Market Risk And Aggregation
So you’ve finally managed to calculate your Market Risk (Partial PV01). What do we do now? Well you probably want to display the number on a traders UI. However, if you have a book that has many trades, do you display PV01 for each trade? Probably now. You probably want to aggregate trades, with different traders wanting different aggregations – many dimensions.
A classic aggregation might be based on organisation hierarchy: Region-Desk-Book. There are many regions, each region can have 1 or more desks, each desk can have many books. When a trades PV01 is calculated the appropriate aggregation needs to be updated. Another fairly classic aggregation is by asset class, where the buy/sell-side may have a hierarchical structure of asset classes e.g. Rates contains all Bonds, IRS and FX trades. Now a trader might want to see various aggregations on his UI, and he may want to slice and dice his trades based of numerous other possible aggregations. What is clear is that you probably can’t calculate in real-time every possible aggregation, and that you are probably better off only calculating (and hence streaming) the aggregations that users are currently viewing.
You may consider using OLAP to handle the aggregations. Oracle, Microsoft and others provide OLAP support on top of relational database, but for anything approaching real-time risk, OLAP is probably just not going to keep up and provide sub second response times coupled with streamed notifications. A number of other vendors have built OLAP cubes in memory, or used vector databases which can provide appropriate real-time aggregation.
Where am I going with all of this? More to come…..
[...] terms, the measure at the intersection of several hierarchies). Anyway, I’m not going to go into any more depth as far as the nitty-gritty of the coding is concerned, but here are a few [...]
Castles in the Air « iGlossolalia said this on March 24, 2010 at 4:47 pm |