Risk Metrics

Risk Report

Tilt Vol Risk

Weighted Delta & Gamma

Option Equivalent (OE) Tilt

Weighted Vega

Tilt Vol Risk (Total, Call and Put)

For 2 sided and 2 sided smooth

Represents the PNL effect for a 1 unit change in Total, Call or Put slope. Unit applied is defined in GLOBAL SETTINGS

For all other skew types

Represents the PNL effect for a 1 unit change in Tilt, Call Tilt or Put Tilt. Unit applied is defined in GLOBAL SETTINGS

Tilt functionality in Metro is meant to emulate a slope change with skew types that do not have a defined slope.

Kurtosis Vol Risk (Total, Call, Put)

For 2 sided and 2 sided smooth

Represents the PNL effect for a 1 unit change in Total, Call or Put curve. Unit applied is defined in GLOBAL SETTINGS

For all other skew types

Represents the PNL effect for a 1 unit change in Kurtosis, Call Kurtosis or Put Kurtosis. Unit applied is defined in GLOBAL SETTINGS.

Kurtosis functionality in Metro is meant to emulate a curve change with skew types that do not have a defined curve.

Weighted (W) Delta and Gamma

If betas are being applied in SET UNERLYING/USE UNDERLYING to adjust underlying spans in the Risk Report, W.Delta and W.Gamma will normalize Delta and Gamma values based on beta values.

In the below example, the report is set to .20 increments in Report Settings . Each expirations span is then determined by multiplying that value (.20) by the beta value seen in the Adjust Underlying box.

Option Equivalent (OE) Tilt (Call, Put, Total)

This feature solves for the most sensitive part of the skew on the call (above the ATM) and put (below the ATM) side for a change in slope and normalizes all inventory (on the call and put side independently) to those points giving the user an indication of how many units they are long or short at that most sensitive point on each side of the skew.

 This risk metric is not compatible with a fixed skew 

For example, each strike's position multiplied by its Tilt Factor returns Put Tilt Risk. The sum of the Put Tilt Risks (-60) is then divided by the Tilt Factor of the most sensitive put (the one with the highest Tilt Factor or in this case the 98.25 strike).  The PnL risk for a change in Put Slope parameter is equivalent to being short 100 of the 98.25 puts.

  Strike Tilt Factor Position Put Tilt Risk
  98.00 0.2 100 20
  98.25 0.6 200 120
  98.50 0.4 -300 -120
  98.75 0.2 -400 -80
ATM 99.00

0.0

200 0
                       SUM -60
         
      OE Put Tilt Risk -100

Weighted Vega

Weighted Vega is available as a field on the Risk Report. Under Report Settings, select the W. Vega report variable. Once the weighted vega field is present in the risk report, you must define the anchor month for that product. Click the W.Vega field, select the desired product and month. When using weighted vega in a risk group all products and expiration dates will be able to be selected.  Once the selection is made, each product will use the expiration within its own product closest to the selected expiration.  Weighted vega does not weight the vega of one product to another selected product in a Risk Group.

Weighted Vega is designed to give the user their vega exposure if time spreads were kept constant with a volatility change.

Example:

Strike to weight, weighted to APRIL April 120 put Vega 40 May 120 call Vega 110

April ATM Vega 120 May ATM Vega 205

The following calculation will give you the weighted vega value for May weighted to April

(April ATM vega / May ATM vega) * May 12