients for a time horizon of 3

months.

Therefore, it is a requirement from GTCO in Zurich to get these figures updated once a month in the VaR Consolidation

System (send the new Betas before the last Friday of the month, in order to get them processed over the weekend).



XII.9 WHICH COUNTRIES DOES EACH LOCATION HAVE AUTHORITY OVER ? A table (LocationCountryAuth) is maintained in the database with the Location code and Country code that a Location is the

Authority over. This table is printed below with the full text of the country name.

Location Country Code Country Name

LO AR Argentina

LO AT Austria

LO AU Australia

LO BD Bangladesh

LO BE Belgium

LO BR Brazil

LO CL Chile

LO CN China

LO CZ Czech Republic

LO DE Germany

LO DK Denmark

LO EG Egypt

LO ES Spain

LO FI Finland

LO FR France

LO GB United Kingdom

LO GR Greece

LO HR Croatia

LO HU Hungary

LO IE Irland

LO IL Israel

LO IN India

LO IT Italy

LO JO Jordan

LO LB Lebanon

LO MA Morocco

LO MX Mexico

LO MY Malaysia

LO NL Netherlands

LO NO Norway

LO NZ New Zealand

LO PE Peru

LO PK Pakistan

LO PL Poland

LO PT Portugal

LO SE Sweden

LO SI Slovenia

LO TR Turkey

LO ZA South Africa

NY CA Canada

NY US United States

SI HK Hong Kong

SI ID Indonesia

SI KR Korea, Republic of

SI PH Philippines

SI SG Singapore

SI TH Thailand

SI TW Taiwan, Republic of China

TO JP Japan

ZH CH Switzerland



XII.10 VALID COMBINATIONS OF COUNTRY CODE AND EQUITY INDEX The Country code of an eqtinfo record is derived from the first two characters of the ISIN code. A table is used to maintain

the valid combinations of Equity Index and Country code. A Country may have several indices assigned to it (e.g. U.K.), so

may an index be assigned to several Countries (e.g. stock with US ISIN prefix mapped to the Egyptian index).

ARS GENL EQT 4765 AR Argentina ATS TRADED 4766 AT Austria AUD ALL ORD 3673 AU Australia BANGLADESH 4778 BD Bengladesh BEF BEL-20 3676 BE Belgium BEF BEL-20 3676 LU Luxembourg BRZL BOVESPA 4767 BR Brazil CAD TSE INDX 3677 CA Canada CHF CS GENL 2276 CH Switzerland CHF SMI 3678 XS International Equity Funds CHF SMI 3678 LU Luxembourg CHF SMI 3678 CH Switzerland CHILE GENL 4768 CL Chile CHINA 4780 CN China CZECH PX50 4769 CZ Czech Republic CZECH PX50 4769 PL Poland DEM DAX EQTY 2275 DE Germany DNMRK KFX20 3679 DK Denmark EGP EGYPT 7462 EG Egypt EGP EGYPT 7462 US United States ESP IBEX35 3687 ES Spain FIM FOX25 3680 FI Finland FRF CAC40 2277 FR France GBP ALL SHR 3675 IE Ireland GBP ALL SHR 3675 JE Jersey

GBP ALL SHR 3675 GB United Kingdom GBP FTSE100 2273 GB United Kingdom GBP FTSE250 3674 GB United Kingdom GREECE ASE 4770 GR Greece HKD HANG SNG 3681 HK Hong Kong HRK CROATIA 7457 HR Croatia HUF HUNGARY 7460 HU Hungary HUF HUNGARY 7460 RU Russia IDR JAKARTA 4779 ID Indonesia IEP IRELAND 7507 IE Ireland INR BOMBAY 4771 IN India ISRL MAOF25 4772 IL Israel ITL MIB 30 3682 IT Italy JOD JORDAN 7458 JO Jordan JPY TOPIX 4023 JP Japan LBP LEBANON 7464 LB Lebanon MAD MOROCCO 7463 MA Morocco MEXICO BOLSA 3684 BZ Belize MEXICO BOLSA 3684 MX Mexico MLYSIA INDX 3683 MY Malaysia NIKKEI 225 2271 JP Japan NLG AEX 25 3685 NL Netherlands NLG AEX 25 3685 AN Netherlands Antilles NOK OSLO OBX 3686 NO Norway NZD SE 40 4774 NZ New Zealand PAKISTAN 4781 PK Pakistan PERUVIAN SOL 6933 PE Peru PHILIPPINES 4782 PH Philippines PLZ POLAND 7461 PL Poland PORTUGAL 4783 PT Portugal S AFR ALLMKT 4775 GA Gabon S AFR ALLMKT 4775 ZA South Africa S AFR ALLMKT 4775 ZM South Africa S AFR ALLMKT 4775 ZW South Africa S KOREA COMP 4773 KR Korea, Republic of SGD STRAITS 3689 SG Singapore SIT SLOVENIA 7459 SI Slovenia SWEDEN OMX 3688 SE Sweden THB BKOK SET 3691 TH Thailand TURKEY COMP 4776 TR Turkey TWD WEIGHTED 3690 TW Taiwan USD S&P 500 2269 BM Bermuda USD S&P 501 2269 BS Bahamas USD S&P 502 2269 US United States XEU CASH 7508 DE Germany



XII.11 SETTING THE BETA FEEDIDS AND THE BETA FEEDER CONTACTS E-Mail notification is provided to the Beta Contact for a particular BetaSource, defined as a feed in the VaRFeeds table (like

PVTs and EQTs). The FeedID is defined by the system through the “EQT”prefix plus the BetaSource code (for instance:

EQT + BAN for NY). The personal record of the Beta Contact (UserID, First name, Last Name, E-Mail Adress) must be

entered in the ‘Employee’ table by the Security Admin.

XII.12 NEW SET OF DUMMY ISINS USING THE COUNTRY CODE

The strict validation rules for equity information discussed before also affects the Dummy ISINs. The latter will be redefined

by GTCO and inserted into the Equity Beta Table. Time will be given to the local sites to amend their Feeder Interfaces

according to a new list of Dummies. After the completion of the conversion by the sites, the old Dummy codes will be deleted

from the Beta Table and the Default ISIN codes associated to the Locations (for missing ISINs) will be updated.

CountryName Country Code Equity Index Description PRC Start Dummy ISIN End Dummy ISIN

Argentina AR ARS GENL EQT 4765 ARDI00000001 ARDI00000070 Australia AU AUD ALL ORD 3673 AUDI00000001 AUDI00000010 Austria AT ATS TRADED 4766 ATDI00000001 ATDI00000070 Bangladesh BD BANGLADESH 4778 BDDI00000001 BDDI00000070 Belgium BE BEF BEL-20 3676 BEDI00000001 BEDI00000010 Brazil BR BRZL BOVESPA 4767 BRDI00000001 BRDI00000070 Canada CA CAD TSE INDX 3677 CADI00000001 CADI00000010 Chile CL CHILE GENL 4768 CLDI00000001 CLDI00000070 China CN CHINA 4780 CNDI00000001 CNDI00000070 Czech Republic CZ CZECH PX50 4769 CZDI00000001 CZDI00000070 Denmark DK DNMRK KFX20 3679 DKDI00000001 DKDI00000010 Finland FI FIM FOX25 3680 FIDI000000001 FIDI000000010 France FR FRF CAC40 2277 FRDI00000001 FRDI00000010 Germany DE DEM DAX EQTY 2275 DEDI00000001 DEDI00000010 Greece GR GREECE ASE 4770 GRDI00000001 GRDI00000070 Hong Kong HK HKD HANG SNG 3681 HKDI00000001 HKDI00000070 India IN INR BOMBAY 4771 INDI00000001 INDI00000070 Indonesia ID IDR JAKARTA 4779 IDDI00000001 IDDI00000070 Israel IL ISRL MAOF25 4772 ILDI00000001 ILDI00000070 Italy IT ITL MIB 30 3682 ITDI00000001 ITDI00000010 Japan JP JPY TOPIX 4023 JPTO00000001 JPTO00000070 Japan JP NIKKEI 225 2271 JPNI00000001 JPNI00000001 Korea, Republic of KR S KOREA COMP 4773 KRDI00000001 KRDI00000070 Malaysia MY MLYSIA INDX 3683 MYDI00000001 MYDI00000070 Mexico MX MEXICO BOLSA 3684 MXDI00000001 MXDI00000070 Netherlands NL NLG AEX 25 3685 NLDI00000001 NLDI00000010 New Zealand NZ NZD SE 40 4774 NZDI00000001 NZDI00000070 Norway NO NOK OSLO OBX 3686 NODI00000001 NODI00000010 Pakistan PK PAKISTAN 4781 PKDI00000001 PKDI00000070 Philippines PH PHILIPPINES 4782 PHDI00000001 PHDI00000070 Portugal PT PORTUGAL 4783 PTDI00000001 PTDI00000070 Singapore SG SGD STRAITS 3689 SGDI00000001 SGDI00000070 South Africa ZA S AFR ALLMKT 4775 ZADI00000001 ZADI00000070 Spain ES ESP IBEX35 3687 ESDI00000001 ESDI00000010 Sweden SE SWEDEN OMX 3688 SEDI00000001 SEDI00000010 Switzerland CH CHF CS GENL 2276 CHCS00000001 CHCS00000001 Switzerland CH CHF SMI 3678 CHSM00000001 CHSM00000010 Taiwan, Republic of China TW TWD WEIGHTED 3690 TWDI00000001 TWDI00000070 Thailand TH THB BKOK SET 3691 THDI00000001 THDI00000070 Turkey TR TURKEY COMP 4776 TRDI00000001 TRDI00000070 United Kingdom GB GBP ALL SHR 3675 GBAL00000001 GBAL00000070 United Kingdom GB GBP FTSE100 2273 GBF100000001 GBF100000010 United Kingdom GB GBP FTSE250 3674 GBF200000001 GBF200000010 United States US USD S&P 500 2269 USDI00000001 USDI00000060

