To get you started with our sandbox environment, we have set up the framework of the step-by-step worked examples that you can follow and replicate, as documented in our user guide. You will also need certain prerequisites in place, as described here.
On this page, we will provide:
- the description of the predefined pricing environments
- the description of other predefined items / settings
Predefined Pricing Environments
The pre-configured ‘BLUESTONE’ and ‘LONDON_FICC’ pricing environments which are referred to in the worked examples, including their underlying company tree, curve setup and data groups, are described in the table below.
| EXAMPLE | BLUESTONE (1) | LONDON_FICC (1) | LONDON_FICC - XVA (1) |
|---|---|---|---|
| Company Long Name | BLUESTONE CAPITAL LIMITED | LONDON FICC BU | LONDON FICC BU |
| Company ID | BLUESTONE | LONDON_FICC | LONDON_FICC |
| Entity Long Name |
HIGH YIELD FUND CORPORATE FUND ALTERNATIVE INVESTMENT FUND | RATES TRADING DESK | RATES TRADING DESK |
| Entity ID |
HY_FUND CORP_FUND ALT_INV_FUND | RATES_DESK | RATES_DESK |
| Curve Group | XPLAIN DEFAULT | LONDON | LONDON |
| Curve Configuration | XPLAIN DEFAULT (2) | LONDON (3) | LONDON |
| Market Data Group | 3PM LONDON | COB LONDON | 12PM LONDON |
| Market Data Group's Pricing Slot | LDN 1600 | LDN COB | LDN 12PM |
| Valuation Data Group |
3PM LONDON 4PM LONDON (for credit trades) | 12PM LONDON | |
| Valuation Data Group's Pricing Slot | LDN 1500 | LDN COB | |
| Portfolio Long Name |
EUROPEAN HIGH YIELD GLOBAL CORPORATE ALTERNATIVE INVESTMENT |
IRS PORTFOLIO 1 IRS PORTFOLIO 2 | IRS PORTFOLIO 2 |
| Portfolio IDs |
EUR_HY_PTF GLOBAL_CORP_PTF ALT_INV_PTF |
IRS_PTF_1 IRS_PTF_2 | IRS_PTF_2 |
| Set up for XVA Calculations? | Without XVA | Without XVA | With XVA |
| Default Discount Ccy | LOCAL CCY DISCOUNTING | USD DISCOUNTING | USD DISCOUNTING |
Other Predefined Items and Settings
In addition to pricing environments described above, we also have the following predefined items and settings which are used in the worked examples:
- default valuation settings (for valuation and exception management))
- example break tests (for exception management)
- break resolution and approval task allocation and granularity (for exception management)
- default valuation settings (for valuation data exception management)
1. Default Valuation Settings
The ‘BLUESTONE’ and ‘LONDON_FICC’ pricing environments described above are setup with the following default valuation settings.
| Valuation Parameters (*) | XPLAIN DEFAULT SETTINGS | BLUESTONE | LONDON_FICC |
|---|---|---|---|
| Market Data Group | N/A | 3PM LONDON | COB LONDON |
| Curve Configuration Type | Single | Xplain Default Settings | Single |
| Curve Configuration (Single, FX / Non-FX) | XPLAIN DEFAULT | Xplain Default Settings | LONDON |
| Curve Stripping | OIS (Dual) | Xplain Default Settings | OIS (Dual) |
| Discount Ccy | Local Ccy | Xplain Default Settings | USD |
| Reporting Ccy | USD | Xplain Default Settings | USD |
| Triangulation Ccy | USD | Xplain Default Settings | USD |
| Projection Valuation | Mid | Xplain Default Settings | Mid |
| Discount Valuation | Mid | Xplain Default Settings | Mid |
| FX Rates Valuation | Mid | Xplain Default Settings | Mid |
| Optionality Valuation | Mid | Xplain Default Settings | Mid |
| Skew Valuation | Mid | Xplain Default Settings | Mid |
| Force ISDA interpolators while calibrating CDS | TRUE | Xplain Default Settings | TRUE |
| Exclude fixings from valuation date | TRUE | Xplain Default Settings | TRUE |
| CSA Discounting | N/A | FALSE | FALSE |
Other predefined items / settings are described here.
