Earnings at Risk Manage Scenarios

The Manage Scenarios tab shows existing scenarios and allows you to create configurable, reusable, and non-parallel rate scenarios.

You can include as many scenarios as needed in your Earnings at Risk analysis.


Earnings at Risk Manage Scenarios tab.

You can review, edit, "" reposition, or "" delete scenarios from the list. You can also "" add new scenarios to the list.

The settings used to define each scenario are:

Shock Type

You can choose from two shock scenarios:

  • Standard - These scenarios are shocked in parallel. The parallel approach to rate shocks assumes that all points on the yield curve shift up or down by the same amount.
  • Custom - These scenarios allow you to create non-parallel interest rate scenarios that are unique forecasts of all key rates and offering rates. For this shock type, use a Rates Only Advanced Quick Forecast to define your custom rate forecasts.
Scenario Name
The unique name for the scenario.
Shock Basis Points
The value indicates the total shock value for the scenario. Enter down shocks as negative values.
Ramp
The value allows you to specify if you want a scenario to take more than one month to reach the shock. A value between 2–120 months indicates that it takes more than one month to reach the shock, and a value of 1 indicates an immediate shock.
Delay
The value controls when rate movements begin. The delay can be between 1–120 months. If a rate shock is delayed, then the application uses the Flat scenario during the delay period. A value of 0 indicates no delay.
Advanced Quick Forecast

This option is only available for Custom shock type scenarios.

Note: The Advanced Quick Forecast must be set up using the Rates Only forecast type. If no Advanced Quick Forecast exists with that forecast type, then there are no options to select.
Stress All

These options allow you to include stress testing options within your defined scenarios and give you the ability to change factors that are set up in the current What If model. You can stress your assumptions by applying changes in magnitude (such as a decrease of 50 percent or an increase of 100 percent) for each account in the chart of accounts.

The three available options are:

  • Stress All Prepayment Speeds
  • Stress All Rate Betas
  • Stress All Rate Lags

Earnings at Risk Manage Scenarios stress testing options.

Parent topic: Earnings at Risk