Note:

The betas for such “default” ISIN codes are generally agreed to be equal to one. The total risk for the equity in such cases

was agreed upon to be 5/3 times the volatility of the index.

Dummy ISINs should be used only in exception cases when no Beta or ISIN information is available. Whenever new

equity information is provided by the market, user should take benefit of the Beta insert facility.



XII.13 EQUITY SECTOR BREAKS In order to accommodate equity sector break reports in the VaR system, a set of tables mapping equities to industry sectors is

provided in VaR Release 4.0. These tables are maintained at the Consolidation Site and replicated to Local Sites (as with all

market tables). Initially, the table mapping equities to sectors will be populated with the full set of ISINcodes as found in the

EquityBetas table, with a special SectorCode indicating “Unassigned” sector. Assignment to true sectors will be performed

by the Equity Sector Loader. Addition or deletion of EquityBetas records by the existing equity info loaders will

correspondingly insert or delete records into the ISIN_Sector_Map table.

XII.14 FILE FORMAT FOR NEW SECTOR BREAK UPDATES A file format consisting of tab-delimited values (no header) is defined. This format is consistent with that of other VaR

loaders. The ISIN_Sector_Map table will be initialized with a full set of ISIN codes found in the EquityBetas table with a

special “unassigned” sector code. Because all of the ISIN codes will already be in the EquityBetas table, Sector Break files

will only consist of updates.

The following fields must be included in the sector break file. For each of the three fields, the table below shows the data

type and validation rules. Each record must contain three fields.

Column Data Type Rules

ISINcode char(12) Exactly twelve alpha-numeric characters, starting with two letters. The first two letters must be

a valid Country Code in LocationCountryAuth table..

SectorCode int The field will be validated for existence in the EquitySectors table.

BetaSource char(3) To indicate the provider of equity information

XII.15 SECTOR BREAK FILE FORMAT All sector break files, copied by the local sites to the HOME directory of the betafeed account, must use the following file

name syntax:

LLYYYYMMDD.sec

where

LL is the location code

YYYY the year

MM the month

DD the day

XII.16 VALIDATION RULES FOR THE SECTOR BREAKS The rules for Beta deliveries apply also for the equity Sector Breaks, in particular:

The Location code imbedded in the file name ‘LL’ must correspond to the Location implied by the BetaSource field, this,

in order to identify the Owner of the equity record as the Authority.



XII.17 VALID MSCI EQUITY SECTORS CODES FROM BARRA The EquitySectors table provided by VaR Release 4.0 is as follows:

SectorCode SectorName

0 Unassigned

1 Energy Sources

2 Utilities - Electric & Gas

3 Building Materials & Component

4 Chemicals

5 Forestry & Paper Products

6 Metals - Nonferrous

7 Metals - Steel

8 Misc. Materials & Commodities

9 Aerospace & Military Technology

10 Construction & Housing

11 Data Processing & Reproduction

12 Electrical & Electronics

13 Electronic Components & Instruments

14 Energy Equipment & Services

15 Industrial Components

16 Machinery & Engineering

17 Appliances & Household Durable

18 Automobiles

19 Beverages & Tobacco

20 Food & Household Products

21 Health & Personal Care

22 Recreation & Other Consumer Goods

23 Textiles & Apparel

24 Broadcasting & Publishing

25 Business & Public Services

26 Leisure & Tourism

27 Merchandising

28 Telecommunications

29 Transportation-Airlines

30 Transportation-Road & Rail

31 Transportation-Shipping

32 Wholesale & International Trading

33 Banking

34 Financial Services

35 Insurance

36 Real Estate

37 Multi-Industry

38 Gold Mines



XIII. BANKING HOLIDAY PROCEDURE

XIII.1 INSURING A COMPLETE SET OF TRADING POSITIONS On Banking Holidays trading positions are automatically duplicated from the previous business day, thus assuring that GTCO

has a complete set of position data for all local systems. The table below lists the Banking Holidays for all the VaR sites in

‘97:

London Frankfurt Luxemb. Paris Singapore Hong Kong Sydney Taipei Tokyo New York Toronto Zurich Lugano

1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97 1-Jan-97

28-Mar-97 28-Mar-97 31-Mar-97 31-Mar-97 2-Jan-97 6-Feb-97 27-Jan-97 2-Jan-97 2-Jan-97 20-Jan-97 28-Mar-97 2-Jan-97 2-Jan-97

31-Mar-97 31-Mar-97 1-May-97 1-May-97 7-Feb-97 7-Feb-97 28-Mar-97 3-Jan-97 3-Jan-97 17-Feb-97 19-May-97 28-Mar-97 6-Jan-97

5-May-97 1-May-97 8-May-97 8-May-97 10-Feb-97 28-Mar-97 31-Mar-97 6-Feb-97 15-Jan-97 28-Mar-97 1-Jul-97 31-Mar-97 19-Mar-97

26-May-97 8-May-97 23-Jun-97 19-May-97 28-Mar-97 31-Mar-97 25-Apr-97 7-Feb-97 11-Feb-97 26-May-97 4-Aug-97 1-May-97 31-Mar-97

25-Aug97 19-May-97 15-Aug-97 14-Jul-97 18-Apr-97 9-Jun-97 9-Jun-97 10-Feb-97 20-Mar-97 4-Jul-97 13-Oct-97 8-May-97 1-May-97

25-Dec-97 3-Oct-97 25-Dec-97 15-Aug-97 1-May-97 30-Jun-97 4-Aug-97 4-Apr-97 29-Apr-97 13-Oct-97 11-Nov-97 19-May-97 8-May-96

26-Dec-97 25-Dec-97 26-Dec-97 10-Nov-97 21-May-97 1-Jul-97 6-Oct-97 9-Jun-97 3-May-97 11-Nov-97 25-Dec-97 1-Aug-97 19-May-97

26-Dec-97 11-Nov-97 9-Aug-97 2-Jul-97 25-Dec-97 1-Jul-97 5-May-97 27-Nov-97 26-Dec-97 25-Dec-97 29-May-97

25-Dec-97 31-Oct-97 18-Aug-97 26-Dec-97 16-Sep-97 20-Jul-97 25-Dec-97 26-Dec-97 1-Aug-97

25-Dec-97 17-Sep-97 10-Oct--97 21-Jul-97 15-Aug-97

1-Oct-97 31-Oct-97 15-Sep-97 8-Dec-97

2-Oct-97 12-Nov-97 23-Sep-97 25-Dec-97

10-Oct-97 25-Dec-97 3-Nov-97 26-Dec-97

25-Dec-97 24-Nov-97

26-Dec-97 23-Dec-97

31-Dec-97

XIII.2 DELIVERING HOLIDAY INFORMATION TO THE VAR SYSTEM Information about holidays is kept locally on each VaR system (no central repository with data replication mechanism). It is

therefore the duty of the local Org./Mapping Manager to provide one year at a time the list of holidays applying to his

Locations in a tab-delimited text file. This file must be loaded into the Local VaR System by the System Operator (the

Holiday Table is not replicated to the other VaR sites). The format of the holiday file is as follows:

1. HolidayDate in one of the following formats:

Mon dd yyyy

mm/dd/yyyy

mm.dd.yyyy

dd-mon-yyyy

2. LocationCode indicating the UBS location to which the HolidayDate pertains.

3. FX flag (which may be NULL) indicating whether FX spot rates should be duplicated or not. If the FX flag field should

be NULL, an empty field must be provided in the input file.

