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Market Value Details Reports (September, 2013)

Article Summary:

This article describes the Market Value Details reports, which are available in AXIS beginning in version 2014.02.02. These reports are a valuable tool that can be used to help reconcile market value calculations in Asset Cells or Reinvestment Cells for any valid projection date or reinvestment date. The reports include cashflows projected on a market value basis, discount rates, the PV of cashflows at these discount rates, and details on the scenario that is referenced if market value cashflows are scenario dependent. An Excel tool and AXIS dataset are attached to illustrate how to reconcile to the Market Value Details reports for a sample bond Asset Cell. Examples are attached in both fixed and flexible scenario format.


Locating the Market Value Details Reports

Market Value Details Reports are only available to view interactively within an Asset Cell or a Reinvestment Cell. They can be accessed by clicking on the "MV Details" button located near the top of the application window while viewing an Asset Cell or Reinvestment Cell assumption screen.

If you are currently viewing an Asset Cell, the options dialog box shown below will appear upon clicking the button, asking which market value calculation date you would like to see reported. 

You can only view the report for a single market value calculation date at a time. The choices for reporting date are either the valuation date or any valid future projection date. Valid future projection dates range from the valuation date until the lesser of the maturity date of the asset and the length of the projection in the "Period and Dates" tab of Dataset Parameters. If selecting a future projection date, year and month should be entered as calendar year and calendar month (i.e. Y=2015, M = 12)

If you are currently viewing a Reinvestment Cell, a slightly different options dialog box from the one above will appear. First of all, the Reinvestment Date options will not be greyed out. The user must select a valid reinvestment date, as determined by the Reinvestment Frequency settings in the Dataset Parameters. Secondly, the market value details reporting date must be on or after the selected reinvestment date.

Market Value Methods Supported

The Market Value Details reports are only supported for the following market value methods:

Asset module:

  • Scientific amortized cost - only for mortgages
  • PV of cashflows to next reset date
  • PV of cashflows to next reset date with BDT option model
  • PV of cashflows to maturity date
  • PV of cashflows to maturity date with Black's model
  • Market value method for bond forward

Reinvestment module:

  • Scientific amortized cost - only for mortgages
  • PV of cashflows to next reset date
  • PV of cashflows to maturity date
  • PV of cashflows to maturity date with Black's model

Three Market Value Reports

  1. Market Value Details Report – Items that can be included in this report are:
Total Asset Cashflows These are cashflows projected based on market value assumptions. If the cashflows are scenario dependent, then it will reference the scenario found in the Market Value Scenario Report to project them. The total asset cashflows shown are also broken down into the usual inflow and outflow components.
PV of Total Asset Cashflows This is the present value of future total asset cashflows, discounted at the below discount rates.
Discount Rate This shows the rates used for discounting, as determined by the "Discount rate" switch in the Market Value section of the cell. This discount rate includes any market value spreads (yield spread table, yield prop adj table, and/or solved-for flat spread).
Par Value This shows the projection of par value from the market value calculation date onward, based on the decrement tables specified in the Market Value section. If decrements are not used in the Market Value section, then the par value will remain constant throughout, meaning the market value will be calculated assuming no future decrements.
Mortgage Outstanding Principal This is an optional field only applicable to mortgages. It is not in the default MV Details report, but can be added by creating a custom MV Details report.

    Notes:

  • For BondEdge assets, only the cashflow items are shown as the other items are not available.
  • For price-settled bond forward, the payoff at maturity is not shown in the report. The cashflow items only includes default charges, expenses and other charges. The "PV of total asset cashflow" line only shows the PV of the cashflow items. It is not the market value of price-settled bond forward. Refer to Market Value Reconciliation For Price-settled Bond Forward for additional details.
  • The Market Value Details report will only display the "PV of cashflow" part of the market value calculation. Any other additional adjustment to the final market value is not included.
  • Example: Under market value method PV of cashflows to next reset date with BDT option model, the report will only show the market value of the naked bond.

Please see the attached spreadsheet for an example reconciling the Market Value Details Report for a plain vanilla bond (fixed or floating) Asset Cell. Note that not all asset features are supported in this spreadsheet.

  1. Market Value Scenario Report

This report is only available if market value cashflows are scenario dependent. In general, if no report is displayed, it is because cashflows under the market value scenario are identical to the processed scenario. (But see below about the BDT option model.)

This report shows the implied yield curves over time if the future scenario were to follow the implied forward rates from the initial yield curve at market value calculation date.

The report is only supported for the following yield curve scenario referencing options:

    Notes:

  • For options 0 and 1 above, the scenario shown is the implied processed scenario without any spread adjustment. Spread adjustments are made after referencing the applicable rate from the scenario.
  • For option 2, the scenario shown is the implied scenario based on including adjustments for spreads. There is no need to make an additional adjustment for spreads when referencing these rates.

Please see the attached spreadsheet for an example reconciling the Market Value Scenario Report for a floating rate bond Asset Cell that uses scenario referencing switch 0-2.

  • The market value scenario report is not available if an asset has an embedded option, the option value is calculated using the BDT model, and cashflows are not otherwise scenario-dependent.
  1. Option Pricing Report

This report in the Market Value Details run became available in AXIS starting in version 2014.10.01.

When market value detail run is performed with market value method selected as PV of cashflows to next reset date with BDT option model, the option pricing report will display the BDT Trees used for the embedded option value calculation at the selected reporting date.

Note: Remember that the market value calculated in the Market Value Details Report does not include the option value calculated in this Option Pricing Report. The total market value reported in the Calendar Year Report, however, will include the naked bond value together with the option value.

Note: For a related article that contains a similar Excel tool that can be useful for reconciling bond calculations, please see Knowledge Base article 1674. The Excel tool found there supports some additional options, including the ability to add sinking funds, defaults, expenses, and to calculate book values. However, it is more focused on reconciling cashflows, book values, and market values along the pricing projection path, as seen in the Calendar Year reports, rather than on the details of a particular market value calculation. It does not illustrate how to reconcile to the MV Details reports.

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