Nothing
R/riskFactor.R
In sstModel: Swiss Solvency Test (SST) Standard Models
#' Constructing a Mapping Table
#'
#' @description \code{mappinTable} is the constructor for the
#' S3 class mappingTable. It allows to define the market risk factors.
#'
#' @param ... riskFactor objects. Please note that no risk factor name can be chosen
#' among the following reserved words (in that case it would trigger an error):
#' \itemize{
#' \item \code{marketRisk}
#' \item \code{lifeRisk}
#' \item \code{healthRisk}
#' \item \code{nonLifeRisk}
#' \item \code{scenarioRisk}
#' \item \code{participationRisk}
#' \item \code{participation}
#' \item \code{marketParticipationRisk}
#' \item \code{asset}
#' \item \code{cashflow}
#' \item \code{liability}
#' \item \code{assetForward}
#' \item \code{fxForward}
#' \item \code{delta}
#' }
#' @param list.arg a logical value, by default set to \code{FALSE}.
#' It allows to use \code{...} argument to pass a list of objects of class \code{riskFactor}.
#'
#' @return An S3 object, instance of the class mappingTable.
#'
#' @export
mappingTable <- function(..., list.arg = F) {
# PUBLIC FUNCTION.
if (list.arg) {
if (!all(sapply(..., is.riskFactor))) {
stop("Invalid parameters, see ?mappingTable.")
}
m <- data.frame(do.call("rbind", ...))
} else {
if (!all(sapply(list(...), is.riskFactor))) {
stop("Invalid parameters, see ?mappingTable.")
}
m <- rbind(...)
}
if (any(m$name %in% c("marketRisk",
"lifeRisk",
"healthRisk",
"nonLifeRisk",
"scenarioRisk",
"participationRisk",
"participation",
"marketParticipationRisk",
"asset",
"cashflow",
"liability",
"assetForward",
"fxForward",
"delta"))) {
stop("Invalid risk-factor names, see ?mappingTable.")
}
if (any(m$scaled)) {
# scaled risk factors only mapped to well defined risk factors.
if (!all(m$name[m$scaled] %in% m$name[!m$scaled])) {
stop("scaled risk-factors for undefined risk-factor names,
see ?mappingTable.")
}
if (any(m$type == "currency")) {
if (any(m$name[m$scaled] %in% m$name[m$type == "currency"])) {
stop("Cannot define scaled risk factor from a currency,
see ?mappingTable.")
}
}
}
if (any(m$type == "currency")) {
base.currency <- na.rm(unique(m$to))
if (length(base.currency) != 1) {
stop("to contains more than one currency, see ?mappingTable.")
}
currencies <- c(na.rm(unique(m$from)), base.currency)
if (!all(na.rm(m$currency) %in% currencies)) {
stop("Undefined currencies, see ?mappingTable.")
}
} else {
if (length(unique(m$currency)) != 1) {
stop("Invalid currencies, see ?mappingTable.")
}
}
# checking eventual pca for rates
if (any(m$type == "pcRate")) {
# checking that for each currency and horizon possibily
# containing pca rates then we have defined the rate
# corresponding to them.
pca.currencies <- unique(m$currency[m$type == "pcRate"])
for (cur in pca.currencies) {
for (hor in unique(m$horizon[m$type == "rate" & m$currency == cur])) {
if (!all(m$name[m$type == "rate" & m$currency == cur & m$horizon == hor] %in%
m$name[m$type == "pcRate" & m$currency == cur]) ||
!all(m$name[m$type == "pcRate" & m$currency == cur] %in%
m$name[m$type == "rate" & m$currency == cur & m$horizon == hor]) ||
any(duplicated(m$name[m$type == "rate" & m$currency == cur & m$horizon == hor]))) {
stop("incoherent pca components with base risks,
see ?mapping.table.")
}
}
}
}
# avoid duplicates except for pcRates names
pca.names <- m$name[m$type == "pcRate"]
if (any(duplicated(m[!c(m$name %in% pca.names) , -c(1, 2, 3)]))) {
stop("Duplicated definitions, see ?mappingTable.")
}
# no duplicated names in base risk factors
if (length(unique(m$name[!m$scaled])) != length(m$name[!m$scaled])) {
stop("Risk factor defined more than once, see ?mappingTable.")
}
class(m) <- c("mappingTable", class(m))
return(m)
}
#' Constructing a Currency (FX Exchange Rate Risk Factor)
#'
#' @description Constructor for the
#' S3 class currency. It allows to define a currency (fx rate) risk factor. This risk factor refers
#' to the \emph{"Fremdwährungsrisikofaktors"} change \eqn{\Delta RF_{t,FX_{j}}} for a certain index \code{j} in the
#' all valuation functions at presented
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value of length one. This corresponds to the name in the covariance matrix of the \code{marketRisk}
#' to which the currency risk factor is mapped. This means that the risk factor change \eqn{\Delta RF_{t,FX_{j}}}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} will be assumed
#' to be modeled by the underlying normal random variable corresponding to \code{name} in the covariance matrix.
#' @param from a character value of length one. The starting currency corresponding to the FX index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param to a character value of length one. The arrival currency to which the exchange rate \eqn{FX_{j}} is mapped.
#'
#' @return An S3 object, instance of the class currency.
