Functionality Beyond BCBS

Description	Details
The tenors required by the SBM calculations will not always be the same as those used internally in risk engines. The FRTB Accelerator will automatically interpolate the input sensitivities to the required tenors.	Vertex Interpolation
Parameterisation and context values give the end-user the ability to configure and/or modify the nature of the calculations according to specific requirements. This is achieved through a combination of user contexts and datastore definition of constants.	Parameterisation and context values
The FRTB Accelerator allows configurable sets of parameters to be associated with a jurisdiction. It also allows the choice of jurisdiction to be made at query time via a filter.	Multiple jurisdictions
The FRTB Accelerator contains functionality that allows a direct navigation path in ActiveUI from the risk charge to the risk position and then to the weighted sensitivities. This functionality is provided by a context menu option in ActiveUI.	Risk Charge Drill-In to Trade Sensitivities
There is support for multiple business days including trend analysis and support for slow moving data such as correlations and Risk Weightings.	Multiple Business Days and Trends
Desk Level for calculations must be distinguished. Variants of capital risk charge calculations must be allowed to address specific jurisdictional requirements, while providing an organisational hierarchy that could have desks and books at arbitrary depths and multiple legal entities.	Legal Entity, Desk and Book Hierarchies
Capital Allocation (also known as additive decomposition) allows allocating a top-level capital charge to lower levels in the hierarchies in an additive way. The FRTB Accelerator implements a number of linear allocation methodologies for achieving this, Analytical Euler, Numerical Euler, and Pro-rata / scaling.	Capital allocation
Incremental measures show the impact of removing a sub-portfolio--for example, a desk or a book--on the reference level calculations.	Incremental Measures
What-If functionality is able to simulate changes to trades, portfolio reclassification, desk eligibility (IMA/SA), and correlation, risk weight, and other parameter changes.	What-If Simulations

Vertex Interpolation

The term 'vertex' refers to a tenor or expiry/maturity point along which a risk factor sensitivity is mapped or projected. For example:

GIRR Delta, where the vertices represent points along a risk-free yield curve.
CSR Delta, where the vertices represent points along a credit spread curve.
Commodity Delta, where the vertices represent time to maturity of a traded commodity.

It is worth noting there are no vertices for FX or Equity delta risk classes. For Vega, vertices represent option expiry dates. In all cases, the vertices are prescribed. For sensitivities that are not exactly mapped, linear interpolation to prescribed points has been implemented in the Reference Implementation.

Parameterisation and context values

Topic	Description
Parameterisation of constants	Parameterisation of constants is defined in BCBS 457; including risk weights, correlations and coefficients.
Context values	Some of the Accelerator's calculation parameters are exposed via Context Values allowing the end user to override the default values of those parameters at query time to customise the calculation logic. For example, set the reference currency

Parameters are soft-coded in the FRTB Accelerator which means that they can be overridden at query time without the need to rebuild or redeploy the application.

The parameters are held in a datastore and accessed by post-processors at query time. The parameters are stored with an additional two dimensions:

[StartDate]: The date from which the parameter takes effect.
[ParameterSet]: The parameter set (e.g. Jurisdiction) the parameter applies to.

Parameters are looked up by AsOfDate and Parameter Set.

Multiple jurisdictions

Topic

Description

Support

The Accelerator also contains support for multiple jurisdictions. There is support for multiple jurisdictions at query time by user selection of different parameter sets. Trades and positions can be reported under multiple jurisdictions.

Conformity

FRTB Regulations	The ActiveViam FRTB Accelerator complies with the FRTB regulations specified in BCBS 457 and amendments thereof. ActiveViam is committed to implementing changes to this regulation in future versions.
Variations required by specific jurisdictions	The FRTB Accelerator is designed to allow variations in parameters, correlations and calculations that may be requested by the jurisdictions implementing FRTB. ActiveViam will also incorporate variations implemented by various jurisdictions where its clients are located in response to client requests.

Legal Entity Filters (for Multiple Concurrent Jurisdictions)

When a bank needs to run the FRTB calculations for global reporting to their main regulators, the relevant sub cube will have no filter on legal entities. When either internal local or local regulatory reports have to be produced, the bank will use filters on the relevant legal entities and, if required, change the relevant context values and parameters (i.e. correlations and risk weights). The filtering might also include trade attributes (e.g. removing internal trades).

The FRTB Accelerator allows configurable sets of parameters to be associated with a jurisdiction. It also allows the choice of jurisdiction to be made at query time via a filter. This means that:

A trade or position can be associated with more than one jurisdiction
The risk charge can be evaluated and compared against different jurisdiction parameter sets

There is no need to duplicate the complete configuration when creating a new parameter set. The FRTB Accelerator provides a parent/child relationship between parameter sets. Only values that need to be overridden compared to their parent parameter set need to be re-defined.

The name of a parameter set can correspond to a jurisdiction (e.g. EU, UK, JPN) or can be any other unique string.

The FRTB Accelerator is provided with a base set of parameters called BCBS. No data is provided by ActiveViam in the FRTB Accelerator for any other jurisdiction.

The data model in the FRTB Accelerator has a “parameter set” attribute as part of the key on the relevant data stores (and input files).

The Datastore Viewer is supplied in the Reference Implementation which allows the parameter sets to be browsed and modified. The Datastore Viewer does not apply any restrictions as to who can see the data and similarly there is no workflow associated with data changes. If a customer project requires workflow, authorisation or persistence on the parameter sets, custom development would be required during the project implementation to add those features.

