What is a parameter set?
In the FRTB calculations, there are a considerable number of constants. These include values such as weightings, the value of rho, the default maturity scaling factor and so forth. The term parameter set identifies a group of constants. See the configuration file FRTBParameters.Why have multiple parameter sets?
Different regulators are expected to make changes to these values. By defining a parameter set per regulator or reporting requirement, the calculations can be re-run with different variations of the parameters, or measures can be compared across different parameter sets.Must every constant be defined for every parameter set?
This is not required, as many regulators are expected to change only certain parameters and fall back to another parameter set otherwise. In the current implementation of the parameter set logic, a parent-child relationship selects the fallback parameter set when a parameter is missing for a specific parameter set. This parent-child relationship is defined in theParameterSet.csv file. In addition,
there is a start date column in all configuration files. A given
parameter will only be considered if the as of date passed in the
query is after the start date.
When defining the fallback logic, single value
parameters, such as GIRR Delta different curve correlation, are distinguished from lists
of parameters such as GIRR major currencies or Commodity Delta
vertices. The latter are best thought of as
vectors of parameters, since they can only be overridden all at once.
Example
The PRA may decide they want to use the exact same parameters as defined by the EU but change the risk weight for the0.5 vertex of the GIRR Delta sensitivities. In this case, the list of GIRR Delta risk weights needs to be overridden.
This requires the following:
- Define two parameter sets, one called EU and another one called PRA. The EU parameter set to be the parent of the PRA parameter set.
-
Add a new row to the
GIRR_Delta_Weightings.csvfile corresponding to all the vertices that are expected to exist when the PRA parameter set is selected. Adding only one row for the0.5 vertexwith the new weight value would mean that under the PRA parameter set, retrieving the risk weight for any other vertex will return null.
Can a calculation run only for child-level parameter sets?
Calculations can be run for any parameter set that is defined at any level of the parameter set hierarchy.How to choose the parameter set for a calculation
Parameter Set is a slicing hierarchy. The parameter set to use can be chosen by either:- Selecting the parameter set in the filters of the query
- Adding the hierarchy to the columns or rows and comparing the results for different parameter sets.
What does a multi-regulator parameter set hierarchy look like?
An example parameter set could be as follows:
- BCBS : The primary parameter set, which all other parameter sets fall back to
- JFSA : Variation of the BCBS parameter set
- FED: Variation of BCBS parameter set
- EU: Variation of the BCBS parameter set
- FINMA: Variation of the BCBS parameter set
- ACPR: Variation of the EU parameter set
- PRA: Variation of the EU parameter set
Lookup results:
In the table above, the BCBS, EU and PRA queries return the
values defined for the respective parameter sets. However, for
ACPR the as of date passed in (2016-06-01) is later than the start date
(2015-01-01), so the values defined for ACPR are ignored and the
calculation falls back to the parent parameter set.
Do I need to define a parameter set for every run date?
Parameters are not expected to vary per run date, so this is not required. Any given parameter needs a start date. An entire parameter set does not need to be re-defined for each start date, only the values that change from that respective start date. However, it still holds that a list of parameters can only be overridden together.Example
This example shows how a parameter list behaves across run dates when a new start date redefines that list. The BCBS parameter set has a full list of risk weights from 2016-06-01, and a single 0.5 vertex weight is redefined from 2018-03-15. Parameter values loaded:
Lookup results:
In the above example, a query for the run date 2018-04-12 returns
results only for the vertex 0.5. As of
the date 2018-03-15, the list of risk weights is overridden, and
the new list defines a risk weight only for vertex 0.5.