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FX impact for Cash sensitivity

When you change the display currency for the Cash sensitivity in Atoti from the risk currency to the display currency, for example, from AUD to USD or EUR, the PnL Explain for the ‘Cash’ sensitivity type accounts for the impact of the FX rate changes between the risk currency and the display currency pair between the current date and the previous date of the sensitivity.

note

This is only applicable to the Cash sensitivity. For all other sensitivity types, when the display currency differs from the risk currency in the input file, the display currency conversion is: $ \text{sensitivity} \times \text{Spot FX rate of the pair}$.

Atoti calculation example

When the display currency is changed in Atoti, for example, from AUD (input file risk currency) to EUR, PnL Explain accounts for the effect of FX movements on the Cash sensitivity. The formula is:

$$ \text{Cash PnL Explain} = \text{Cash Native Previous} \times (\text{FX Rate Current}−\text{FX Rate Previous})$$

Example

For a sensitivity of 3933.89 AUD with:

  • FX Rate Current: 0.7023 (AUD to EUR)
  • FX Rate Previous: 0.7051 (AUD to EUR)
  • Calculation: $ \text{Cash PnL Explain} = 3933.89 \times (0.7023−0.7051)= −11.014892 $

FX rate look-up happens with the following logic:

  1. The Solution looks up the FX rate directly in the FX Rate Market Data store, for example, AUD/EUR.
  2. If it can’t find it directly, the Solution tries to retrieve the inverse rate: EUR/AUD.
  3. If it can’t find that FX rate either, it uses the pivot currency to retrieve two FX rates and compute the required FX rate from them. For example, it retrieves two FX rates with pivot currency: USD. AUD/USD and EUR/USD, to then compute AUD/EUR.