#'
#' @note Please consider that we do not allow for scaled currency risk factors.
#'
#' @examples
#' # constructing a currency risk factor
#' # (assuming "EURCHF" exists in marketRisk).
#' cur <- currency(name = "EURCHF",
#' from = "EUR",
#' to = "CHF")
#'
#' @export
currency <- function(name, from , to) {
# PUBLIC FUNCTION.
if (is.list(name) || is.list(from) || is.list(to) ||
(!is.character(name)) || (!is.character(from)) ||
(!is.character(to))) {
stop("Invalid types, see ?currency.")
}
if (any(sapply(list(name, from, to), length) != 1)) {
stop("Invalid dimensions, see ?currency.")
}
if (any(sapply(list(name, from, to), is.na))) {
stop("Missing values, see ?currency.")
}
if (from == to) {
stop("Invalid currency, see ?currency.")
}
r <- data.frame(name = name,
scale = NA,
scaled = FALSE,
type = "currency",
currency = NA,
from = from,
to = to,
horizon = NA,
rating = NA,
stringsAsFactors = FALSE)
class(r) <- c("currency", "riskFactor", class(r))
return(r)
}
#' Constructing a Rate (Risk Factor)
#'
#' @description Constructor for the
#' S3 class rate. It allows to define a rate-type risk factor. This risk factor refers
#' to the \emph{"stetigen Zins"} change \eqn{\Delta R_{j}(t, i_{\tau})} for a certain \code{horizon} index \eqn{i_{\tau}} and a certain
#' \code{currency} j in the
#' valuation function for \emph{"Fixed-Income-Assets und Versicherungsverpflichtungen"} presented
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value. If the length is one, this corresponds to the name in the covariance matrix of the \code{marketRisk}
#' to which the rate risk factor is mapped. This means that the risk factor change \eqn{\Delta R_{j}(t, \tau)}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} (version 31.1.2018) will be assumed
#' to be modeled by the underlying normal random variable corresponding to \code{name} in the covariance matrix
#' (potentially scaled by \code{scale} if not \code{NULL}). If the length is strictly greater than one,
#' this corresponds to multiple names in the covariance matrix of the \code{marketRisk}
#' to which the rate risk factor is mapped in the case of principal component modeling.
#' This means that the risk factor change \eqn{\Delta R_{j}(t, \tau)}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}
#' will be assumed to be modeled by a linear combination (with coefficients \code{scale})
#' of normal random variable corresponding to the multiple names \code{name} in the covariance matrix.
#' Please refer to the note section to have more information.
#' @param currency a character value of length one. The currency in which the underlying
#' \emph{"Fixed-Income-Assets oder Versicherungsverpflichtungen"} is valuated.
#' This refers to the currency corresponding to the index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param horizon a character value of length one. The time-to-maturity
#' (projected on the time mapping). This refers to the index \eqn{i_{\tau}}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param scale a numeric value of length one. If not set \code{NULL},
#' this defines a scaled risk factor equal to \code{scale} times
#' the risk factor defined by \code{name} in the covariance matrix contained in \code{marketRisk}.
#' By default its value is \code{scale = NULL}. In the case of principal component modeling (i.e. \code{name} of
#' length strictly greater than one) this parameter should be provided as a numeric values of the
#' same length as \code{name} corresponding to the \emph{loadings} in the principal component decomposition.
#' Please consider that these loadings should be contained in the Euclidean disk, i.e. the sum of there squared value should be below 1,
#' if not a warning will be triggered.
#'
#' @return An S3 object, instance of the class rate.
#'
#' @note In the case that principal component modeling of rate curves is chosen,
#' all risk factors named in \code{name} should be scaled, otherwise an error will be
#' triggered.
#'
#' @examples
#' # constructing a non-scaled rate risk factor
#' # (assuming "2Y_CHF" exists in marketRisk).
#' r <- rate(name = "2Y_CHF",
#' currency = "CHF",
#' horizon = "k")
#'
#' # constructing a scaled rate risk factor
#' # (assuming "2Y_CHF" exists in marketRisk).
#' r <- rate(name = "2Y_CHF",
#' currency = "CHF",
#' horizon = "k",
#' scale = 0.5)
#'
#' # constructing a rate risk factor from principal component
#' r <- rate(name = c("pcRate_EUR_1",
#' "pcRate_EUR_2",
#' "pcRate_EUR_3"),
#' currency = "EUR",
#' horizon = "k",
#' scale = c(0.3, -0.2, sqrt(1-(0.3^2)-((-0.2)^2))))
#'
#' @export
rate <- function(name, currency, horizon, scale = NULL) {
# PUBLIC FUNCTION.
if (is.list(name) || is.list(currency) || is.list(horizon) ||
(!is.character(name)) || (!is.character(currency)) ||
(!is.character(horizon))) {
stop("Invalid types, see ?rate.")
}
if (length(name) < 1) {
stop("Invalid dimensions, see ?rate.")
}
if (is.null(scale)) {
if (length(name) > 1) {
stop("a linear combination of risk-factors
should have scale defined, see ?rate.")
}
scaled <- FALSE
scale <- NA
} else {
scaled <- TRUE
if (is.list(scale) || (!is.numeric(scale))) {
stop("Invalid types, see ?rate.")
