sstModel (version 1.0.0)

spread: Constructing a Spread (Risk Factor)

Description

Constructor for the S3 class spread. It allows to define a spread-type risk factor. This risk factor refers to the "Modell-Spread" change \(\Delta S(1,j,r)\) for a certain index rating r and a certain currency j in the valuation function for "Fixed-Income-Assets und Versicherungsverpflichtungen" at page 6 in the FINMA document "SST-Marktrisiko und -Aggregation Technische Beschreibung".

Usage

spread(name, currency, rating, scale = NULL)

Arguments

name

a character value of length one. This corresponds to the name in the covariance matrix of the marketRisk to which the spread risk factor is mapped. This means that the risk factor change \(\Delta S(1,j,r)\) in the FINMA document "SST-Marktrisiko und -Aggregation Technische Beschreibung" will be assumed to be modeled by the underlying normal random variable corresponding to name in the covariance matrix (potentially scaled by scale if not NULL).

currency

a character value of length one. The currency in which the underlying "Fixed-Income-Assets oder Versicherungsverpflichtungen" is valuated. This refers to the currency corresponding to the index j in the FINMA document "SST-Marktrisiko und -Aggregation Technische Beschreibung" (version 31.1.2018).

rating

a character value of length one. The corresponding rating of the spread refering to the index r at in the FINMA document "SST-Marktrisiko und -Aggregation Technische Beschreibung".

scale

a numeric value of length one. If not set NULL, this defines a scaled risk factor equal to scale times the risk factor defined by name in the covariance matrix contained in marketRisk. By default its value is scale = NULL.

Value

An S3 object, instance of the class spread.

Examples

# NOT RUN {
# constructing a non-scaled spread risk factor
# (assuming "AA_EUR_Spread" exists in marketRisk).

e <- spread(name     = "AA_EUR_Spread",
            rating   = "AA",
            currency = "EUR")
# constructing a scaled spread risk factor
# (assuming "AA_EUR_Spread" exists in marketRisk).

e <- spread(name     = "AA_EUR_Spread",
            rating   = "AA",
            currency = "EUR",
            scale    = 0.5)

# }