A sample text file might appear as follows (where indicates a TAB):

Apr 5 1996 NY FX

Apr 5 1996 TN

Jul 1 1996 TN

Jul 4 1996 NY FX



XIII.3 EXAMPLE OF GENERATING A HOLIDAYS INPUT FILE USING EXCEL The tab-delimited input file for loading the Holidays table may be generated by first creating the table in Microsoft Excel and

then exporting the worksheet as a tab-delimited file. An outline of these steps is as follows:

Create worksheet as follows:

A B C

1 04/05/1996 TN

2 04/05/1996 NY FX

3 07/01/1996 TN

4 07/04/1996 NY FX

5 . . .

Note that if the 3rd column (Flags) is completely blank, you should enter a blank text string into the cells to have some

data value in this column (otherwise the subsequent export will omit this column). A blank text string can be entered by

typing a single-quote (‘) followed by <Enter>.

The first column should also have its format set to Date | mm/dd/yyyy in order to display the dates in this Sybase-

recognized format.

Select Save As... from the File menu. For Save File as Type, choose Text (Tab delimited). Enter a file name for the

text file (e.g., HOL1996.TXT).

XIV. TESTING A NEW FEED

Whenever a new feed is ready for delivery to VaR following procedure must take place:

Define a new FeedID on a local system test machine (through the VaR Team or IT Support)

Define a Feeder Contact in the Employee table of the system test machine including an e-mail address

for instance:

Feeder Contact Location E-Mail Address

Andrew Tindle/Alan Cooper LO Andrew.Tindle/[email protected]

Jack Wong LO Jack.Wong/lobroad/[email protected]

Eric Yu NY [email protected]

Chen Shuang-Jun/Daryl Soh SI Shuang-Jun.Chen/[email protected]

Koki Tamura TO [email protected]

Walter Neuenschwader ZH Walter Neuenschwander/[email protected]

Werner Hürlimann ZH [email protected]

Adrian Zweig ZH Adrian.Zweig/[email protected]

Markus Fürer ZH Markus.Fürer/[email protected]

Jörg Salmini ZH Jörg Salmini/[email protected]

Send a sample file of the new feed via ftp to the datafeed account of one the following test systems:

LO s2007.sys.lo.ubs.com 139.149.224.220

NY lemur.ny.ubs.com 161.239.136.66

SI svtinggi.raffles.si.ubs.com 192.238.8.180

TO svsaturn.ub.tyo.ubs.com 147.60.112.150

ZH stmls1.mp.zh.ubs.com 193.5.110.18

GZ stmcs1.mp.zh.ubs.com 193.5.110.19

Check the loaded positions and VaR exposures (local Product Control and GTCO)

Agree on a schedule between Feeder Contact, local Product Control and GTCO for a start of production

Define the new FeedID and Feeder Contact on the production system (IT Operation).



XV. Remote Bank Datafeed

UBS subsidiaries such as Cantrade, Banco di Lugano and Hyposwiss cannot send directly their data feed to the VaR system,

since they are located outside the firewall. Therefore, a special utility (ftpfeed script in feedmstr) described in reference 4

remotely polls the ‘SYS2/GROUPS/VARREMFD’ directory of a Novell server in the subsidiary bank to get the PVT and EQT

files transferred to UBS.

U b in e t

F ir e w a ll

G a t e w a y

R e m o te B a n k

1 9 2 .1 6 8 .1 3 4 .2 0 (B a n c o d i L u g a n o )

1 9 4 .3 8 .1 9 7 .2 5 0 (C a n tra d e )

1 9 4 .3 8 .2 5 2 .7 0 (H y p o s w is s )

G a t e w a y

1 9 3 .5 .1 1 0 .1 8

1 9 3 .5 .1 1 0 .1 9

1 9 3 .1 3 4 .1 0 7 .1 1 1

1 9 3 .1 3 4 .1 0 7 .1 1 2

V a R d a t a b a s e

S e r v e r s

In order to prevent the transfer of a PVT or EQT file whilst it is being created, an additional ‘sentinel’ file is used as a flag to

indicate that something is available for copying on the remote system. Only data files with a corresponding ‘sentinel’ file are

copied to the datafeed account of the VaR System. These empty flag files must be created at the remote location with the

following extension:

.psg associated with a .pvt position file

.esg associated with a .eqt equity position file.

XVI. Adjustment (VaR Controller) Feed

A utility provided in the Reports GUI allows controllers to create an adjustment PVT or EQT datafeed which can be fed into

the VaR system. Each authorized VaR Controller gets a unique FeedID assigned, to be used in the PVT/EQT Override

Facility (see also in the Reports GUI manual).

The recommended procedure for position adjustment is the following:

1. enter the opposite position for a particular ReptID and PRC in order to offset the current PVT or EQT

2. add the correct position for that ReptID and PRC (the Loader will net both positions in the table)

3. save the file with a .pvt or .eqt extension (any file name)

4. send via ftp the file to the local VaR system in the datafeed account.



XVII. WHO’S WHO IN VAR

Zurich

VaR Project Leader: Lukas Gubler * 46180, Fax: * 42160

IT Development: Peter Mossel/Andrea Fabi/John MacPherson * 49395/* 42759/* 43804

Ingrid von der Marwitz * 49394

Risk Analysts: Jörg Salmini/Daniel Zilka * 48505/* 42405

Business Support: Ingrid Loewenton/Glenys Lynn * 48731/* 67843

VaR Help Desk: (Zurich office time: 8.30 - 18.00) * 48728

Market Data: Mary Cullinane * 42430

Global IT Support/Deployment: Sunder Annamraju/Andy Church * 65429/* 69782

VaR Controller: Marc Bonnassieux * 44902

Global Funding: Beat Koch/Thomas Arnet * 55301/* 52256

Core System Mapping: Tom Novak (FX/FI)/J.-P.Vuissoz (PM) * 53309/ * 43258

Equities Mapping: Werner Hürlimann/Gabriela Waser * 43677/* 49315

Commodities Mapping: Stefan Judisch * 46599

VaR Controller FI/FX: Oliver Hofer/Adrian Zweig * 55056/* 55069

Equities: Karin Welti * 49852

Commodities: Tim Poullain-Patterson * 43985

IT Operation: Victor Fieldhouse/Graziano Romualdi/Felix Meier * 68798/* 58121/* 54939

Interfaces to VaR: Walter Neuenschwander/Christophe Vogt * 69381/* 68009

Geneva Roberto Severi 022 388 90 16

Banco Di Lugano Enrico Berardo/Raffaella Dozio/Antonio Roggiani (IT) 091 910 83 92/ 910 83 94/ 910 86 56

Bank Cantrade Stefan Christen/Roland Gubser 01 295 24 56/ 295 23 91

Hyposwiss Roland Heini 01 214 31 11

London

VaR Project Leader: Nick Joseph * 16726

Fixed Income: Victoria Collins/Nick Michelmore * 13321/* 13449

Equity: Hemal Patel/David Morley * 11187/* 11044

Funding: Peter Healey/Tyne Cameron/Martina Slowey * 14007/* 11438

IT Operation: Alan Cooper/Andrew Tindle/Nick Wright * 12016/* 14705/* 17675

Paris

IT Operation: Hervé Chamillard * 1628

Frankfurt

IT Operation: André Sarkic * 4612

Luxembourg

VaR Controller: Heike Keber * 2025

IT Operation: Georges Kapgen * 2623

New York

VaR Project Manager: Reto Tuffli * 6810

Business Analyst: Marc Nunes/Alex Riesch * 4234/* 3852

IT Development: Eric Yu/ Eugene Roytenberg/Bryan Althaus/Chintan Upadhyay * 3624/* 6290/* 6869/* 6448

Business Support: Gisela Mandl * 4801

VaR Controllers: David Molloy/Michael Allen/Keith Hughes * 4824/* 4944/* 4245

Equity Contact: Sam Morland/Christy Chen * 6842/* 5658

Toronto

IT Operation: Alfred Yip/Jane Nyman (1416) 343 1991

Singapore

VaR Project Leader: Enoch Chng * 3933/Fax: 3923

Business Support/Time Series: Craig San/Daryl Soh * 3926/*3927

IT Operation: Chen Shuang-Jun/Anurag Mohan * 3925/* 3929

IT Security Officers Erlich Phua/Kitty Yuen * 6820/* 6103

Hong Kong

VaR Project Leader: Seah Hway Keng * 8525

Business Support: Patrick Ho/Edward Ng * 1271/* 1216

IT Operation: Homer Cheng/Stephen Kung * 8549/* 1214

Taipei

VaR Project Leader: Lilian Liang * 6783

Business Support: Jessica Chiang * 6776

IT Operation: Amy Su * 6788

Sydney

VaR Project Leader: Richard Knox * 653

VaR Controller Peter Simpson * 610

Business Support: Dianna Cheung/Caroline Mock * 638/* 543

IT Operation: Peter Cant * 684

Tokyo

VaR Controller William Hooper * 80-8219

IT Operation: Koki Tamura/Joji Boyd * 80-8930/80-8935



XVIII. VAR FEEDS

FeedID Description PosID System Datafeed Contact

BETAMSTR General Equity Info Contact

BLBSEQT Banco di Lugano Equity Positions from Boss System EQT Boss Antonio Roggiani