}
if (length(scale) != length(name)) {
stop("Invalid dimensions, see ?rate.")
}
if (any(is.na(scale))) {
stop("Missing values, see ?rate.")
}
if (any(is.infinite(scale))) {
stop("scale must be finite, see ?rate.")
}
if ((length(name)) > 1 && (sum(scale^2) > 1)) {
warning("In case of principal component modeling
the squares of the scales should sum to one, see ?rate.")
}
if (any(scale == 0)) {
warning("scale is zero, remove for efficiency, see ?rate.")
}
}
if (any(sapply(list(currency, horizon), length) != 1)) {
stop("Invalid dimensions, see ?rate.")
}
if (length(name) != length(scale)) {
stop("Invalid dimensions, see ?rate.")
}
if (any(sapply(list(c(name, currency, horizon)), is.na))) {
stop("Missing values, see ?rate.")
}
r <- data.frame(name = name,
scale = scale,
scaled = scaled,
type = "rate",
currency = currency,
from = NA,
to = NA,
horizon = horizon,
rating = NA,
stringsAsFactors = FALSE)
class(r) <- c("rate", "riskFactor", class(r))
return(r)
}
#' Constructing a Principal Component Rate (Risk Factor)
#'
#' @description Constructor for the
#' S3 class pcRate. It allows to define a principal component of rate curves risk factor. This risk factor refers
#' to a principal component in the decomposition of the \emph{"stetigen Zins"} change \eqn{\Delta R_{j}(t, i_{\tau})}
#' for a certain \code{horizon} index \eqn{i_{\tau}} and a certain \code{currency} j in the
#' valuation function for \emph{"Fixed-Income-Assets und Versicherungsverpflichtungen"} presented
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value of length one. This corresponds to the name in the covariance
#' matrix of the \code{marketRisk} to which the principal component rate risk factor is mapped.
#' This means that the principal component change will be assumed to be modeled by the underlying
#' normal random variable corresponding to \code{name} in the covariance matrix
#' (potentially scaled by \code{scale} if not \code{NULL}).
#' @param currency a character value of length one. The currency in which the underlying
#' rate is modelling. This refers to the currency corresponding to the index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param scale a numeric value of length one. If not set \code{NULL},
#' this defines a scaled risk factor equal to \code{scale} times
#' the risk factor defined by \code{name} in the covariance matrix contained in \code{marketRisk}.
#' By default its value is \code{scale = NULL}.
#'
#' @return An S3 object, instance of the class pcRate.
#'
#' @examples
#' # constructing a principal component rate risk factor
#' # (assuming "2Y_CHF" exists in marketRisk).
#' p <- pcRate(name = "pcRate_EUR_1", currency = "EUR")
#'
#' @export
pcRate <- function(name, currency, scale = NULL) {
# PUBLIC FUNCTION.
if (is.null(scale)) {
scaled <- FALSE
scale <- NA
} else {
scaled <- TRUE
if (is.list(scale) || (!is.numeric(scale))) {
stop("Invalid types, see ?pcRate.")
}
if (any(sapply(list(scale, name), length) != 1)) {
stop("Invalid dimensions, see ?pcRate.")
}
if (any(is.na(scale))) {
stop("Missing values, see ?pcRate.")
}
if (any(is.infinite(scale))) {
stop("scale must be finite, see ?pcRate.")
}
if (any(scale == 0)) {
warning("scale is zero, remove for efficiency, see ?pcRate.")
}
}
if (is.list(name) || is.list(currency) ||
(!is.character(name)) || (!is.character(currency))) {
stop("Invalid types, see ?pcRate.")
}
if ((length(currency) != 1) || (length(name) != 1)) {
stop("Invalid dimensions, see ?pcRate.")
}
if (any(sapply(list(c(name, currency)), is.na))) {
stop("Missing values, see ?pcRate.")
}
r <- data.frame(name = name,
scale = scale,
scaled = scaled,
type = "pcRate",
currency = currency,
from = NA,
to = NA,
horizon = NA,
rating = NA,
stringsAsFactors = FALSE)
class(r) <- c("pcRate", "riskFactor", class(r))
return(r)
}
#' 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 \emph{"Modell-Spread"} change \eqn{\Delta S(1,j,r)} for a certain index \code{rating} r and a certain
#' \code{currency} j in the
#' valuation function for \emph{"Fixed-Income-Assets und Versicherungsverpflichtungen"} at page 6
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value of length one. This corresponds to the name in the covariance matrix of the \code{marketRisk}
#' to which the spread risk factor is mapped. This means that the risk factor change \eqn{\Delta S(1,j,r)}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} will be assumed
#' to be modeled by the underlying normal random variable corresponding to \code{name} in the covariance matrix
#' (potentially scaled by \code{scale} if not \code{NULL}).
#' @param currency a character value of length one. The currency in which the underlying
#' \emph{"Fixed-Income-Assets oder Versicherungsverpflichtungen"} is valuated.
#' This refers to the currency corresponding to the index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} (version 31.1.2018).
#' @param rating a character value of length one. The corresponding rating of the spread refering to
#' the index \code{r} at in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param scale a numeric value of length one. If not set \code{NULL},
#' this defines a scaled risk factor equal to \code{scale} times
#' the risk factor defined by \code{name} in the covariance matrix contained in \code{marketRisk}.
