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This topic contains 3 replies, has 2 voices, and was last updated by  Roland Lichters 6 months, 2 weeks ago.

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  • #6634

    coling
    Participant

    We’re doing something that involves getting some sensitivities, and we’re interested in bumping multiple quotes simultaneously to keep basis constant (for example, bumping Libor 3M, Fedfunds and Libor 1M cash quotes simultaneously by 1bp in one sensitivity scenario, and then getting basis spread sensitivity after that in separate scenarios).

    What’s the best way to do this in ORE? It looks like the actual “sensitivity” file is set up to bump each quote and tenor individually? (Can parallel bumps be done via the sensitivity config?) Can the cross-gamma functionality be leveraged with 3+ quotes? Is the “stress test” functionality a better way to do this?

    Thanks!
    – Colin

    #6653

    Roland Lichters
    Keymaster

    Hi Colin,

    yes, please try the stress testing functionality, this allows shifting any number of points on a single curve or several curves simultaneously,
    see example 15. But note that rate shifts are not applied to quotes such as Deposit or Swap rates, but to zero rates. ORE does not provide utilities that support quote sensitivity or stress tests so far, although you can work around that by manipulating the market data input and rerunning the ore executable.

    Regards,
    Roland

    #6663

    coling
    Participant

    What are shifts applied to in the case of default curves? It looks like they are not applied to underlying CDS quotes, are they instead applied to survival probabilities or something?
    Thanks!
    – Colin

    #6683

    Roland Lichters
    Keymaster

    Hi Colin,

    yes, they are applied to -ln(S(t)) / t, in analogy to zero rate bumps for yield curves (see user guide appendix A.13).

    Regards,
    Roland

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