BLBSFX Banco Di Lugano FX Positions from Boss System PVT Boss Antonio Roggiani

BLBSRATE Banco Di Lugano FI Positions from Boss System PVT Boss Antonio Roggiani

BSCOFXMM Core FX/MM Basel PVT Desy+ Walter Neuenschwander

CTGDHFX PVT Cantrade from GDH System PVT GDH Stefan Christen

CTGDHMM MM Cantrade Positions from GDH System PVT GDH Stefan Christen

CTXLS1 PVTs Cantrade Positions from Excel SpSh PVT MS Excel Stefan Christen

F_RR0105 Global Credit Derivatives PVT Raider Jack Wong/James Steadman

FMFX0001 FX Spot PVT

FMGD0001 Mony PVT GDH

FMGD0003 FRANKFURT FX FORWARDS PVT GDH

FMRR0003 Schedulscheine Pfiendbrief PVT Raider Jack Wong/James Steadman

FMRR0006 Frankfurt Repos PVT Raider Jack Wong/James Steadman

GECOFXMM Core FX/MM Geneva PVT Desy+ Walter Neuenschwander

GECOPMET Core PM Geneva PVT Desy+ Walter Neuenschwander

GEOP0001 Optas EQT (Geneva) EQT Optas Werner Hürlimann/Gabriela Waser

GEOP0002 Optas PVT (Geneva) PVT Optas Werner Hürlimann/Gabriela Waser

HKCO2197 DESY feed (HK Desy FX system) PVT Desy+ Chen Shuang-Jun/Homer Cheng

HKDBASE GFD/EA feed (HK DBase System) PVT PAP Chen Shuang-Jun/Homer Cheng

HKGFDNL1 HK ELF GFDE NL feed1 MAT Elf Craig San

HKGFDNL2 HK ELF GFDE NL feed2 Elf Craig San

HSEQ Hyposwiss Equities PVT MS Excel Roland Heini

HSFI Hyposwiss Fixed Income PVT MS Excel Roland Heini

HSFX Hyposwiss FX PVT MS Excel Roland Heini

HSMM Hyposwiss Money Market PVT MS Excel Roland Heini

LGCOFXMM Core FX/MM Lugano PVT Desy+ Walter Neuenschwander

LOCBNL Covertible Bonds NL MAT Monis Hemal Patel

LOED0001 Equity Feed ID EQT EDP Andy Tindle/Alan Cooper

LOED0002 PVT Feed ID PVT EDP Andy Tindle/Alan Cooper

LOED0003 Equities FX Exposure PVT EDP Andy Tindle/Alan Cooper

LOED0004 EDP Currency books PVT EDP Andy Tindle/Alan Cooper

LOgemsNL London GEMS NL Elf Anthony Hewitt 17746

LOGEMSNL GEMS Derivatives London ZAR Elf Anthony Hewitt 17746

LOGEMSNM GEMS Derivatives London USD

LOGFDA04 GFDE London Prop Arbitrage DEM

LOGFDA10 GFDE London Prop Arbitrage ITL

LOGFDB03 GFD Bond Options NL MAT Elf Anthony Hewitt 17746




LOGFDB08 GDF Bond Options NL MAT Elf Anthony Hewitt 17746


LOGFDB13 London Non-Linear Feed MAT



LOGFDB19 GFE Bond Options NL MAT Elf Anthony Hewitt 17746




LOGFDBOM GFD Bond Options NL MAT Murex Trevor Shilton

LOGFDE02 GFD Exotic IR Options NL MAT Elf Anthony Hewitt 17746

LOGFDE03 GFDE London Exotics Flow CHF










LOGFDE12 GFDE London Exotics Flow SEK

LOGFDE13 GFDE London Exotics Flow USD

LOGFDE14 GFDE London Exotics Flow JPY

LOGFDO01 GFD Options NL MAT Elf Anthony Hewitt 17746














LOLB0001 Equity Feed ID EQT LBSE Andy Tindle/Alan Cooper



LOLB0004 PVT Feed ID PVT LBSE Andy Tindle/Alan Cooper





LOLB0010 C & W FX Exposure PVT LBSE Andy Tindle/Alan Cooper

LOLB0011 Convertibles Vega Risk PVT

LOMN0001 Manually entered EQV positions - PVT PVT

LOMN0002 Manually entered EQV positions - EQT

LOPR0001 Cash Stocks - Paris EQT Sophis Nadia Lericolais

LOPR0003 Stocks Options - Paris Sophis Nadia Lericolais

LOPR0004 Index Options - Paris Sophis Nadia Lericolais

LOPR0007 Option Vega Risk - Paris Sophis Nadia Lericolais

LORR0001 GILTS 50001 BONDMM1 PVT Raider Jack Wong/James Steadman

LORR0002 EURO GOVT 50002 BONDMM2 PVT Raider Jack Wong/James Steadman

LORR0003 N AMERICAN 50003 BONDMM3 PVT Raider Jack Wong/James Steadman

LORR0004 EURO 50005 BONDMM4 PVT Raider Jack Wong/James Steadman

LORR0007 EURO YEN 50004 BONDMM7 PVT Raider Jack Wong/James Steadman

LORR0008 ASSET TRAD 50007 BONDMM8 PVT Raider Jack Wong/James Steadman

LORR0009 MANAGEMENT 50009 BONDMM9 PVT Raider Jack Wong/James Steadman

LORR0010 Retail Interbank Desk PVT Raider Jack Wong/James Steadman

LORR0100 SWAP & IROS 50018 FIDERIV1A PVT Raider Jack Wong/James Steadman

LORR0101 BOND OPTIONS 50019 FIDERIV2 PVT Raider Jack Wong/James Steadman

LORR0102 ARBITRAGE 50021 FIDERIV4 PVT Raider Jack Wong/James Steadman

LORR0103 IROS PVT Raider Jack Wong/James Steadman

LORR0104 OFFLINE EXOTICS PVT Raider Jack Wong/James Steadman

LORR0105 CORE SWAPS PVT Raider Jack Wong/James Steadman

LORR0202 FX FORWARDS 50023 FOREX3 PVT Raider Jack Wong/James Steadman

LORR0400 MONY HEDGING 50017 MONEY1 PVT Raider Jack Wong/James Steadman

LORR0500 NEW ISSUES 50012 ORIG1 PVT Raider Jack Wong/James Steadman

LORR0501 ECP MTN 50014 ORIG2 PVT Raider Jack Wong/James Steadman

LORR0502 G S P 50013 ORIG3 PVT Raider Jack Wong/James Steadman

LORR0700 London Feed PVT Raider Jack Wong/James Steadman

LORR0800 REPOS 50011 REPOS1 PVT Raider Jack Wong/James Steadman

LORR0801 Toronto Repo PVT Raider Jack Wong/James Steadman

LORR1000 FXSPOTLON 50016 PVT Raider Jack Wong/James Steadman

LORR1001 FXSPOSLON 50024 PVT Raider Jack Wong/James Steadman

LUFX0001 ,FX Spot PVT Georges Kapgen/Ag. Spiragen

LUGD0001 Money Market PVT GDH Georges Kapgen/Ag. Spiragen

LUGD0002 FX Forwards PVT GDH Georges Kapgen/Ag. Spiragen

NYBRotc New York Feed ID BRotc (BRASS OTC) EQT Brass Steve Grunblatt

NYCBeqt New York Convertible Arb EQT feed EQT CATS Maged Tawfik

NYCBNL1 NY CB NL feed MAT CATS Marc Nunes/Maged Tawfik

NYCBpvt New York Convertible Arb pvt Feed PVT CATS Maged Tawfik



NYDHhp New York Feed ID DHhp PVT QV Jeff Brightfield

NYEOeup New York Feed ID EOeup (Equity Options) EQT David Bruce Jeff Brightfield

NYEONL1 NY Equity Options NL matrix feed MAT David Bruce Jeff Brightfield

NYEQfut2 New York Feed ID EQfut2 PVT QV Help desk

NYEQopt New York Feed ID EQopt PVT David Bruce Jeff Brightfield

NYFCBd New York Feed ID FCBd

NYFId New York Feed ID FId PVT RMS Tony Caracciolo/Joe Masri

NYFIEQ NY FI Mutual Fund Feed (EQT File) EQT MARS Vishal Dubey

NYFIEQpv NY FI Mutual Fund Feed (PVT file)