#' By default its value is \code{scale = NULL}.
#'
#' @return An S3 object, instance of the class spread.
#'
#' @examples
#' # 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)
#'
#' @export
spread <- function(name, currency, rating, scale = NULL) {
# PUBLIC FUNCTION.
if (any(sapply(list(name, currency, rating), is.list))) {
stop("Invalid types, see ?spread.")
}
if (any(sapply(list(name, currency, rating), length) != 1)) {
stop("Invalid dimensions, see ?spread.")
}
if (!all(sapply(list(name, currency, rating), is.character))) {
stop("Invalid types, see ?spread.")
}
if (any(sapply(list(name, currency, rating), is.na))) {
stop("Missing values, see ?spread.")
}
if (is.null(scale)) {
scaled <- FALSE
scale <- NA
} else {
scaled <- TRUE
if (is.list(scale) || (!is.numeric(scale))) {
stop("Invalid types, see ?spread.")
}
if (length(scale) != 1) {
stop("Invalid dimensions, see ?spread.")
}
if (is.na(scale)) {
stop("Missing values, see ?spread.")
}
if (is.infinite(scale)) {
stop("scale must be finite, see ?spread.")
}
}
s <- data.frame(name = name,
scale = scale,
scaled = scaled,
type = "spread",
currency = currency,
from = NA,
to = NA,
horizon = NA,
rating = rating,
stringsAsFactors = FALSE)
class(s) <- c("spread", "riskFactor", class(s))
return(s)
}
#' Constructing an Equity (Risk Factor)
#'
#' @description Constructor for the
#' S3 class equity. It allows to define an equity-type risk factor. This risk factor refers
#' to the \emph{"Preisrisikofaktor"} change \eqn{\Delta RF_{t,i}} for a certain index \code{i} in the
#' valuation function for \emph{"Aktiven mit direkt marktabhängigen Preisen"} presented
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value of length one. This corresponds to the name in the covariance matrix of the \code{marketRisk}
#' to which the equity risk factor is mapped. This means that the risk factor change \eqn{\Delta RF_{t,i}}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} will be assumed
#' to be modeled by the underlying normal random variable corresponding to \code{name} in the covariance matrix
#' (potentially scaled by \code{scale} if not \code{NULL}).
#' @param type a character value of length one. The type of equity. (e.g. \code{"equity"},
#' \code{"hedge fund"}, etc.). This parameter is a unique identifier of the equity risk factor
#' corresponding to the index \code{i} introduced above.
#' The following words are reserved and should not be used:
#' \itemize{
#' \item \code{currency}
#' \item \code{rate}
#' \item \code{pcRate}
#' \item \code{spread}
#' }
#' @param currency a character value of length one. The currency in which the underlying
#' asset with direct market price (\emph{"Aktiv mit direkt marktabhängigen Preisen"}) is valuated.
#' This refers to the currency corresponding to the index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param scale a numeric value of length one. If not set \code{NULL},
#' this defines a scaled risk factor equal to \code{scale} times
#' the risk factor defined by \code{name} in the covariance matrix contained in \code{marketRisk}. By default its value is \code{scale = NULL}.
#'
#' @return An S3 object, instance of the class equity.
#'
#' @examples
#' # constructing a non-scaled equity risk factor
#' # (assuming "MSCI_CHF" exists in marketRisk).
#' e <- equity(name = "MSCI_CHF",
#' type = "equity",
#' currency = "CHF")
#'
#' # constructing a scaled equity risk factor
#' # (assuming "MSCI_CHF" exists in marketRisk).
#' e <- equity(name = "MSCI_CHF",
#' type = "equity",
#' currency = "CHF",
#' scale = 0.5)
#'
#' @export
equity <- function(name, type, currency, scale = NULL) {
# PUBLIC FUNCTION.
if (is.list(name) || is.list(type) || is.list(currency) ||
(!is.character(name)) || (!is.character(type)) ||
(!is.character(currency))) {
stop("Invalid types, see ?equity.")
}
if (any(sapply(list(name, type, currency), length) != 1)) {
stop("Invalid dimensions, see ?rate.")
}
if (is.null(scale)) {
scaled = FALSE
scale = NA
} else {
scaled = TRUE
if (is.list(scale) || (!is.numeric(scale))) {
stop("Invalid types, see ?equity.")
}
if (length(scale) != 1) {
stop("Invalid dimensions, see ?equity.")
}
if (is.na(scale)) {
stop("Missing values, see ?equity.")
}
if (is.infinite(scale)) {
stop("scale must be finite, see ?equity.")
}
if (scale == 0) {
warning("scale is zero, remove for efficiency, see ?equity.")
}
}
if (type %in% c("rate", "pcRate", "spread", "currency")) {
stop("Invalid type, see ?equity.")
}
if (any(sapply(list(name, type, currency), is.na))) {
stop("Missing values, see ?equity.")
}
e <- data.frame(name = name,
scale = scale,
scaled = scaled,
type = type,
currency = currency,
from = NA,
to = NA,
horizon = NA,
rating = NA,
stringsAsFactors = FALSE)
class(e) <- c("equity", "riskFactor", class(e))
return(e)
}
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#' Constructing a Mapping Table
#'
#' @description \code{mappinTable} is the constructor for the
#' S3 class mappingTable. It allows to define the market risk factors.
