Create custom stress scenarios with our Multi-Shock report

Traders, investors, funds, brokers, and commercial firms use our post-trade tools regularly to attain insights about the market risk of their holdings. The best risk reporting solutions can assist to mitigate risk across your trading platform by tuning your risk tolerances and settings. For example, different types of portfolios might call for different views of Value at Risk (VaR), ranging from H-VaR for Global Macro strategies, Monte Carlo for option specialists, and Parametric for relative value funds and hedgers. The same goes for Stress Testing– often there is a need for specific stress tests, such as shocking prices or volatilities by a pre-determined amount or according to a past market incident. There is never a set standard for how to run market risk reports.

Unfortunately, all this flexibility can come at the cost of resources needed to manage all of the possible settings applicable to your business. Risk managers must frequently tweak their reports or interact with the risk system to make sure they are running simulations that fit changing use cases and market conditions.

Luckily, Theorem has developed a risk reporting solution that addresses these issues by zooming out and simultaneously running many different simulations on a single report. With our Multi-Shock report, for example, clients can now create custom scenario ranges across their portfolios instead of being constrained to just a few shocks at a time.

In the example of a Multi-Shock Report seen below, the portfolio is shocked +/- 20% on spot prices as well as on volatility. As you can see, the colored grid allows you to quickly and efficiently visualize the scenarios that are most beneficial or detrimental to the current holdings. You can control the starting and ending values and increments for both axis of the grid, and even what is displayed in the grid:

  • Shocked amount in currency
  • Percentage of the account value
  • Percentage of account’s limits
  • # of accounts over limits

Shock Matrix

By adding accessible and intuitive stress reporting to their suite of risk analytics tools, our clients are much better positioned to manage market risk.

Our years of experience in data aggregation and normalization, combined with our partnership with Portfolio Science’s on-demand risk analytics, allow us to deliver turnkey risk reporting. And since it’s delivered via Theorem’s Software-as-a-Service model, our clients save on market data, maintenance, and IT support costs that would otherwise fall on their shoulders. Quick to deploy, our reports can be sent automatically via STP or fine-tuned and pulled interactively on our portal.

If you would like to discuss our custom stress scenarios or schedule a demo of a stress test, please let us know.

Schedule some time with us to discuss this insight further or learn about the ways in which Theorem can help elevate your post-trade processes.

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