VPD Risk Reporting
Using the flagship product VPD Risk & Performance you will have a wide range of options for reporting. This document briefly touches on the reporting capabilities related to risk management. For asset managers it is a priority to enhance risk management and communicate risk measures. Risk is also an area where regulatory requirements are extensive. Examples are: • UCITS IV •
Solvency II •
Basel III Using VPD Risk & Performance you can meet these requirements and easily keep control of their risk measure limits. Using VPD Risk & Performance you will automate processes, validate and calculate risk measures, and distribute the results in various ways. One is VPD Web Portal. Some of the available reports and functionality are described below. For more information on either VPD Risk & Performance in general, or the solution for Risk Reporting, please contact VPD. Please email any query to info@vpd.biz 18 January 2012 1 Risk Reporting in VPD MDC
Examples of reports
StatusOverviewReport(UCITSIV,CESR/09‐178$51‐57)
Shows the status of breaches of limits or warnings for any risk figure having limits set up. The user is able to navigate to underlying limit reports filtered on the breached portfolios. Examples of limit categories shown in the report are listed below. •
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Issuer concentration Counterparty Risk Global Exposure VaR Report Global Exposure Commitment Report Leverage Report Stress test The report is used to easily get an overview of the relevant risks and limits and to monitor, control them and find the contributors though drilling down to more detailed reports. Figure 1: Example of the Status Overview Report; By clicking on a limit category the appropriate report is shown where the problems are disclosed 18 January 2012 2 Globalexposure(UCITSIV,inaccordancewithCESR/10‐788$1)
A UCITS must calculate its global exposure on at least a daily basis. The limits on global exposure must be complied on an ongoing basis. Concerning the calculation of the global exposure, CESR sets out detailed methodologies to be followed by UCITS when they use the commitment or the Value at Risk (VaR) approach. GlobalExposureCommitmentReport(InaccordancewithCESR/10‐788$2)
The report shows the Global Exposure calculated using the Commitment Approach as specified by CESR. The commitment of each individual derivate is calculated, netting and hedging arrangements are identified and the absolute values of all positions are aggregated. The exposure, the limit and indicates limit breaches for each portfolio are shown. The report is linked to the Global Exposure Position Report described below. GlobalExposureVaRReport(InaccordancewithCESR/10‐788$3)
For the purpose of calculating global exposure the UCITS can use the Relative VaR Approach or the Absolute VaR Approach. The user can choose VaR approach as well as VaR model on portfolio level in MDC. The value of the chosen VaR number, the limit and indication of limit breaches for each portfolio are shown. The VaR numbers are imported from any risk calculation system and can be rescaled to the CESR calculation standard in MDC. If needed, the Relative VaR can be calculated using the portfolio VaR and the reference portfolio VaR in MDC. The report is linked to the Global Exposure Position Report. Figure2: Example of the Global Exposure VaR Report; By clicking on a portfolio the user drills down to the Global Exposure Position Report where the underlying positions and their contribution can be seen. 18 January 2012 3 GlobalExposurePositionReport
Shows the positions of a chosen portfolio and their exposure, VaR and risk contributors. The report is mainly used to identify which positions are contributing to the global exposure. Figure3: Example of the VaR Global Exposure Position Report OTCCounterpartyRisk(UCITSIV,InaccordancewithCESR/10‐788$
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OTCRiskExposureOverviewReport
Shows the status of counterparty risk exposures for the chosen portfolios. Drilldown functionality to OTC Risk Exposure Report. OTCRiskExposureReport
The report shows the risk exposure to the counterparts of a UCITS for each OTC derivative. The value of each OTC is calculated in MDC if necessary. The exposure is shown both as an absolute value and as % of the NAV Limits, warnings and breaches are exposed. Reduction of counterparty risk exposure due to collateral will be handled. IssuerConcentrationOverviewReport
Shows the status of issuer concentration limits for the chosen portfolios. Drilldown to Issuer Concentration Report. 18 January 2012 4 IssuerConcentrationReport
The report shows the risk exposure of a UCITS to each issuer. The exposure is shown both as an absolute value and as % of the NAV. Position exposure to the underlying assets of FDI is calculated using the Commitment Approach. Limits, warnings and breaches are exposed. StressTestReport(UCITSIV,InaccordancewithCESR/10‐788:§3.6.5)
Each UCITS using the VaR approach should conduct a rigorous, comprehensive and risk adequate stress testing program. Stress tests must be performed to illustrate the potential default of the portfolio. The Stress Test Report displays a number of chosen stress tests imported from the risk measure calculation system. Disclosing limits, warnings and breaches is optional. VaRBacktestingReport(UCITSIV,InaccordancewithCESR/10‐788:
§3.6.4)
VaRBacktesting
The VaR Backtesting report shows the number of exceptions of the VaR on a given period, the specified limit and all breaches, if any, on portfolio level. The limit is by default four, as recommended by CESR, but can be set to any desired custom value. VaRBacktestingPortfolio
Shows a graph of a chosen portfolios VaR values and the realized PL over a period. A list of all exception is also disclosed. LeverageLimitReport(UCITSIV)
A UCITS must have a global exposure relating to derivative instruments that does not exceed the total net value of its portfolio. The leverage report discloses the total portfolio exposure and leverage and any breaches of the limits. RiskSummaryReport(UCITSIII/IV,CESR/09-178)