NYFINL1 NY Fixed Income matrix feed MAT RMS Olivier LeFevre

NYFINL2 NY Fixed Income matrix feed #2 MAT RMS Michael Rosenberg

NYFINL3 NY Fixed Income matrix feed (MBS) MAT Suhrud Dagli

NYFIrepo New York Repo Datafeed PVT ADP Chuck Haspel/Craig Stansbury

NYFNMmkt Money Market Plug Feed (Controller-Entered)

NYFXdesy New York DESY/FX feed PVT Desy+ Nagaraj Katti/Harald Rieder/Fred Lobmeyer

NYFXNL1 NY Non-linear FX feed MAT Devon Roger Williams

NYFXopt New York FX Option Risk Feed PVT MS Excel Chivon Thornhill/Jim Boyle -- DEVON

NYFXplug New York Feed ID FXplug

NYGEDNL NY GED NL matrix feed MAT GED Risk Peter Shima/Andrew Mui

NYGEDvg GED with full vega ladder PVT GED Peter Shima/Andrew Mui

NYgems Global Emerging Markets Feed PVT MARS Mike Labella/Janet Samuels

NYgems2 New York GEMS Feed (Spreadsheet) PVT MS Excel Janet Samuels

NYgems3 GEMS Derivatives Feed (London ELF) PVT Elf Jack Wong/Simon Lowe

NYgemsDE GEMS DESY+ FX Feed (London) PVT Desy+ Jack Wong/Simon Lowe

NYgemsFX GEMS FX Feed (Spreadsheet from London) PVT MS Excel Jack Wong/Simon Lowe

NYgemsNL NY GEMS non-linear matrix feed MAT MS Excel Sal Casabianca

NYGFDBO NY GFD Bond Options MAT Elf Henry Huang

NYGFDNL1 NY GFD matrix feed (IPSOUT) MAT Elf Henry Huang

NYGFDNL2 NY GFD matrix feed (RNGOUT) MAT Elf Henry Huang

NYGFDNL3 NY GFD matrix feed (CMTOUT) MAT Elf Henry Huang

NYGFDNL4 NY GFD matrix feed (CAPOUT) MAT Elf Henry Huang

NYGFDNL5 NY GFD matrix feed (AMROUT) MAT Elf Henry Huang

NYMBlin NY MBS linear feed PVT

NYMMa New York Feed ID MMa PVT RMS Tony Caracciolo/Alex Stolitzka

NYPMdesy New York DESY/PM feed PVT Desy+ Nagaraj Katti/Harald Rieder/Fred Lobmeyer

NYPRtrad New York Proprietary Trading Feed ID PVT RMS Tony Caracciolo/Joe Masri

NYQVpos New York Feed ID QVpos (QV VARAGE file) EQT QV Help desk

NYRAeup Risk Arbitrage Options (EQT Positions) EQT David Bruce

NYRANL1 NY Risk Arb NL feed MAT David Bruce Jeff Brightfield

NYRAopt Risk Arbitrage Options (Vega & Rho) PVT MS Excel

NYreposw Repo Swap Plug Feed (Controller-Entered) PVT MS Excel Craig Stansbury

NYSWlin New York GFD Swaps Feed PVT Elf Henry Huang/Susan Paul

PSSM0001 AL3 PVT

PSSM0002 AMM PVT Sycomore Nadia Lericolais

PSSM0003 AOB PVT Sycomore Nadia Lericolais

PSSM0004 TMM PVT Sycomore Nadia Lericolais

PSSM0006 MCO PVT Sycomore Nadia Lericolais

PSSM0007 MEU PVT Sycomore Nadia Lericolais

PSSM0008 MIL PVT Sycomore Nadia Lericolais

PSSM0014 MBF PVT Sycomore Nadia Lericolais

PSSM0016 MOP PVT Sycomore Nadia Lericolais

PSSM0017 MOS PVT Sycomore Nadia Lericolais

PSSM0018 MST PVT Sycomore Nadia Lericolais

PSSM0023 Bonds TMF PVT Sycomore Nadia Lericolais

PSSM0024 Repo TRR PVT Sycomore Nadia Lericolais

PSSM0025 Bonds TMG PVT Sycomore Nadia Lericolais

PSSM0026 Repo AL1 PVT Sycomore Nadia Lericolais

PSSM0027 Other books PVT Sycomore Nadia Lericolais

PSSM0029 Paris Book ACC PVT Sycomore Nadia Lericolais

PSSM0030 Paris Bonds - MCA PVT

PSSM0032 MOE Bonds PVT Sycomore Nadia Lericolais

PSSM0033 MCE Bonds PVT Sycomore Nadia Lericolais

PSSM0036 AL4 Repos PVT Sycomore Nadia Lericolais

SIBPDOS GFD/EA feed (BPAT System) PVT Opera FI Chen Shuang-Jun/Daryl Soh



SICCEXCL SI Excel CB (MGPRI) PVT MS Excel Chen Shuang-Jun/Daryl Soh

SICDEXCL SI Fix income Equity Position EQT MS Excel Chen Shuang-Jun/Daryl Soh

SICO2199 DESY feed (SI Desy FX system) PVT Desy+ Eddi Tai

SIDDBERT Fixed Income Option Vega from Bert PVT Bert Chen Shuang-Jun/Daryl Soh

SIDEVOFX FX Option feed (SI DEVEN system) PVT Devon Chen Shuang-Jun/Daryl Soh

SIELF Delta Risk for SWAPTION PVT Elf Chen Shuang-Jun/Daryl Soh

SIGFDNL1 Singapore ELF GFDE NL feed1 MAT Elf Craig San

SIKONDNL Singapore Kondor+ NL matrix MAT Kondor+ Shuan Jun Chen

SIKONDOR Equity Feed (SI KONDOR System) EQT Kondor+ Chen Shuang-Jun/Daryl Soh

SIKPFI SI Fixed Income feed from KONDOR + PVT

SINLBERT Singapore Bert NL matrix MAT Bert Ng Yi Ee

SINLOFX Singapore Devon OFX NL matrix MAT Devon Janet Ng

SIORM ORM feed (SI Opera Risk Management Sytem for MM) PVT Opera RM Chen Shuang-Jun/Daryl Soh

