Currency
The first Security that must be created in the RiskWin framework is a Currency.
A currency is considered a security because it has a specification of its
value and is backed by a counterparty - which for currencies is usually a
government's central bank. For example, each currency denomination in the United States
specifies the amount of value that it has and also specifies that it is backed
by the United States Federal Reserve. The following is the screen display for
the Currency USD:
A Currency has all the attributes of a security. The following are default
values for some of these attributes:
Unit and Contract Size:
The Contract Size for a Currency is always set to be 1 Unit per Contract.
Transaction Currency:
Since positions in currencies are financed by positions in other currencies,
there is no one currency in which transactions must be conducted. The default
setting for a Currency's transaction currency is itself. [See also Accounting for Positions in Currency.]
Earnings:
Each position in a Currency accrues interest earnings or charges at the
risk-free rate specified by the appropriate Sovereign Yield Curve for that currency, which is found in the currently active World State.
Valuation:
The spot value of a Currency is the same as the quantity held in the position.
The forward value of a Currency at some time in the future, is calculated as
the spot value of the Currency plus the appropriate interest earned or charged
from the spot date to the valuation date.
To value a Currency at a particular World State, it is necessary to have the
appropriate Sovereign Yield Curve for that currency assigned to that World State.
Counterparty and Credit:
Since the Counterparty for a Currency is the appropriate central bank, a Currency always assumes the Credit Rating of its Counterparty.
Holiday Calendar:
There is no Holiday Calendar required for a Currency.