The report shows a number of performance and ex ante and ex post risk figures for the chosen portfolios and specified date. It also shows limits, warnings and breaches. The performance and ex post numbers are imported or calculated in MDC and the ex ante are imported from any third party risk calculation system. The level of limits and warnings are managed in MDC per portfolio. The user is able filter in many ways and to drill down to the Position Risk Summary Report. Example of figures and portfolio information: •
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Performance YTD Relative performance YTD Performance MTD Relative performance MTD Monte Carlo VaR (ex ante) Historical VaR (ex ante) VaR limit VaR breach status Tracking Error (ex ante) Tracking Error limit Tracking error breach status Tracking Error (ex post) Stress Tests (ex ante) Max Drawdown Turnover Ratio Sharpe Ratio (Daily) (ex post) Sharpe Ratio (Monthly) (ex post) Information Ratio (ex post) Portfolio manager PositionRiskSummaryReport
Shows a number of performance and ex ante and ex post risk figures on position level for the specified portfolio. The report is used for finding the risk contributors in a portfolio. AnnualLimitReport(AnnualFDIReport)
Shows instances of any breaches of global exposure and counterparty risk exposure during the year and duration of the breaches. It is possible to make comments on each breach in MDC which also can be shown in the report as explanations and descriptions of taken remedial actions. The report also discloses a list of the financial derivative instrument types used by the UCITS during the year. SettlementRiskExposure(UCITSIV)
Visualizes the total exposure to the brokers arisen from unsettled trades. The broker exposure limits, warnings and breaches are also shown. The exposures can be filtered on instrument settlement type, portfolio or on any portfolio or counterparty settings. 18 January 2012 6 SettlementRiskReportdrilledtobroker
Shows the distribution of the exposure to a chosen counterparty on portfolios. The report is linked from the Counterparty Risk Report. LiquidityRisk
LiquidityRiskReport:Market
Shows a graph of the liquidity per portfolio for the chosen portfolios and time period. It also includes a table of actual liquidity risk measurements for the chosen portfolios. PositionLiquidityRiskReport
Visualizes a number of liquidity risk figures for each position for the chosen portfolio. The report is linked from the Liquidity Risk Report. LiquidityFlowReport:CashFlow
A graph of the cash flows for the chosen portfolios and time period. The cash flow can be shown as redemption, subscription or net. MarketRiskReport:Volatility
The report shows a graph of the volatility for the chosen portfolios and time period. There are many ways to filter the portfolios. Annualreport(Riskfigures)(UCITSIV,inaccordancewithCESR/10‐
788$3.8)
The report publishes the actual VaR and Commitment Approach measures as well as the lowest, the highest and average utilization of the Global Exposure limit during the financial year. The method used to calculate the global exposure, the applied model and the input used for the calculation are shown. Information on the reference portfolio is disclosed when using the relative VaR approach. Prospectus(Riskfigures)(UCITSIV,InaccordancewithCESR/10‐788
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The report discloses the risk information that should be shown in the fund prospectus. •
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Method used to calculate the global exposure (i.e. Commitment Approach, Relative VaR or Absolute VaR) Expected level of leverage and the possibility of higher leverage levels 18 January 2012 7 •
When using the relative VaR approach, information on the reference portfolio should be disclosed in the prospectus LimitUtilizationReport
Shows the utilization of any of the limits for a chosen period. KeyInvestorInformationDocument(KID)(UCITSIV)
KID
The KID is one of the key provisions of the UCITS IV Directive and the document replaces the simplified prospectus. The KID is to be a short document containing key investor information intended to allow comparisons to be made easily between funds. The KID is divided into five sections, each of them with specific requirements in accordance to CESR. •
Objectives and investment policy •
Synthetic risk and reward profile (SRRI) •
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Past performance •
Practical information The SRRI is calculated in accordance with CESR (CESR/10‐673) taking into consideration the methodologies that should be applied to the calculation for funds where the general approach may not be appropriate. For example market funds with an insufficient performance history, funds with predetermined risk or reward targets or structured funds. Charges and past performance are calculated in accordance with CESR. UnderlyingKIDDataReport
Discloses underlying information to each KID such as volatility, proxy information, current and official risk class and number of weeks left until a potential change of risk class. 18 January 2012 8 Examples of general functionality
Filtering
All the reports can be filtered while running in a wide range of ways for example in order to show the correct portfolio scope. Figure 1: An example of possible filtering alternatives in the reports Distributionviaweb
The reports can be run via the web in MDC Web Portal. 18 January 2012 9 Fileexport
Functionality to export the reports to many file types such as Excel or PDF. Figure 2: Example of one page of the VaR Backtesting Report exported in PDF format 18 January 2012 10 Dataadministration
Static data such as risk figure limits can easily be administrated in MDC. Figure 3: Example of the portfolio administration showing specific UCITS IV settings DataReconciliation
Reconciliation functionality for imported and calculated data. 18 January 2012 11 Reportrelations
Many of the reports can be linked together to be able to navigate between them. One of the strengths of this is the possibility to drill down from one report to another. For example, from a portfolio report to another report showing its underlying positions just by clicking on the chosen portfolio. An example of portfolio relation structure are shown below. Limit Status Report Global Exposure Report VaR Backtesting Report Global Exposure Position Report OTC Counterparty Risk Overview
OTC Counterparty Risk VaR Backtesting Portfolio Report
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