Risk Charge Drill-In to Trade Sensitivities

The FRTB Accelerator contains functionality that allows a direct navigation path in ActiveUI from the risk charge to the risk position and then to the weighted sensitivities. This functionality is provided by a (right mouse click) context menu option in ActiveUI. On the IMA side the drill-in functionality is from IMCC by desk to book to asset class then to data set and liquidity horizon and finally to the PnL vector.

Multiple Business Days and Trends

There is support for multiple business days including trend analysis and support for slow moving data such as correlations and Risk Weightings.

The FRTB Data Model includes an AsOfDate key attribute. This allows the in-memory database to hold several days' data concurrently. The AsOfDate attribute is extended to other parts of the data model including the market data (FX rates) and parameters, allowing all the associated calculations to be date sensitive. This enables analytics to be performed over date ranges including the calculation of intraday changes to any measure. Trends can also be visualised by graphing the measures using AsOfDate as an axis on the charts.

Legal Entity, Desk and Book Hierarchies

Desk Level for calculations must be distinguished. Variants of capital risk charge calculations must be allowed to address specific jurisdictional requirements, while providing an organisational hierarchy that could have desks and books at arbitrary depths and multiple legal entities.

Approach

The approach to creating and configuring Hierarchies, Cubes and Legal Entity filters is shown in the table below:

Entity	Approach to adopt
Hierarchies	Input the organisation hierarchy as two parent/child relationships: Relationship 1:Desk/Book relationships with particular nodes in the hierarchy flagged as desks. Relationship 2:Legal Entity relationships. A trade/position will have at least the following attributes: Legal Entity Book The hierarchies are built from these relationships.
Cube Configuration	An FRTB Desk hierarchy (flat list of desks). A Book/Desk organisational hierarchy with multiple levels (based on the book parent child relationship provided). A Book hierarchy (flat list of books). A Legal Entity organisational hierarchy with multiple levels (based on the legal entity relationship provided). A Legal Entities hierarchy (flat list of legal entities).
Legal Entity Filters (for Multiple Concurrent Jurisdictions)	When a bank needs to run the FRTB calculations for global reporting to their main regulators, the relevant sub cube will have no filter on legal entities. When either internal local or local regulatory reports have to be produced, the bank will use filters on the relevant legal entities and, if required, change the relevant context values and parameters (i.e. correlations and risk weights).

Entity

Approach to adopt

Hierarchies

Input the organisation hierarchy as two parent/child relationships:

Relationship 1:Desk/Book relationships with particular nodes in the hierarchy flagged as desks.
Relationship 2:Legal Entity relationships.

A trade/position will have at least the following attributes:

Legal Entity
Book

The hierarchies are built from these relationships.

Cube Configuration

An FRTB Desk hierarchy (flat list of desks).
A Book/Desk organisational hierarchy with multiple levels (based on the book parent child relationship provided).
A Book hierarchy (flat list of books).
A Legal Entity organisational hierarchy with multiple levels (based on the legal entity relationship provided).
A Legal Entities hierarchy (flat list of legal entities).

Legal Entity Filters (for Multiple Concurrent Jurisdictions)

When a bank needs to run the FRTB calculations for global reporting to their main regulators, the relevant sub cube will have no filter on legal entities. When either internal local or local regulatory reports have to be produced, the bank will use filters on the relevant legal entities and, if required, change the relevant context values and parameters (i.e. correlations and risk weights).

Capital allocation

Capital Allocation (also known as additive decomposition) allows allocating a top-level capital charge to lower levels in the hierarchies in an additive way.

The FRTB Accelerator implements a number of linear allocation methodologies for achieving this:

Method	Description
Euler	Euler can be calculated in two different ways, based on Euler’s Theorem of Homogeneous Functions.
	Analytical Euler The capital allocation is the directional derivative of the capital charge at the top-level. To employ the Analytical Euler method, analytically differentiate the risk measure function and evaluate the derivative.
	Numerical EulerTo employ the Numerical Euler method, calculate a numerical approximation to the derivative.
Pro-rata/scaling	To employ Pro-rata/scaling, calculate a charge based on a scaling of the portfolio’s capital charge by the ratio of the top-level capital charge and the sum of all the sub-portfolios’ capital charges.

In the default accelerator implementation, we provide all of the above capital allocation methodologies as different measures. We expect clients to combine them together as they may feel appropriate. As an example, they may wish to make a measure which contains a mix of the analytical (where available) and numerical (for the remaining) Euler calculations.

Incremental Measures

Incremental measures show the impact of removing a sub-portfolio (for example, a desk or a book) on the reference level calculations. The FRTB Accelerator provides measures that compute the incremental impact for all the calculations in both SA & IMA up to the capital charge.

What-If Simulations

The FRTB Accelerator uses native ActivePivot what-if capabilities to deliver powerful simulation tools in four main areas:

What-If simulation	Description
Trades and Trade Level Adjustments	What-if is provided on trades (new trades, amended trades) to assess the impact on capital; trade scaling on sensitivities for any trade for all assets.
Reclassifications of Book/Desk/Portfolio Hierarchies	It is possible to reclassify trades, books and other attributes and immediately see the impact on all measures - including final capital requirements.
Moving Desks between the two FRTB Approaches	What-If functionality is supplied to allow an assessment of the impact of desk moves between the two approaches (SA vs. IMA).
Correlation, Risk Weight, and Parameter changes	To analyse calculations under different parameter values, side-by-side.

Functionality beyond BCBS

Approach