By Israr Ahmed
This article looks the relationship between Base PnL Explained and Impact Of Delta sim results and how an adjustment may need to be made.
There are three issues here in how the [SimulationResult].Columns are related :
1. Endur does a FX Conversion to the [ImpactOfDelta].ImpactOfDelta to populate the [BasePnLExplained].ImpactOfDelta. However this is a ‘blind’ FX conversion from Deal Side Currency to Base Currency which assumes that the “Impact Of Delta Reporting Currency” setting is set to ‘Deal Side Currency’.
2. In the FX conversion above Endur uses the FX Rate from t-1 instead of from t.
3. The [BasePnLExplained].impact_spot_fx ignores ( and double counts ) the [ImpactOfDelta].ImpactOfDelta values from the FX curves.
Recommended Potential Change