#'
#' @param ... riskFactor objects. Please note that no risk factor name can be chosen
#' among the following reserved words (in that case it would trigger an error):
#' \itemize{
#' \item \code{marketRisk}
#' \item \code{lifeRisk}
#' \item \code{healthRisk}
#' \item \code{nonLifeRisk}
#' \item \code{scenarioRisk}
#' \item \code{participationRisk}
#' \item \code{participation}
#' \item \code{marketParticipationRisk}
#' \item \code{asset}
#' \item \code{cashflow}
#' \item \code{liability}
#' \item \code{assetForward}
#' \item \code{fxForward}
#' \item \code{delta}
#' }
#' @param list.arg a logical value, by default set to \code{FALSE}.
#' It allows to use \code{...} argument to pass a list of objects of class \code{riskFactor}.
#'
#' @return An S3 object, instance of the class mappingTable.
#'
#' @export
mappingTable <- function(..., list.arg = F) {
# PUBLIC FUNCTION.
if (list.arg) {
if (!all(sapply(..., is.riskFactor))) {
stop("Invalid parameters, see ?mappingTable.")
}
m <- data.frame(do.call("rbind", ...))
} else {
if (!all(sapply(list(...), is.riskFactor))) {
stop("Invalid parameters, see ?mappingTable.")
}
m <- rbind(...)
}
if (any(m$name %in% c("marketRisk",
"lifeRisk",
"healthRisk",
"nonLifeRisk",
"scenarioRisk",
"participationRisk",
"participation",
"marketParticipationRisk",
"asset",
"cashflow",
"liability",
"assetForward",
"fxForward",
"delta"))) {
stop("Invalid risk-factor names, see ?mappingTable.")
}
if (any(m$scaled)) {
# scaled risk factors only mapped to well defined risk factors.
if (!all(m$name[m$scaled] %in% m$name[!m$scaled])) {
stop("scaled risk-factors for undefined risk-factor names,
see ?mappingTable.")
}
if (any(m$type == "currency")) {
if (any(m$name[m$scaled] %in% m$name[m$type == "currency"])) {
stop("Cannot define scaled risk factor from a currency,
see ?mappingTable.")
}
}
}
if (any(m$type == "currency")) {
base.currency <- na.rm(unique(m$to))
if (length(base.currency) != 1) {
stop("to contains more than one currency, see ?mappingTable.")
}
currencies <- c(na.rm(unique(m$from)), base.currency)
if (!all(na.rm(m$currency) %in% currencies)) {
stop("Undefined currencies, see ?mappingTable.")
}
} else {
if (length(unique(m$currency)) != 1) {
stop("Invalid currencies, see ?mappingTable.")
}
}
# checking eventual pca for rates
if (any(m$type == "pcRate")) {
# checking that for each currency and horizon possibily
# containing pca rates then we have defined the rate
# corresponding to them.
pca.currencies <- unique(m$currency[m$type == "pcRate"])
for (cur in pca.currencies) {
for (hor in unique(m$horizon[m$type == "rate" & m$currency == cur])) {
if (!all(m$name[m$type == "rate" & m$currency == cur & m$horizon == hor] %in%
m$name[m$type == "pcRate" & m$currency == cur]) ||
!all(m$name[m$type == "pcRate" & m$currency == cur] %in%
m$name[m$type == "rate" & m$currency == cur & m$horizon == hor]) ||
any(duplicated(m$name[m$type == "rate" & m$currency == cur & m$horizon == hor]))) {
stop("incoherent pca components with base risks,
see ?mapping.table.")
}
}
}
}
# avoid duplicates except for pcRates names
pca.names <- m$name[m$type == "pcRate"]
if (any(duplicated(m[!c(m$name %in% pca.names) , -c(1, 2, 3)]))) {
stop("Duplicated definitions, see ?mappingTable.")
}
# no duplicated names in base risk factors
if (length(unique(m$name[!m$scaled])) != length(m$name[!m$scaled])) {
stop("Risk factor defined more than once, see ?mappingTable.")
}
class(m) <- c("mappingTable", class(m))
return(m)
}
#' Constructing a Currency (FX Exchange Rate Risk Factor)
#'
#' @description Constructor for the
#' S3 class currency. It allows to define a currency (fx rate) risk factor. This risk factor refers
#' to the \emph{"Fremdwährungsrisikofaktors"} change \eqn{\Delta RF_{t,FX_{j}}} for a certain index \code{j} in the
#' all valuation functions at presented
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value of length one. This corresponds to the name in the covariance matrix of the \code{marketRisk}
#' to which the currency risk factor is mapped. This means that the risk factor change \eqn{\Delta RF_{t,FX_{j}}}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} will be assumed
#' to be modeled by the underlying normal random variable corresponding to \code{name} in the covariance matrix.
#' @param from a character value of length one. The starting currency corresponding to the FX index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param to a character value of length one. The arrival currency to which the exchange rate \eqn{FX_{j}} is mapped.
#'
#' @return An S3 object, instance of the class currency.
#'
#' @note Please consider that we do not allow for scaled currency risk factors.
