4.11 Synthetic.help

Octarisk Class: object = Synthetic(id)

Octarisk Class: object = Synthetic()

Class for setting up Synthetic objects. A Synthetic instrument is a linear combination of underlying instruments. The following Synthetic types are introduced:

• SYNTH: Synthetic instrument with underlyings. The Synthetic price is based on the linear combination of underlying instrument’s prices.
• Basket: The same as type SYNTH, but additional attributes for specifying underlying volatility surface and volatility types are introduced to enable basket option valuation.

In the following, all methods and attributes are explained and a code example is given.

Methods for Synthetic object obj:

• Synthetic(id) or Synthetic(): Constructor of a Synthetic object. id is optional and specifies id and name of new object.
• obj.set(attribute,value): Setter method. Provide pairs of attributes and values. Values are checked for format and constraints.
• obj.get(attribute): Getter method. Query the value of specified attribute.
• obj.calc_value(valuation_date,scenario, instrument_struct, index_struct) Calculate the value of Synthetic instruments based on valuation date, scenario type, underlying instruments and FX rates. The provided structures have to contain the referenced underlying instrument objects and FX rates.
• obj.getValue(scenario): Return Synthetic value for given scenario. Method inherited from Superclass Instrument
• Synthetic.help(format,returnflag): show this message. Format can be [plain text, html or texinfo]. If empty, defaults to plain text. Returnflag is boolean: True returns documentation string, false (default) returns empty string. [static method]

Attributes of Synthetic objects:

• id: Instrument id. Has to be unique identifier. (Default: empty string)
• name: Instrument name. (Default: empty string)
• description: Instrument description. (Default: empty string)
• value_base: Base value of instrument of type real numeric. (Default: 0.0)
• currency: Currency of instrument of type string. (Default: ’EUR’) During instrument valuation and aggregation, FX conversion takes place if corresponding FX rate is available.
• asset_class: Asset class of instrument. (Default: ’derivative’)
• type: Type of instrument, specific for class. Set to ’Synthetic’.
• value_stress: Line vector with instrument stress scenario values.
• value_mc: Line vector with instrument scenario values. MC values for several timestep_mc are stored in columns.
• timestep_mc: String Cell array with MC timesteps. If new timesteps are set, values are automatically appended.
• day_count_convention: Day count convention of curve. See ’help get_basis’ for details (Default: ’act/365’)
• compounding_type: Compounding type. Can be continuous, discrete or simple. (Default: ’cont’)
• compounding_freq: Compounding frequency used for discrete compounding. Can be [daily, weekly, monthly, quarterly, semi-annual, annual]. (Default: ’annual’)
• instruments: Underlying instrument identifiers (Cellstring )
• weights: Underlying instruments weights (Numeric vector)
• discount_curve: Discount curve (Default: empty string)
• instr_vol_surfaces: Required for Options on Baskets only: Underlying instruments volatility surface identifiers (Cellstring )
• correlation_matrix: Required for Options on Baskets only: Correlation matrix object of Basket underlyings (Default: empty string)
• basket_vola_type: Required for Options on Baskets only: Approximation method for basket volatility calculation [Levy, VCV, Beisser] (Default: ’Levy’)

For illustration see the following example: A fund modelled as synthetic instrument with two underlying indizes (MSCI World and Euro Stoxx 50) is set up and the synthetic value (1909.090909) is calculated and retrieved:

fprintf('Pricing Synthetic Instrument');
s = Synthetic();
instrument_cell = cell;
instrument_cell(1) = 'EURO_STOXX_50';
instrument_cell(2) = 'MSCIWORLD';
s = s.set('id','TestSynthetic','instruments',instrument_cell);
s = s.set('weights',[1,1],'currency','EUR');
i1 = Index();
i1 = i1.set('id','EURO_STOXX_50','value_base',1000,'scenario_stress',2000);
i2 = Index();
i2 = i2.set('id','MSCIWORLD','value_base',1000);
i2 = i2.set('scenario_stress',2000,'currency','USD');
fx = Index();
fx = fx.set('id','FX_EURUSD','value_base',1.1,'scenario_stress',1.2);
instrument_struct = struct();
instrument_struct(1).id = i1.id;
instrument_struct(1).object = i1;
instrument_struct(2).id = i2.id;
instrument_struct(2).object = i2;
index_struct = struct();
index_struct(1).id = fx.id;
index_struct(1).object = fx;
valuation_date = datenum('31-Mar-2016');
s = s.calc_value(valuation_date,'base',instrument_struct,index_struct);
s.getValue('base')

Dependencies of class: