Documentation Index
Fetch the complete documentation index at: https://docs.activeviam.com/llms.txt
Use this file to discover all available pages before exploring further.
Euler capital allocation
Naming pattern: Measures with “Euler” behavior follow the name pattern:Main Measure Name Euler. Euler is one of the approaches implemented in to decompose a non-linear measure down to additive components. For instance, the Euler variation of the IMCC measure is called IMCC (Euler): the latter enables you to allocate a result (for instance, at firm level) down to individual components (typically, desks).Overview of Euler Calculations
The theory behind Euler Calculations is based on these facts:- Use of Euler’s theorem of homogeneous functions
- Capital Charges are homogeneous functions of degree 1
- Euler Capital Allocation is the evaluation of the derivative on a sub-portfolio
Analytical vs Numerical Euler
The difference between Analytical and Numerical Euler is in how the calculations are performed:- For Analytical Euler, we differentiate the functions and evaluate the derivative (this gives the exact value).
- For Numerical Euler, we use the Existing Capital Charge calculations to numerically approximate the derivative.