#'
#' @examples
#' # constructing a currency risk factor
#' # (assuming "EURCHF" exists in marketRisk).
#' cur <- currency(name = "EURCHF",
#' from = "EUR",
#' to = "CHF")
#'
#' @export
currency <- function(name, from , to) {
# PUBLIC FUNCTION.
if (is.list(name) || is.list(from) || is.list(to) ||
(!is.character(name)) || (!is.character(from)) ||
(!is.character(to))) {
stop("Invalid types, see ?currency.")
}
if (any(sapply(list(name, from, to), length) != 1)) {
stop("Invalid dimensions, see ?currency.")
}
if (any(sapply(list(name, from, to), is.na))) {
stop("Missing values, see ?currency.")
}
if (from == to) {
stop("Invalid currency, see ?currency.")
}
r <- data.frame(name = name,
scale = NA,
scaled = FALSE,
type = "currency",
currency = NA,
from = from,
to = to,
horizon = NA,
rating = NA,
stringsAsFactors = FALSE)
class(r) <- c("currency", "riskFactor", class(r))
return(r)
}
#' Constructing a Rate (Risk Factor)
#'
#' @description Constructor for the
#' S3 class rate. It allows to define a rate-type risk factor. This risk factor refers
#' to the \emph{"stetigen Zins"} change \eqn{\Delta R_{j}(t, i_{\tau})} for a certain \code{horizon} index \eqn{i_{\tau}} and a certain
#' \code{currency} j in the
#' valuation function for \emph{"Fixed-Income-Assets und Versicherungsverpflichtungen"} presented
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value. If the length is one, this corresponds to the name in the covariance matrix of the \code{marketRisk}
#' to which the rate risk factor is mapped. This means that the risk factor change \eqn{\Delta R_{j}(t, \tau)}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} (version 31.1.2018) will be assumed
#' to be modeled by the underlying normal random variable corresponding to \code{name} in the covariance matrix
#' (potentially scaled by \code{scale} if not \code{NULL}). If the length is strictly greater than one,
#' this corresponds to multiple names in the covariance matrix of the \code{marketRisk}
#' to which the rate risk factor is mapped in the case of principal component modeling.
#' This means that the risk factor change \eqn{\Delta R_{j}(t, \tau)}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}
#' will be assumed to be modeled by a linear combination (with coefficients \code{scale})
#' of normal random variable corresponding to the multiple names \code{name} in the covariance matrix.
#' Please refer to the note section to have more information.
#' @param currency a character value of length one. The currency in which the underlying
#' \emph{"Fixed-Income-Assets oder Versicherungsverpflichtungen"} is valuated.
#' This refers to the currency corresponding to the index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param horizon a character value of length one. The time-to-maturity
#' (projected on the time mapping). This refers to the index \eqn{i_{\tau}}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param scale a numeric value of length one. If not set \code{NULL},
#' this defines a scaled risk factor equal to \code{scale} times
#' the risk factor defined by \code{name} in the covariance matrix contained in \code{marketRisk}.
#' By default its value is \code{scale = NULL}. In the case of principal component modeling (i.e. \code{name} of
#' length strictly greater than one) this parameter should be provided as a numeric values of the
#' same length as \code{name} corresponding to the \emph{loadings} in the principal component decomposition.
#' Please consider that these loadings should be contained in the Euclidean disk, i.e. the sum of there squared value should be below 1,
#' if not a warning will be triggered.
#'
#' @return An S3 object, instance of the class rate.
#'
#' @note In the case that principal component modeling of rate curves is chosen,
#' all risk factors named in \code{name} should be scaled, otherwise an error will be
#' triggered.
#'
#' @examples
#' # constructing a non-scaled rate risk factor
#' # (assuming "2Y_CHF" exists in marketRisk).
#' r <- rate(name = "2Y_CHF",
#' currency = "CHF",
#' horizon = "k")
#'
#' # constructing a scaled rate risk factor
#' # (assuming "2Y_CHF" exists in marketRisk).
#' r <- rate(name = "2Y_CHF",
#' currency = "CHF",
#' horizon = "k",
#' scale = 0.5)
#'
#' # constructing a rate risk factor from principal component
#' r <- rate(name = c("pcRate_EUR_1",
#' "pcRate_EUR_2",
#' "pcRate_EUR_3"),
#' currency = "EUR",
#' horizon = "k",
#' scale = c(0.3, -0.2, sqrt(1-(0.3^2)-((-0.2)^2))))
#'
#' @export
rate <- function(name, currency, horizon, scale = NULL) {
# PUBLIC FUNCTION.
if (is.list(name) || is.list(currency) || is.list(horizon) ||
(!is.character(name)) || (!is.character(currency)) ||
(!is.character(horizon))) {
stop("Invalid types, see ?rate.")
}
if (length(name) < 1) {
stop("Invalid dimensions, see ?rate.")
}
if (is.null(scale)) {
if (length(name) > 1) {
stop("a linear combination of risk-factors
should have scale defined, see ?rate.")
}
scaled <- FALSE
scale <- NA
} else {
scaled <- TRUE
if (is.list(scale) || (!is.numeric(scale))) {
stop("Invalid types, see ?rate.")
}
if (length(scale) != length(name)) {
stop("Invalid dimensions, see ?rate.")
