The riskpro™ contracts type approach

To fulfill its analytical purpose for any financial product/instrument in any dimension riskpro™ replicates the real contracts/transactions in standard patterns defined as distinct riskpro™ contract types. During the riskpro™ Extraction Translation and Load [ETL] process the real life financial contracts transactions are translated into the standardized riskpro™ contract types in a way to allow riskpro™ to calculate value and income under any selected circumstances (market scenarios, customer behaviour, strategies) and selected valuation system. In other words, the riskpro™ contract types are pattern of expected cash-flow with the links to the risk factors affecting them. The real life financial products listed below can be represented 1:1 into riskpro™ contract types.

Basic contract types

Cash, current accounts, call money, discount notes, floating rate notes, reverse floaters, zero coupon bonds, perpetual bonds, constant maturity bonds, step-up bonds, regular amortizing mortgages, annuities, sight deposits, saving deposits, term deposits, stocks, commodities, indices.

Combined contract types

Currency swaps, vanilla and complex interest rate swaps, foreign interest rate swaps, forward rate agreements, money market and long bond futures, stock futures, swaptions, caps, floors, collars on vanilla and complex underlyings, callable and puttable bonds, interest rate options, bond options, vanilla equity and foreign exchange rate options, exotic options like Asian options on foreign exchange rates and interest rates, single and double barrier options and foreign exchange rates and interest rates.

This list is not exhaustive as IRIS continuously expands the contract coverage.

User defined contract types

riskpro™ offers a generic framework which allows the user to define his own financial contract types. This framework is based on a graphical user interface and a Java API (application programming interface). Newly defined contracts can either be non-option or financial option contracts. The valuation for options happens by using dynamic Monte Carlo simulations with the LIBOR market model and Longstaff-Schwartz.

Special strengths of the riskpro™ contract data approach

• easy modelling of collateral and guaranties

• ability to enrich the default data structure with customer specific data fields, i.e. with customer controlled free defined attributes, to satisfy for example customer specific reporting needs

• ability to customize the default data structure and thus optimize the performance of the data processing by descriptor records

• ability to distinguish between facts and fiction in the data provision. The facts are based on the data delivered, whereas the fiction, i.e. the behaviour assumptions of retail instruments with respect to for example the prepayments or drawings, is configured in riskpro™.

Required processes

The automated contract processing requires the riskpro™ selection function to load automatically the data into the system. The automated extraction and transformation of data including the load requires the riskpro™ ETL module. The analysis specific compression of provided data requires the riskpro™ aggregation module.

Analysis coverage

Above contract types apply and produce consistent results for any type of analysis implementation in riskpro™ from ALM, Market risk, performance to Credit risk, Basel II, IFRS39.