2. Example Break Tests
The example break tests for the market data and valuation data exception management process are described in the tables below.
| Field Name (*) | Quantum Break Test | EUR IRS Source to Source Overlay Break Test (**) |
|---|---|---|
| Test Type | Preliminary | Overlay |
| Test Definition | Value | Primary vs Secondary Provider |
| Child Break Test | ~ | ~ |
| Break Test Name | Quantum | EUR IRS Source to Source |
| Asset Classes | All | IR Rates |
| Rates Currencies | All | EUR |
| IR Instruments | All | FixedIborSwap |
| Credit Sectors | All | ~ |
| FX Ccy Pairs | All | ~ |
| Scaling | ~ | Relative Difference |
| Z-Score Observation Period | ~ | ~ |
| Threshold/Factor 1 | ~ | 0.05 |
| Threshold/Factor 2 | ~ | ~ |
| Threshold/Factor 3 | ~ | ~ |
| Operator | >= | >= |
| Observation Period (# Day) | ~ | ~ |
| Field Name (*) | DV01 Break Test | Vega Break Test | PvS Overlay II Break Test |
|---|---|---|---|
| Test Type | Overlay I | Overlay I | Overlay II |
| Test Definition | Primary vs Secondary | Primary vs Secondary | Primary vs Secondary |
| Child Break Test | ~ | ~ | ~ |
| Break Test Name | DV01 Test | Vega Test | PvS Overlay II Test |
|
Company Entity Portfolio | All | All | All |
| Trade Type | IRS | XCCY Swap | Inflation Swap | All Credit | Cap/Floor | Swaption | FX Option | FX Collar | All |
| Rates Currencies | All | All | All |
| Credit Sectors | All | ~ | All |
| FX Ccy Pairs | ~ | All | All |
| Providers | ~ | ~ | ~ |
| Scaling | Greeks - 01 | Greeks - Vega | Relative |
| Threshold/Factor 1 | 3 | 3 | 0.03 |
| Threshold/Factor 2 | ~ | ~ | 0.04 |
| Threshold/Factor 3 | ~ | ~ | 0.05 |
| Operator | > | > | ~ |
| Observation Period (# Day) | ~ | ~ | ~ |
Other predefined items / settings are described here.
3. Break Resolution and Approval Task Allocation and Granularity
The predefined task allocation settings are as follows:
- the ‘TEAM_DEFAULT’ team is set as the global resolution and approval team, which means that its members can perform any task
- the ‘Resolution Team’ is set up as the resolution team at the top level for all market data and valuation breaks, which means that its members can perform any resolution task
- the ‘Approval Team’ is set up as the approval team at the top level for all market data and valuation breaks, which means that its members can perform any approval task
As to the granularity settings, we have added:
- a “Per Asset Class” as a task granularity for market data breaks, which means that the resolution / approval tasks will each be split accordingly into three further sub-tasks: one for Rates, one for Credit and one for FX market data, in addition to the split by curve configuration
- a “Per Trade Type” as a task granularity for valuation data, which means that the resolution / approval tasks will each be split accordingly into further sub-tasks: e.g. for FX trades, one for FX Forwards, one for FX Swaps, one for FX Collars and one for FX Options, in addition to the split by pricing slot
Other predefined items / settings are described here.
4. Valuation Data Currency Definition
Prior to running a valuation data anomaly detection process, you will first need to define the currency in which third-party valuation data is reported (i.e. trade currency or reporting currency). This is relevant in particular when Xplain is one of your valuation data providers, to ensure that the correct valuation calculated in Xplain is used during the exception management workflow.
In our Sandbox environment, Currency Type is set to be “TRADE_CCY”, which means that all third-party valuation data will be deemed to be expressed in the trade currency, as defined at trade level.
Other predefined items / settings are described here.