SIOSCAR Equity FX

SIPKONDR SI KONDOR CB PIF feed PVT Kondor+ Chen Shuang-Jun/Daryl Soh

SIRMUNIX SI RMAC Swap manager feed PVT Swaps Mgr Chen Shuang-Jun/Daryl Soh

SISMUNIX GFD/EA feed (SI Swaps Manager) PVT Swaps Mgr Chen Shuang-Jun/Daryl Soh

SYGFDNL1 Sydney ELF GFDE NL feed1 MAT Elf Craig San

SYGFDNL2 Sydney ELF GFDE NL feed2 MAT Elf Craig San

SYMDGSEN Sydney MDGSEN PVT PVT MDGSEN (Madge) Chen Shuang-Jun/Daryl Soh

SYMMSENS Sydney MMSENS PVT PVT MM Sensitivites Chen Shuang-Jun/Daryl Soh

SYREX Sydney REX PVT PVT Rex Chen Shuang-Jun/Daryl Soh

SYSPFX Sydney SPFX PVT PVT SPFX Spot System Chen Shuang-Jun/Daryl Soh

SYSYELF1 Sydney Elf PVT Feed PVT Elf Chen Shuang-Jun/Daryl Soh

SYSYELF2 Sydney Elf2 PVT Feed PVT Elf Chen Shuang-Jun/Daryl Soh

SYSYELF3 Sydney ELF PVT PVT Elf Chen Shuang-Jun/Daryl Soh

SYSYELF4 Sydney ELF4 PVT PVT Elf Chen Shuang-Jun/Daryl Soh

TNGFDNL1 Toronto NL matrix feed (GFD) MAT Elf Nick Vasseman/Allan Yim

TNOPTE1 Toronto datafeed TNOPTE1 PVT Elf Bryn Joynt

TOAM0000 Amtex Equities (EQT) EQT Amtex Koki Tamura

TOAM0001 Amtex Equities (PVT) PVT Amtex Koki Tamura

TOBLBOND Bloomberg Bonds PVT Bloomberg Koki Tamura

TOCNTRL Feed adjustments

TODYMMFX Core FX/MM PVT Desy+ Koki Tamura

TOFXOPTN FX Option PVT Devon Koki Tamura

TOGBDBO Tokyo Bond Options

TOGFDVR1 GFD NL Elf George Maddoc, 8216





TORAIDRI Raider Risk GATS PVT Raider Risk Koki Tamura

TORDREPO Raider Risk Repo PVT Raider Repo Koki Tamura

TOSMUNIX Tokyo Bond Option

TOSMUNIX Swaps Manager DGFD PVT Swaps Mgr Koki Tamura

TPMSXS TP Feed (MS Excel warehouse) PVT MS Access Chen Shuang-Jun/Leon Chang

ZHBOHED Hedge Positions Bond Zurich PVT Bopt+,SM,ETRA Tom Novak

ZHCBMNL0 Zurich Base Metals NL (Devon) Devon Daniel Zilka

ZHCBMNL1 Zurich Base Metal Exotic NL (Excel) MS Excel Daniel Zilka

ZHCENNL0 Zurich Energy NL (Devon) Devon Daniel Zilka

ZHCOBOND Core Bond Zurich PVT Desy+ Walter Neuenschwander

ZHCOFXMM Core FX/MM Zurich PVT Desy+ Walter Neuenschwander

ZHCOPMET Core PM Zurich PVT Desy+ Walter Neuenschwander

ZHCRM Zurich Commodities (Base Metals/Energy) PVT Devon Tim Poulain Patterson

ZHGEDEQT GED Equity Positions

ZHGXDPC GXD Feed Zurich PVT MS Excel Surresh Chadda/Adrian Zweig

ZHGXEXNL Zurich GXD Exotic NL MAT Elf Surresh Chadda

ZHGXFGNL GXD Global wholesale out of FNX MAT

ZHGXFZNL GXD Retail ZH out of FNX MAT

ZHGXSTNL GXD NL Feed from FNX System MAT

ZHNLNX Zurich Bond Options NL MAT Bond Opt Christian Rapp

ZHNOSY Zurich Banknotes PVT Nosy Dimitri Andreou

ZHNX Bond Opt Zurich PVT NeXt Christian Rapp

ZHOP0001 Optas EQT EQT Optas Werner Hürlimann/Gabriela Waser



ZHOP0002 Optas PVT PVT Optas Werner Hürlimann/Gabriela Waser

ZHOPNL Zurich Equities NL Optas Andreas Bitz/Martina Gruber

ZHPMO PM Option PVT Devon Markus Furer

ZHPMONL Zurich PM Options NL MAT Devon Jacek Trejnis Daniel Zilka Walter Beetschen

ZHPRPNL Zurich PM Prop NL MAT Devon Jacek Trejnis Daniel Zilka Walter Beetschen 55

ZHRR0900 Raider Risk CHF Bonds London PVT Raider Jack Wong/James Steadman



XIX. IT Terminology

Account Manager: person responsible for organization and application support in a particular business like authorization,

data mapping and user requirement specification.

Client: a process that requests services from another process usually called a server.

crontab: a UNIX file which lists all the programs to be periodically executed and the specific times when they are to be run.

Data Release: set of SQL (Structured Query Language) scripts used to carry out a major update of Reference Data; it is

installed on the system after having passed through regular acceptance tests.

Domain Name Server (DNS): an application which maps host names, such as man5112.mp.zh.ubs.com, to IP-Addresses.

This makes it possible for users to send files, mails, or initiate terminal sessions without having to memorize IP-Addresses.

Entity: an object of importance to the organization. It usually corresponds to a table in the relational data base model.

ftp: stands for file transfer protocol, a TCP/IP protocol (and command) used to transfer files between computers.

html: stands for Hypertext Markup Language, the language used to create documents on the World-Wide Web.

IP Address: address assigned to a computer using TCP/IP as a network protocol (dotted decimal address), for instance:

193.134.107.112

IT Operations: all routine tasks performed by System Operators to keep computers up and running.

IT Support: assistance in the solution of problems when they arise provided by different levels of expertise.

Local VaR System: a local data base/compute server into which the daily PVT and EQT files are sent from the different

trading systems. All positions thus loaded are copied across the network through the Sybase Data Replication mechanism to

the VaR Consolidation System.

Local VaR Test System: a server used by the local IT organization for component integration test.

ODBC: stands for ‘Open Database Connectivity’, a PC-client interface used by, for instance, Access, Excel, Power Builder to

access a database server such as Sybase or Oracle. The OBDC protocol is independent of the native SQL command set of the

database system.

Port: a logical network communication channel. Example: the VaR SQL server listens to Port 2025 for incoming client

communication requests.

Replication Server: an application which synchronizes updates to selected tables across multiple SQL servers. In the VaR

System, Reference Data is replicated from the Consolidation System to the local servers, while Site Specific Data is

replicated from the local to the Consolidation VaR System.

Relational Table: a structure composed of columns and rows containing information about an entity.

Relationship: the description, in a relational data base, of how entities are being related (one-to-one, one-to-many, many-to-

many relationships).

SQL: stands for Structured Query Language, a non-procedural language originally developed by IBM in the late 1970s to

support their mainframe relational database DB2.

Stored Procedure: a group of compiled SQL commands stored under a procedure name. The procedure is capable of

accepting and returning a set of pre-defined parameters. It may also return a set of rows.

TCP/IP: stands for Transmission Control Protocol/Internet Protocol, the most widely used protocol to interconnect hosts and



networks.

Trigger: SQL commands invoked when a modification to a table takes place (insert, update, delete).

Update-related commands may also be invoked on a field-by-field basis.

URL: stands for Uniform Resource Locator, an address used by the html language in the World-Wide Web to describe the

absolute or relative location of information (for instance, a url starting with http means that the information is retrieved via

the HypertText Transfer Protocol, ftp indicates that the File Transfer Protocol is being used, mailto points to an e-mail

address).

VaR Consolidation System: the global data base server which gets the trading positions from all the UBS locations through

data replication; no positions are fed directly into this system.

VaR Consolidation Test System: the counterpart of the Consolidation Production System where system test for data releases

and new versions of the application takes place.

VaR Reports GUI: A PC-based application with a Graphical User Interface (GUI) to view VaR numbers, Limits, and

Position Detail. This application is also used to perform limited data entry, e.g., create adjustment feeds and preparing Beta

overrides.

VaR Org./Limit GUI: A PC-based application to make modifications to the Organization Structure, consisting of the Risk

Delegation Hierarchy and the Major/Minor Business Line Hierarchy. In addition, this application allows limits associated

with entities of the Risk Delegation Hierarchy to be set or modified.

VaR Access Control GUI: A PC-based application to define the entities for which a user is allowed to view VaR numbers

and limits as well as to add supplementary functions such as ‘B’ and ‘C’ Roles. General personal information about Feeder

Contacts and VaR Limit Holders is also maintained through this GUI.

View: a stored information extract from a relational data base that behaves like a table. In the Core System, the term ‘View’ is

also used to designate a collection of portfolios.

XX. Business Naming Conventions

Agency Bond: bond issued by government agencies, for instance ‘Bundesbahn’ or ‘Bundespost’ in Germany, and fully

backed by the Federal government.

Asset Backed Securities: securities collateralised by assets such as car loans and credit cards receivables.

Authority Location: Location which has the responsibility to sent equity information of one or more countries to the VaR

system. The Authority Location is usually also the Beta Source (owner of the information) but alternative ways where new

Betas supplied from non-authoritative sources are supported. However, the Authority Location is the ultimate responsible for

the Betas and can override information supplied by other sources.

Base Currency (Reporting Currency): the currency in which Market Risk is measured.

Beta Source: code used to identify the provider of equity information. Each Location may have one or more Beta Sources

(e.g. BAN for Barra NY and BLN for Bloomberg NY). The provider of equity Betas is also the owner of that information and

can delete it from the system, providing that no equity position with that ISIN Code exists in the system.

Bond Option: an option to buy or sell a bond for a certain price.

Brady Bond: a bond backed by the US Treasury but with actual repayment being made by a sovereign lesser developed

country (proposed by Nicholas Brady, U.S. Treasury Secretary in 1989).



Broad Risk Type: a sub-division of the Risk Class in the Market Structure, specially useful for the Fixed Income Business

where risk is aggregated by currency:

Risk Class Broad Risk Type

Commodities: Base Metal, Energy, Precious Metals

Equity: East Asia Equity, Europe Equity, NorthAMerica Equity, Other Equity

FX: East Asia FX, Europe FX, NorthAMerica FX, Other FX

Fixed Income: AED Interest Rates, ATS Interest Rates, AUD Interest Rates, BEF Interest Rates etc.

Business Unit (BU): level 5 of the Risk Delegation Hierarchy locally defined by the business; it can be a desk, a trader, a

group of trader or a book. Setting a VaR Limit at this level is left at the discretion of the Section Heads.

Cap: an over-the-counter option which provides insurance against rising floating interest rates.

CAPM: stands for Capital Asset Pricing Model, an approach developed by William Sharpe to describe the relationship

between return and systematic (market) risk. It asserts that the expected excess return on securities is proportional to their

systematic risk coefficient or Beta (market portfolio has a Beta of 1).

Cheapest-to-Deliver (CTD): the security available in the cash market which can be delivered the most economically against a

futures position.

