Shifting Data used in the Term Structure

When working with the term structure, being able to automatically shift a selected market data parameter by the same value for each tenor in the term structure is useful for:

Stress testing.

Scenario analysis of a strategy or a portfolio.

Adding a margin through changing the ATMF volatility spread. This would be used by a market maker.

In the Term Structure page you can automatically shift the following market data parameters:

ATMF volatility *

You can define a shift for the:

ATMF volatility spread *

This will affect the resultant bid/ask values that are calculated from the mid ATMF volatility.

Mid ATMF volatility *

This is supported for precious metals only.

Future price (for listed assets) *

Forward price (for precious metals) *

Forward rate (for precious metals) *

Swap prices (for OTC energy assets) *

Spread to spot

 

Not all of these market data parameters are displayed for all assets. In addition, some of them can only be shifted for certain assets.

All these market data parameters can be shifted by a certain amount.

In addition, the market data parameters marked with an asterisk (*) can be shifted by a defined percentage as well as by an amount. To do this, after activating the parallel shift feature you instruct the system to shift the data by a percentage rather than an amount by typing “%” after the defined amount. So for example in the Forward Prices column you can enter “10%” and as soon as you click elsewhere in the window the system will first shift all the forward prices by 10%, and then update the data in the other columns accordingly as relevant.

 

You can only edit the deposit rates via the Yield Curve window.

To use the parallel shift feature:

1. In the Term Structure page to activate the parallel shift functionality click the Enable Parallel Shift button. A text box opens under each type of market data that can be parallel shifted.
2. For each piece of market date you want to shift, in the relevant text box enter the amount or, if supported, the amount + “%”.
3. Click Enter on the keyboard or click elsewhere in the Term Structure window. The shifted values are displayed for the selected column, and the data in the other columns is also updated accordingly (as relevant).