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Market Data Retrieval Service

The market data retrieval service is a Spring Bean intended to provide market data for the market data postprocessors and the PnL explain postprocessors. It also provides market shift vectors for the Taylor VaR computation. It is intended to be customizable.

Spring

The market data retrieval service provides the com.activeviam.accelerator.common.services.IMarketDataRetrievalService interface as a Spring Bean. The Bean is instantiated on the com.activeviam.mr.common.measures.MarketDataRetrievalServiceConfig Spring configuration file. It has several implementations depending on the Spring configuration.

Services

  • getMarketData: returns a list of market data.
  • getPnlVector: returns a list of PnL vectors used for the Taylor VaR.
  • getCorporateAction: returns any corporate action related to the market data, such as dividend, coupon, or split.

Multi-dimension handling

The services are able to handle multi-dimension market data. The size of the IPillarSet[] requestedPillars on the services input parameters provides the number of requested dimensions. The returned array will contain the values for all the requested coordinates. For instance, for a 3 dimensions request, the values for (x, y, z) will be at the location:

(x * requestedPillars[1].getSize() + y) * requestedPillars[2].getSize() + z

For a scalar setup, the request provides a pillar set of size 1 and then get back a single value.

Customization

Most of the customization should be performed on the IInterpolationConfiguration Bean that is injected to the service.

If you need to rely on additional parameters (extra levels for instance), the property List<Object> ServiceContext.leafCoordinates; can be used. It is filled by the custom user service Bean com.activeviam.accelerator.common.services.ICustomParameters, instantiated in com.activeviam.mr.common.measures.CustomParametersConfig.

If the input data need to be retrieved elsewhere or in a different way than the standard one, you can override or replace com.activeviam.mr.common.services.impl.MarketDataRetrievalService or com.activeviam.mr.common.services.impl.ScalarMarketDataRetrievalService for the service implementation.

If the non-interpolated way of matching pillars needs to be changed, the class com.activeviam.accelerator.common.utils.ModifiedPillarSetOfPillar should be used to encapsulate the requested pillar set. It overrides the equality between pillars by a custom lambda function. This has to be done on the InterpolationConfiguration.fixPillarSet(…) method.

The default double value for empty slots can be set on the constructor of the service Bean.

Interpolation

We can choose to interpolate or not a dataset on the configuration Bean. We can set the following options:

  • Enable or disable the interpolation.

  • Set the interpolation order.

  • Specify a transformation to apply to a specific axis before the interpolation:

    $ y = f(pillar, x) $

    and

    $ x = f^{-1}(pillar, y) $

    have to be provided.

The interpolation logic is embedded on the class:

  • com.activeviam.accelerator.common.services.impl.marketdataretrieval.InterpolationDouble for double interpolation.

  • com.activeviam.accelerator.common.services.impl.marketdataretrieval.InterpolationVector for IVector interpolation.

Nominal, absolute or relative price

The service can handle absolute or relative price. Take the following example of a bond:

Instrument Price Nominal
CREDIT AGRICOLE 2% 02/05/27 EUR 107.44 % 15000.00 EUR

We can see that the MtM of the Bond is Price * Nominal / 100 = 16116.00 EUR. For PnL computation we need to use the MtM, absolute price. To achieve this, the following must be configured in the InterpolationConfiguration class:

Method Expected return for the bond price Explanation
isRelativeMarketData true Must return true for risk factor with relative price, so the formula is applied correctly
relativeToAbsoluteMarketDataOperator (nominal, md) -> md * nominal / 100 Transforms relative price to absolute price
absoluteToRelativeMarketDataOperator (nominal, md) -> md / nominal * 100 Transforms absolute price to relative price
relativeToAbsoluteShiftOperator (md, shift) -> shift * md / 100 Transforms the market shift used for VaR from relative to absolute
absoluteToRelativeShiftOperator (md, shift) -> shift / md * 100 Transforms the market shift used for VaR from absolute to relative

Retrieving the market price

The service and, by extension, the MarketDataPostProcessor can retrieve the market data as an absolute or relative price. This is done with the MarketType typeOfMarketData parameter.

MarketType How Market Data is expressed
ABSOLUTE An absolute price in currency.
RELATIVE A price relative to the nominal price.
RAW An absolute or relative price, depending on the way it is stored. The nominal is not used.

For PnL explain and VaR, the market data must be expressed in absolute price.

Corporate Action

The corporate action can be stored in the CorporateAction store or via any customization. Atoti Market Risk handles two corporate actions: dividend and split. Use the getCorporateAction function to retrieve these input data.

Split

The market data retrieval service provides an option to integrate corporate splits into the market price to calculate PnL. This integration is defined by the function corporateActionOperator in the InterpolationConfiguration class.

Method Expected return for the bond price Explanation
corporateActionOperator (value, action) -> value * action.getSplitRatio() Defines how to integrate the corporate action into the market price

Dividend or coupon

The dividend is not integrated by default into the market price because it can interfere with the PnL calculation. Instead it is handled in a specific metric that assumes PnL = sensitivity * dividend. The formula used is defined in the PnL Explain service.

Shift vector normalization

You can compute the market shift vector with a different sensitivity convention. In this case, the vector should be normalized to fit on the sensitivity stored on the Cube. This is defined by the function normalizationShiftOperator in the InterpolationConfiguration class. If no normalization is required, the function MUST return null.

Method Expected return Explanation
normalizationShiftOperator (md, shift) -> normalized shift Transforms the input shift into a shift fitted for the sensitivity stored in the Sensitivity Cube