}
if (any(is.na(scale))) {
stop("Missing values, see ?rate.")
}
if (any(is.infinite(scale))) {
stop("scale must be finite, see ?rate.")
}
if ((length(name)) > 1 && (sum(scale^2) > 1)) {
warning("In case of principal component modeling
the squares of the scales should sum to one, see ?rate.")
}
if (any(scale == 0)) {
warning("scale is zero, remove for efficiency, see ?rate.")
}
}
if (any(sapply(list(currency, horizon), length) != 1)) {
stop("Invalid dimensions, see ?rate.")
}
if (length(name) != length(scale)) {
stop("Invalid dimensions, see ?rate.")
}
if (any(sapply(list(c(name, currency, horizon)), is.na))) {
stop("Missing values, see ?rate.")
}
r <- data.frame(name = name,
scale = scale,
scaled = scaled,
type = "rate",
currency = currency,
from = NA,
to = NA,
horizon = horizon,
rating = NA,
stringsAsFactors = FALSE)
class(r) <- c("rate", "riskFactor", class(r))
return(r)
}
#' Constructing a Principal Component Rate (Risk Factor)
#'
#' @description Constructor for the
#' S3 class pcRate. It allows to define a principal component of rate curves risk factor. This risk factor refers
#' to a principal component in the decomposition of the \emph{"stetigen Zins"} change \eqn{\Delta R_{j}(t, i_{\tau})}
#' for a certain \code{horizon} index \eqn{i_{\tau}} and a certain \code{currency} j in the
#' valuation function for \emph{"Fixed-Income-Assets und Versicherungsverpflichtungen"} presented
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value of length one. This corresponds to the name in the covariance
#' matrix of the \code{marketRisk} to which the principal component rate risk factor is mapped.
#' This means that the principal component change will be assumed to be modeled by the underlying
#' normal random variable corresponding to \code{name} in the covariance matrix
#' (potentially scaled by \code{scale} if not \code{NULL}).
#' @param currency a character value of length one. The currency in which the underlying
#' rate is modelling. This refers to the currency corresponding to the index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param scale a numeric value of length one. If not set \code{NULL},
#' this defines a scaled risk factor equal to \code{scale} times
#' the risk factor defined by \code{name} in the covariance matrix contained in \code{marketRisk}.
#' By default its value is \code{scale = NULL}.
#'
#' @return An S3 object, instance of the class pcRate.
#'
#' @examples
#' # constructing a principal component rate risk factor
#' # (assuming "2Y_CHF" exists in marketRisk).
#' p <- pcRate(name = "pcRate_EUR_1", currency = "EUR")
#'
#' @export
pcRate <- function(name, currency, scale = NULL) {
# PUBLIC FUNCTION.
if (is.null(scale)) {
scaled <- FALSE
scale <- NA
} else {
scaled <- TRUE
if (is.list(scale) || (!is.numeric(scale))) {
stop("Invalid types, see ?pcRate.")
}
if (any(sapply(list(scale, name), length) != 1)) {
stop("Invalid dimensions, see ?pcRate.")
}
if (any(is.na(scale))) {
stop("Missing values, see ?pcRate.")
}
if (any(is.infinite(scale))) {
stop("scale must be finite, see ?pcRate.")
}
if (any(scale == 0)) {
warning("scale is zero, remove for efficiency, see ?pcRate.")
}
}
if (is.list(name) || is.list(currency) ||
(!is.character(name)) || (!is.character(currency))) {
stop("Invalid types, see ?pcRate.")
}
if ((length(currency) != 1) || (length(name) != 1)) {
stop("Invalid dimensions, see ?pcRate.")
}
if (any(sapply(list(c(name, currency)), is.na))) {
stop("Missing values, see ?pcRate.")
}
r <- data.frame(name = name,
scale = scale,
scaled = scaled,
type = "pcRate",
currency = currency,
from = NA,
to = NA,
horizon = NA,
rating = NA,
stringsAsFactors = FALSE)
class(r) <- c("pcRate", "riskFactor", class(r))
return(r)
}
#' 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 \emph{"Modell-Spread"} change \eqn{\Delta S(1,j,r)} for a certain index \code{rating} r and a certain
#' \code{currency} j in the
#' valuation function for \emph{"Fixed-Income-Assets und Versicherungsverpflichtungen"} at page 6
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value of length one. This corresponds to the name in the covariance matrix of the \code{marketRisk}
#' to which the spread risk factor is mapped. This means that the risk factor change \eqn{\Delta S(1,j,r)}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} will be assumed
#' to be modeled by the underlying normal random variable corresponding to \code{name} in the covariance matrix
#' (potentially scaled by \code{scale} if not \code{NULL}).
#' @param currency a character value of length one. The currency in which the underlying
#' \emph{"Fixed-Income-Assets oder Versicherungsverpflichtungen"} is valuated.
#' This refers to the currency corresponding to the index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} (version 31.1.2018).
#' @param rating a character value of length one. The corresponding rating of the spread refering to
#' the index \code{r} at in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param scale a numeric value of length one. If not set \code{NULL},
#' this defines a scaled risk factor equal to \code{scale} times
#' the risk factor defined by \code{name} in the covariance matrix contained in \code{marketRisk}.
#' By default its value is \code{scale = NULL}.
