Security
This is the core component of the RiskWin framework. It has been designed to separate those attributes and capabilities
that are common to all securities from those that are specific to each of the
different security types.
The attributes that are common to all securities provide a good foundation for
accommodating the wide variety of securities that are available in the
financial marketplace. These attributes and capabilities are discussed below.
Unit and Contract Size:
Each security definition is assumed to apply on a per unit basis and the
default contract size is set to be one unit. However, it is possible during most
security definitions to specify the contract size to be greater than one.
It is important to note that when market prices are specified for a security
in an appropriate World Variable , that this price is expected to be on a per unit basis. The contract size
specified in the security definition will ensure that the position and portfolio
values are calculated on the correct number of total units.
Transaction Currency:
That currency in which all transactions in a security are conducted is called
the transaction currency and it must be specified when defining the security.
All valuation calculations on a security are first computed in the specified
transaction currency and then converted to the desired valuation currency - if
necessary.
Earnings:
A security may receive cash amounts over time - such as dividends. And it may
pay out amounts over time - such as financing charges.
Any valuations of a portfolio at future times should include the net effect of
such cash flows. It is therefore necessary for all securities to provide the
net earnings expected over a given time frame.
Valuation:
The most important capability of each security is its ability to calculate a
value for itself under a given set of conditions. This valuation is obtained in the security's transaction currency.
Each security in RiskWin calculates a value for itself at a specified World State. While each security will have different pricing models and will require
different inputs, each security must collect all inputs it needs, which have not
been specified as part of its definition, from a World State.
Counterparty and Credit:
Each security must specify the Counterparty that facilitates trades in this security. Also, this security will assume the Credit Rating of the specified Counterparty unless a Rating for the security is explicitly
specified.
The Counterparty and Credit attributes are used primarily as query criteria in
order to aggregate positions.
The Credit attribute may also be used in the valuation routine specific to
each security.
Category Tags:
The Category tags are additional attributes that can be attached to a security for use as
query criteria in order to aggregate positions.
It is possible to have an unlimited number of tags; however, there may be
performance implications if there are too many tags.
Holiday Calendar:
Each security can specify a Holiday Calendar to be used for calculating the actual days on which earnings related cash
flows occur. Also, if a security needs to be reset periodically, the reset date
can be correctly set to coincide with a business date.
If no Holiday Calendar is specified with the security and a calendar is
required, then the default Holiday Calendar is used. The default Holiday Calendar is
set as part of the Application Defaults.