Capture Point: the code of the location where the positions are originated. It is used by the Datafeed Loader to generate the

Synthetic FX Position in the Base Currency of the Location. Virtual Location codes may also be used for the Capture Point if

the Base Currency of the business is different from the local currency.

Collaterals: assets which are guaranteed as security for a loan.

Commodity: a sub-division of the Broad Risk Type in the Market Structure defining the underlying (the ‘Commodity’)

originating the risk:

Broad Risk Type: Commodity:

Base Metal: Aluminum, Copper, Lead, Nickel, Tin, Zinc

Energy: Crude Oil, Gasoline, Jet Fuel, High Sulfur, Low Sulfur, Naphtha, Natural Gas

Precious Metal: Gold, Palladium, Platinum, Rhodium, Silver

East Asia Equity: AUD Equity, HKD Equity, JPY Equity etc.

East Asia FX: USD/AUD, USD/HKD, USD/JPY, etc.

AUD Int. Rates: AUD Agency, AUD Asset Backed, AUD Corp., AUD Fut., AUD Gov., AUD Libor

Convertible Bond: a debt instrument with embedded options issued by corporations. The holder has the right to exchange a

convertible bond for equity in the issuing company at certain times in the future according to a certain exchange ratio.

Correlation Coefficient: a number which describes to what degree two variables move together: +1 or in opposite direction: -

1 (the perfect hedge), zero meaning no tendency at all (perfect diversification of the portfolio).

Correlation Matrix: the matrix of Correlation CoefficientsAMong all the current time series. For instance, element rij

represents the correlation between the time series i (row i) and the time series j (column j). The elements on the diagonal are

equal to 1 and the matrix is symmetrical. The matrix should ideally be positive semi definite (meaning that all its eigenvalues

are 0), in order to be able to use it for the generation of correlated random variables (e.g. through the Cholesky

decomposition into two triangular matrices). Therefore, if one data point in one of the Time Series changes, the entire matrix

is affected.

Covariance: a statistical term defined as the average of the cross product (after removing the mean) of two random variables

to measure the degree of association. The Covariance and the Correlation Coefficient provide the same information about the

joint distribution of two variables, zero Covariance (or zero Correlation Coefficient) meaning that the random variables are

independent. The Correlation of X and Y is defined through the Covariance as follows: (sx and sy are estimators of the

Standard Deviation of X and Y, and r an estimator of the Correlation):r X Y

C o v X Y

s sx y

( , )( , )



Cross Currency Implied Volatility: volatility of one currency against another (non USD) currency. The relation between the

Cross Currency Implied Volatility and the USD expressed volatility used in VaR is given by the following basic result of

statistics: 1 2

2

1

2

2

2

1 22

where 12 stands for the cross currency volatility of currency 1 against currency 2

and 1, 2 for the volatility of currency 1, respectively currency 2 against the USD.

Daily Volatility: the Annual Volatility divided by 2 5 2 (average number of business days per year).

Data Feed Location Code: a two-character location code of a Primary Location into which a Secondary Location feeds its

position data.

Delta: the ratio of the change in the price of an option to the change in the price of the underlying. It is the number of units of

the underlying (in percentage) to be held for each option shorted to create a riskless hedge.

Derivative: a financial instrument whose value depends on the value of other underlying variables.

Diversification: spreading investment riskAMong different instruments and market in order to reduce the overall exposure of

a portfolio.

Domain: subset of the Organization Structure defined by a range of ReptIDs.

Equity Add-on: exposure created by convertibles uncorrelated with the market; it is aggregated with all the other exposures

as follows:

V a R V a R V a Rto t a d d o n

2 2 2

Equity Beta: a factor in the Capital Assets Pricing Model (CAPM) used by the VaR calculator. It represents the slope of the

regression line between the return on equity and the return on the market index. This factor together with the volatility (‘Total

Risk’ in the Beta table) is specific to each equity.

Equity Position Table (EQT): table containing the equity positions (number of shares, market price or delta equivalent for

options, convertibles etc.) together with the corresponding ISIN codes and trade date information.

Exercise Date: the date, in an option contract, when the right to buy or sell the underlying expires.

Feeder System: a program used in the Middle Office area to run the end-of-day revaluation of the trading positions. In some

cases, it creates a Position Inventory File which is converted into a PVT or an EQT file.

FeedID: an identifier with a minimum length of 4 and a maximum length of 8 characters assigned to each data feed. The

FeedID code is globally unique with the 2 first characters specifying the Location (FM, GE, HK, LO, NY, LU, PS, SI, SY, TO,

TN, TP, ZH).

Financial Element: attribute of the Time Series describing the financial underlying (Commodity Spot, Commodity Forward,

FX Spot, FX Forward, Equity Spot, Equity Add-on, Term Volatility, Par Yield, etc.).

Futures Contract: an agreement between two parties to buy or to sell an asset at a certain time in future for a certain price;

Futures Contracts are normally traded on an exchange.

Gold Leasing Rate: interest rate received by Central banks for gold holdings they lease out to the Gold Mines companies.

ISIN code: a universal equity identifier.

Level of Aggregation: level to which the VaR figures are consolidated (1 to 5 on the Risk Delegation Hierarchy starting from

GTRM, 1 to 3 for the Major/Minor Business Lines, Risk Class/Broad Risk Type and Commodity for the Market Structure.

LIBOR: stands for London Interbank Offer Rate, the rate of interest offered by banks on deposits from other banks in

Eurocurrency markets.



Linear Risk: market exposures which can be calculated by a straight multiplication of the sensitivity with 2 standard

deviations (neglecting the convexity of the underlying).

Loader: a program used to append data (in the PVT, EQT or FX format) into the VaR database on a daily basis. The Loader

does some plausibility checks (format, date, ReptID, ISIN). It rejects the whole file if one entry is invalid.

Location: code used to identify a UBS site. In VaR we differentiate between:

Primary Locations: sites running a VaR System with a proper team supporting the application.

Secondary Locations: sites producing positions to be fed into a VaR System at a Primary Location.

Virtual Locations: the global businesses of UBS which are not bound to a geographic location.

Mapping: the process of translating sensitivities and positions delivered by Middle Office systems into a standardized format

called PVT or EQT readable to the VaR system.

Market Structure: the classification of market risks as defined in the VaR system:

Risk Class, Broad Risk Type, Commodity, Risk Sensitivity, Financial Element

Market Break Variable: an element of the Market Structure (instance of the Risk Class, Broad Risk Type, Commodity, Risk

Sensitivity or Financial Element) used to break down the VaR exposure of a particular node into its market risk components.

Mortgage Backed Security: a security backed by a pool or package of mortgage loans. Monthly payments of principal and

interest from the underlying pool of mortgages is passed along to the holder of the security.

MatrixID: a sequential number (1, 2, 3, 4, 5..) identifying the Correlation Matrix used by the Calculator.

Model: template used by the VaR Calculator to compute the VaR exposures for different levels of aggregation (1 to 5 for the

Risk Delegation Hierarchy and 1 to 3 for the Major/Minor Business Lines) broken down by categories of market risk. For

instance, “Function FUNCADV” is a Model, or presentation of VaR results, such that there is a VaR number for GTRM, and

one for each category of “Functional Advisor” within GTRM. A Design represents a particular grouping or a vector of

positions classified by Time Series used in the quadratic form to calculate VaR.

C o m m o d it ie s E q u it ie s F X

F u n c tio n a l A d v iso r

G T R MF u n c tio n

F ix e d I n c o m e G T D E

T im e

S e rie s K

T im e

s e rie s 2

T im e

S e rie s 1

T im e

S e rie s K

T im e

s e rie s 2

T im e

S e rie s 1. . . . . . .

MSCI: stands for Morgan Stanley Capital International, a provider of Sector Breaks information.

Monte Carlo Method:

A numeric probability approach to the pricing of options which cannot be valued with closed-form (analytic) solutions. It is

also used in the Value-at-Risk computation of an option portfolio where return doesn’t match a standardized distribution.

Naphta: a liquid made by distillation from petroleum used as an additive to gasoline.

Netting: allowing positions with opposite signs (long and short) to offset. This happens in the VaR system whenever positions

or equities are mapped to the same Time Series (same Volatility and Correlation). Furthermore, in the case of equities,

Market Risk induced by a single index is netted while Specific Risk is not, as shown by the equation:

V a R V a R V a Re q u itym a r k e t s p e c if ic

_

22

2

Non-Linear Risk: VaR calculation for financial instruments such as options where the risk is not normally distributed, hence

requiring a revaluation of the portfolio’s P&L evaluated at random draws.



Notional: principalAMount which is not exchanged (for instance in futures contracts and IR swaps).

Organization Structure: the collection of trading hierarchies along which risk figures are reported.