#'
#' @return An S3 object, instance of the class spread.
#'
#' @examples
#' # 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)
#'
#' @export
spread <- function(name, currency, rating, scale = NULL) {
# PUBLIC FUNCTION.
if (any(sapply(list(name, currency, rating), is.list))) {
stop("Invalid types, see ?spread.")
}
if (any(sapply(list(name, currency, rating), length) != 1)) {
stop("Invalid dimensions, see ?spread.")
}
if (!all(sapply(list(name, currency, rating), is.character))) {
stop("Invalid types, see ?spread.")
}
if (any(sapply(list(name, currency, rating), is.na))) {
stop("Missing values, see ?spread.")
}
if (is.null(scale)) {
scaled <- FALSE
scale <- NA
} else {
scaled <- TRUE
if (is.list(scale) || (!is.numeric(scale))) {
stop("Invalid types, see ?spread.")
}
if (length(scale) != 1) {
stop("Invalid dimensions, see ?spread.")
}
if (is.na(scale)) {
stop("Missing values, see ?spread.")
}
if (is.infinite(scale)) {
stop("scale must be finite, see ?spread.")
}
}
s <- data.frame(name = name,
scale = scale,
scaled = scaled,
type = "spread",
currency = currency,
from = NA,
to = NA,
horizon = NA,
rating = rating,
stringsAsFactors = FALSE)
class(s) <- c("spread", "riskFactor", class(s))
return(s)
}
#' Constructing an Equity (Risk Factor)
#'
#' @description Constructor for the
#' S3 class equity. It allows to define an equity-type risk factor. This risk factor refers
#' to the \emph{"Preisrisikofaktor"} change \eqn{\Delta RF_{t,i}} for a certain index \code{i} in the
#' valuation function for \emph{"Aktiven mit direkt marktabhängigen Preisen"} presented
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#'
#' @param name a character value of length one. This corresponds to the name in the covariance matrix of the \code{marketRisk}
#' to which the equity risk factor is mapped. This means that the risk factor change \eqn{\Delta RF_{t,i}}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"} will be assumed
#' to be modeled by the underlying normal random variable corresponding to \code{name} in the covariance matrix
#' (potentially scaled by \code{scale} if not \code{NULL}).
#' @param type a character value of length one. The type of equity. (e.g. \code{"equity"},
#' \code{"hedge fund"}, etc.). This parameter is a unique identifier of the equity risk factor
#' corresponding to the index \code{i} introduced above.
#' The following words are reserved and should not be used:
#' \itemize{
#' \item \code{currency}
#' \item \code{rate}
#' \item \code{pcRate}
#' \item \code{spread}
#' }
#' @param currency a character value of length one. The currency in which the underlying
#' asset with direct market price (\emph{"Aktiv mit direkt marktabhängigen Preisen"}) is valuated.
#' This refers to the currency corresponding to the index \code{j}
#' in the FINMA document \emph{"SST-Marktrisiko und -Aggregation Technische Beschreibung"}.
#' @param scale a numeric value of length one. If not set \code{NULL},
#' this defines a scaled risk factor equal to \code{scale} times
#' the risk factor defined by \code{name} in the covariance matrix contained in \code{marketRisk}. By default its value is \code{scale = NULL}.
#'
#' @return An S3 object, instance of the class equity.
#'
#' @examples
#' # constructing a non-scaled equity risk factor
#' # (assuming "MSCI_CHF" exists in marketRisk).
#' e <- equity(name = "MSCI_CHF",
#' type = "equity",
#' currency = "CHF")
#'
#' # constructing a scaled equity risk factor
#' # (assuming "MSCI_CHF" exists in marketRisk).
#' e <- equity(name = "MSCI_CHF",
#' type = "equity",
#' currency = "CHF",
#' scale = 0.5)
#'
#' @export
equity <- function(name, type, currency, scale = NULL) {
# PUBLIC FUNCTION.
if (is.list(name) || is.list(type) || is.list(currency) ||
(!is.character(name)) || (!is.character(type)) ||
(!is.character(currency))) {
stop("Invalid types, see ?equity.")
}
if (any(sapply(list(name, type, currency), length) != 1)) {
stop("Invalid dimensions, see ?rate.")
}
if (is.null(scale)) {
scaled = FALSE
scale = NA
} else {
scaled = TRUE
if (is.list(scale) || (!is.numeric(scale))) {
stop("Invalid types, see ?equity.")
}
if (length(scale) != 1) {
stop("Invalid dimensions, see ?equity.")
}
if (is.na(scale)) {
stop("Missing values, see ?equity.")
}
if (is.infinite(scale)) {
stop("scale must be finite, see ?equity.")
}
if (scale == 0) {
warning("scale is zero, remove for efficiency, see ?equity.")
}
}
if (type %in% c("rate", "pcRate", "spread", "currency")) {
stop("Invalid type, see ?equity.")
}
if (any(sapply(list(name, type, currency), is.na))) {
stop("Missing values, see ?equity.")
}
e <- data.frame(name = name,
scale = scale,
scaled = scaled,
type = type,
currency = currency,
from = NA,
to = NA,
horizon = NA,
rating = NA,
stringsAsFactors = FALSE)
class(e) <- c("equity", "riskFactor", class(e))
return(e)
}
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