What would be your P&L in one year if all your product underlying levels increase or decrease by 10%?
Whether it is for internal needs, regulatory duties, or even client reports: running scenarios on future dates and studying the corresponding evolutions of prices and risk metrics is a precious feature!
LexiFi quants have recently extended our Risk Scenario tool by adding a time machine.
The Forward Risk Scenario tool allows running a simulation at any date between today and product maturity date. Users specify a set of scenarios at future dates for the needed valuation.
Ever wondered when running future scenarios if results are realistic? If corresponding market data shocks are coherent? And if lifecycle events are correctly considered? With LexiFi Apropos forward scenario, you can be certain that:
With LexiFi’s Risk Scenario tool users can define, store, combine and reuse fully customizable market scenarios tailored to their needs or regulatory requirements. See our Risk Scenarios Monthly Focus for more details.
What would be the product PNL in 1 year if underlying spot prices go up or down by 2, 4, 6, 8, or 10 percent from today’s spot? The product is an Autocall on Eurostoxx 50, Nikkei with coupon 5%: Autocall level = coupon level = 100%, with memory effect.
Suppose underlying asset spots increase by 2% in 2023-06-02 compared to 2021-03-02. We report results on a quarterly frequency. The product is an Autocall on Eurostoxx 50, Nikkei, and S&P500, with annual coupon payment distribution of 8%: Autocall Barrier 100%, coupon barrier 80%, capital protection barrier 60%.
Note: For this example, we chose to compute the VaR. Users may compute and report other metrics such as the Greeks.
We report the price and intermediate cash flows arising from lifecycle events such as the Autocall at 2023-03-02. The interpolation of intermediate fixings between today and the final date is computed such that each underlying makes +2% compared to today.
The PNL is calculated as follows:
t: observation date
PNL(t) = price(t) - price(0) + sum(cashflow(i)) ; i from 0 to t