Introduction
The first calculation task is typically a Mark to Market task. Results from this task (trade or position Mtms) may be useful in their own right, but generally the purpose of this task is to ensure:
- All trades can be valued.
- The trade valuation is the same as the valuation arrived at by the customer's trading system.
These objectives are explored in further detail below:
Valuation
In valuing each trade the system ensures that the trade arguments or cashflows that have been supplied are valid for the chosen product, and that the system has all the required rates available to value the trade.
If trade or cashflow details are missing or inconsistent, the product library will issue an error specifying the problem. Similarly, the system will supply details of missing rates (required to value the trade).
Reconciliation
The load format for trades includes fields for externally generated Mtm. The configuration file for a Mtm task includes the ability to set tolerances (absolute and percentage) against which the difference in Mtms is checked. Any trades which fall out of tolerance will be displayed in red at the top of the trade list in the MarkToMarket viewer. A cursory glance at this screen will tell the user if there are suspicious Mtm results that should be looked at before trusting any of the more complex simulation results.
Configuration
The configuration files that affect MarkToMarket calculations are:
| Configuration File | Details |
| Assumptions | Base assumptions common to all calculations. |
| MarkToMarketDefinitions | A definition contains tolerance rules (percent and absolute tolerances, both at the product level and default level. It also contains a flag allowing the user to request cashflow detail to be returned from the calculation. These cashflow details can be shown in a cashflow report. |
| MarkToMarketCalculations | A calculation associates a task name with a definition file. |
Viewing Results of a Mark To Market Calculation
Opening a successful MarkToMarket task from the summary page, a user can select a particular calculation to view its results. A sample result is shown below. Trades that are outside tolerance are displayed in red.
The Reconcile Mtm column above is the Mtm for each trade in the source currency. To see trade Mtm in the reporting currency you need to choose "Mark To Market" in the Drilldown menu at the top of the screen. It is also possible to calculate theta for each trade by setting the Theta flag in the MtmDefinition configuration. The theta values are shown alongside the reporting Mtm.