Operational Limit: key risk exposure that is actually traded and should not be exceeded at trader level.

Portfolio: a collection of financial instruments in the possession of an investor.

Position: balance of purchases and sales in a given financial instruments for a given maturity (in the VaR System: reported

sensitivities).

Position Value Table (PVT): table containing the trading positions together with the corresponding codes (ReptID, PRC) and

the Trade Date. Individual equities are excluded from the PVT.

Position Inventory File (PIF): file containing the positions from the feeder system prior the mapping to VaR (in feeders such

as Core).

Position Risk Code (PRC): the lowest level in the Market Structure used in the VaR System to catalog market exposures.

Position Risk Codes map to a Commodity as well to a Time Series for instance:

Position Risk Code: Commodity Time Series

ATS Libor 6 M ATS Libor ATS Eurocurrency 6M

The link between positions (PVT; EQT/Beta) and market risk (Volatility, Correlation) occurs at this level.

Product Control: staff unit responsible for market risk monitoring and trading P&L reporting.

Repo: stands for Repurchase Agreement, an operation where the dealer is effectively a borrower of funds to finance further

purchases of securities. The dealer collateralises the loan by selling his securities to the investor and repurchasing them at an

agreed price and date . The difference between the sale and repurchase price represents the interest payable on the loan.

Report ID (ReptID): a numerical identifier used to tie up positions in the Org. Structure. A unique ReptID code may be

assigned to each individual trading book or to a “desk”, depending on what is locally acceptable. The VaR calculator does not

break Value-at-Risk out by ReptID, so it does not make a difference in reporting whether different ReptID codes are used for

different trading books mapping to a particular Business Unit, or whether the same ReptID is used for these trading books.

ReptID Range: set of numbers to be used as ReptIDs in a Location:

NY (New York) 10001 - 40000 TN (Toronto) 40001 - 50000 LO (London) 50001 - 80000 PS (Paris) 80001 - 85000 JE (Jersey) 85001 - 90000 LU (Luxembourg) 90001 - 95000 FM (Frankfurt) 95001 - 100000 ZH (Zurich) 100001 - 120000 LG (Lugano) 120001 - 125000 BS (Basel) 125001 - 130000 CT (Bank Cantrade) 130001 - 135000 BL (Banco di Lugano) 135001 - 140000 HY (Hyposwiss) 140001 - 145000 SI (Singapore) 150001 - 200000 GFD (Global FI Derivatives) 200001 - 210000 GED (Global Equity Derivatives) 210001 - 220000 GXD (Global FX Derivatives) 220001 - 230000 GCD (Global Commodity Derivatives) 240001 - 250000 TO (Tokyo) 250001 - 300000 GE (Geneva) 300001 - 325000 HK (Hong Kong) 325001 - 350000 SY (Sydney) 350001 - 375000 TP (Taipei) 375001 - 400000

Retro-active, non retro-active change: the first term describes a modification to the data base after which old and new

Calculator results are no longer comparable over time (e.g. changes to a Business Unit Code or a Section Code,



reorganization of the Risk Delegation Hierarchy, extension of the Correlation Matrix dimension etc.), the second term

applies to regular updates of the data like Volatility, Correlation Matrix, Betas, VaR Limits, Limit Holders, new Sections,

Business Units and ReptIDs.

Return: the difference between two consecutive values of a financial parameter, two methods can be used:

Xt - Xt-1 weekly differences (used in interest rates and vegas)

ln (Xt/Xt-1) weekly relative differences (used in FX, commodities and cash equities)

Rho: the rate of change of the value of the portfolio with respect to the interest rate.

Risk (Exposure): loss which may occur on a trading position (various types of risks exist like: Market (Systematic) Risk,

Specific Risk, Credit Risk, Country Risk, Liquidity Risk, Operational Risk etc.).

Risk Aggregation: consolidation of exposures taking into account Market Diversification through the Correlation Matrix.

Risk Class: a table in the Market Structure describing the main type of financial risks encountered in the market:

Commodities, Equity, FX, Fixed Income.

Risk Factor: the product of the Daily Volatility and the number of Standard Deviations (2.0) chosen for the

Value-at-Risk calculation.

Risk Factor = 2.0 (Annual Volatility / 2 5 2 )

Risk Sensitivity: attribute of the Position Risk Code describing what type of sensitivity is reported

(+1 USDVBP, Notional, Principal, Ounces, Vega +1% etc.).

Role: attribute describing the function of the user:

U: User, O: Org. Manager, S: Security Admin.,B: Beta Override Administrator, C: Controller).

Section: level 4 of the Risk Delegation Hierarchy, usually a trading desk holding a VaR Limit.

Sectors: segments of the economy like Finance & Insurance, Basic Industry, Energy, Transportation, High Technology,

Consumer Goods etc. into which stocks are classified. VaR exposures are not computed separately for each sector, however,

reports displaying market values of the shares by sector are provided.

Sensitivity: the degree of responsiveness of a portfolio to changes in the market defined according to the financial instrument

involved. Positions reported to the VaR system are actually Sensitivities.

Specific Risk: part of the volatility of a stock which is totally uncorrelated with the market according to the Capital Asset

Pricing Model (CAPM). The Total Risk (Stock Volatility) is related to the Market Risk (Systematic Risk)and the Specific Risk

as follows:

T o ta lR isk M a rke tR isk S p ec ificR iskeq u ity

2 2 2

Spread: difference in yield between two fixed income securities.

Standard Deviation (): the most common parametric measure of dispersion. 68.26 % of the observations of normally

distributed data lie within -1 and +1 , 95.44 % lie within 2.

Swap: agreement between two companies to exchange cashflows in the future according to a prearranged formula.

Swaption: an option which gives the holder the right to enter an interest rate swap.

Term Structure: the pattern of interest rates on default-free debt instruments with various terms to maturity illustrated by a

yield curve.



Term Structure of Volatility: the curve of the relashionship between price volatility and time to maturity.

Time Series: historical data about rates and prices which are used to produce the volatility and the market correlation needed

by the VaR calculator, they are provided by third party vendors like DRI. The VaR model assumes that proportional changes

in price are normally distributed. (lognormal distribution of returns).

Time to Expiration: the period of time between the ‘Value Date’ and the Exercise Date of an option.

Trade Date: the business date to which the position value refers (‘Value Date’).

Value at Risk (VaR): the largest amount of capital that can be lost from day to day based on a specific portfolio with 97.7 %

probability (up to +/- 2 standard deviations move in rates).

FX spot risk Value at Risk (VaR) = (Position Value/FX rate * % Annual Volatility / 2 5 2 )*2

All other risks Value at Risk (VaR) = (Position Value * Annual Volatility / 2 5 2 )*2

VaR Calculator: the program which calculates the VaR figures using the Correlation Matrix:

V a R R isk V e c to r C o rre la tio n M a tr ix

R isk

V e c to r

2

( ) *

Components of the risk vector are individual VaR exposures.

VaR Limit: the Value-at-Risk exposure allocated by the management which must not be exceeded. A distinction is made here

between Official Limits, the fully binding limits, and Pro-Forma Limits, the provisional limits defined for businesses where

the quality of the data used in VaR exposure calculation is not yet sufficient for controlling purposes.

Vega: the measure of change in the value of an option compared with a 1 % change in volatility.

Volatility: the annualized Standard Deviation of returns expressed in basis points for fixed income, in % of price for equities,

in $/oz. for precious metals, in $/barrel for oil etc.

Warrant: an option attached to a bond with a separate life and value. A warrant is freely transferable and can be traded

separately.

Weighted Volatility: Market Volatility calculated under the assumption that recent observations have to be more heavily

weighted than earlier ones.

Yankee Bond: bond issued in the U.S. by a foreign borrower in U.S. dollar.

Zero-Coupon Sensitivity: the change in value of a portfolio for a 1bp parallel shift of the zero-coupon yield curve (i.e. bonds

with no intermediate payments). Alternatively, the Par Rate Sensitivity is obtained by shifting separately each Par Rate of the

yield curve and calculating the induced change in value of the portfolio. In the VaR system, sensitivity positions must be

expressed against the Par Rate yield curve, since all Time Series data refers to these rates.



XXI. REFERENCES

1 Guido Schätti, Interest Sensitivity Ladder Specification , GTCO/GTCM Paper February 1997.

2 Paul Miron and Philip Swannell, Pricing and Hedging Swaps, Euromoney Books 1990.

3 Reto Quadroni and Claudio Ortelli, Finite Sample Properties of the New Variance/Covariance Estimator, April 1997.

4 Richard Crosby and Ingrid von der Marwitz, Remote Datafeed Polling, VaR team January 1997.

5 Eric Yu, Lukas Gubler, Alex Riesch, Jörg Salmini, Non-Linear Interface Specification, VaR team May 97.

value at risk mapping

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