• What is the ActiveMargin™ risk computation methodology? |
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ActiveMargin™ uses historical data (or data from value added vendors) to determine the variance-covariance matrix. It uses full valuation Monte Carlo simulation,
hybrid simulation and historical simulation methods to determine the riskiness of a portfolio over a given time horizon, at a given confidence level. ActiveMargin™ uses an advanced mathematics kernel to optimize and speed up computations. ActiveMargin™ can today provide real-time performance in the most demanding of environments. 
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| • Does ActiveMargin™ also support the parametric method of VaR computations? |
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ActiveMargin™ does not currently support the parametric method, largely because of the limitations of this method when a portfolio contains a large option component. To maintain generality, ActiveMargin™ provides Monte Carlo and historical simulation methodologies.
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| • How does ActiveMargin™ forecast volatility? |
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ActiveMargin™ forecasts volatility using one of the following methods
- Simple Moving Average
- EWMA
ActiveMargin™ can also be configured to use implied volatilities when such volatilities are available. For currency derivatives, ActiveMargin™ uses the risk reversal and the strangle volatilities to compute a volatility surface, from which required volatilities are interpolated.
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