EVERYTHING EVERYWHERE - Northfield

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Warrants Long side in a Price of instrument is Effectively, a Yes. Proper Composite A holding file 1. A holding file with a name Not needed
contingent claim on because options
an equity. derived via Black- delta-neutral sized specific risk representation is (extension hld) corresponding to the ID of the always have non-
Scholes method. position in the representation is needed to render to be placed in position provided by the user zero economic
value and can be
underlying, with needed because appropriate specific the Northfield and extension .hld. listed with it in a
the exposures of equity does have risk in situations Optimizer datafile or a
non-factor where a constituent inputs 2. CompFile.csv - a set of composite assets
the underlying explained risk. of the underlying is directory, plus records to be appended to the file.
being scaled by also held separately a record in the main composite asset file.

the ratio of the
delta times the in the portfolio. composite

underlying price assets file.
over the option

price.

50 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Forward Long side in a future Price of instrument is Effectively, a Yes for equity For equity options 1. For 1. A holding file with a name Not needed
Start Call contingent claim on because options
Options an equity or an index derived as the delta-neutral sized options and not composite currency corresponding to the ID of the always have non-
of stocks or a present value of a position in the for currency representation is options - a position provided by the user zero economic
currency. value and can be
basic option settled underlying, with options. Proper needed to render record to be and extension .hld. listed with it in a
via a Black-Scholes the exposures of specific risk appropriate specific appended to datafile or a
representation is risk in situations the exposures 2. CompFile.csv - a set of composite assets
price in the future. the underlying needed because where a constituent file. records to be appended to the file.
being scaled by equity and equity of the underlying is main composite asset file.
index also held separately 2. For equity
the ratio of the constituents do in the portfolio. options - a 3. DataFile.csv - exposure file
delta times the have non-factor holding file apendate where currency
explained risk. (extension hld) options are listed.
underlying price to be placed in
over the option

price.

the Northfield

Optimizer
inputs

directory, plus
a record in the

composite

assets file.

51 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Barrier Long side in a future Price of instrument is Effectively, a Yes for equity For equity options 1. For 1. A holding file with a name Not needed
Options contingent claim on because options
an equity or an index derived via binomial delta-neutral sized options and not composite currency corresponding to the ID of the always have non-
of stocks or a trees. Please see position in the for currency representation is options - a position provided by the user zero economic
currency. value and can be
descriptive underlying, with options. Proper needed to render record to be and extension .hld. listed with it in a
attachments on the exposures of specific risk appropriate specific appended to datafile or a
representation is risk in situations the exposures 2. CompFile.csv - a set of composite assets
derivative analytics. the underlying needed because where a constituent file. records to be appended to the file.
being scaled by equity and equity of the underlying is main composite asset file.
index also held separately 2. For equity
the ratio of the constituents do in the portfolio. options - a 3. DataFile.csv - exposure file
delta times the have non-factor holding file apendate where currency
explained risk. (extension hld) options are listed.
underlying price to be placed in
over the option

price.

the Northfield

Optimizer
inputs

directory, plus
a record in the

composite

assets file.

52 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Asians Long side in a future Please see Effectively, a Yes for equity For equity options 1. For 1. A holding file with a name Not needed
contingent claim on descriptive delta-neutral sized because options
an equity or an index attachments on position in the options and not composite currency corresponding to the ID of the always have non-
of stocks or a derivative analytics underlying, with for currency representation is options - a position provided by the user zero economic
currency. for pricing formula the exposures of value and can be
used. the underlying options. Proper needed to render record to be and extension .hld. listed with it in a
being scaled by specific risk appropriate specific appended to datafile or a
the ratio of the representation is risk in situations the exposures 2. CompFile.csv - a set of composite assets
delta times the needed because where a constituent file. records to be appended to the file.
underlying price equity and equity of the underlying is main composite asset file.
over the option index also held separately 2. For equity
price. constituents do in the portfolio. options - a 3. DataFile.csv - exposure file
have non-factor holding file apendate where currency
explained risk. (extension hld) options are listed.
to be placed in
the Northfield

Optimizer
inputs

directory, plus
a record in the

composite

assets file.

53 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Lookbacks Long side in a future Please see Effectively, a Yes for equity For equity options 1. For 1. A holding file with a name Not needed
contingent claim on descriptive delta-neutral sized because options
an equity or an index attachments on position in the options and not composite currency corresponding to the ID of the always have non-
of stocks or a derivative analytics underlying, with for currency representation is options - a position provided by the user zero economic
currency. for pricing formula the exposures of value and can be
used. the underlying options. Proper needed to render record to be and extension .hld. listed with it in a
being scaled by specific risk appropriate specific appended to datafile or a
the ratio of the representation is risk in situations the exposures 2. CompFile.csv - a set of composite assets
delta times the needed because where a constituent file. records to be appended to the file.
underlying price equity and equity of the underlying is main composite asset file.
over the option index also held separately 2. For equity
price. constituents do in the portfolio. options - a 3. DataFile.csv - exposure file
have non-factor holding file apendate where currency
explained risk. (extension hld) options are listed.
to be placed in
the Northfield

Optimizer
inputs

directory, plus
a record in the

composite

assets file.

54 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Basic Long side in a Price of instrument is Effectively, a Yes for equity For equity index 1. For 1. A holding file with a name Not needed
Options On contingent claim on a because options
Futures position that entails derived via Black- delta-neutral sized futures options options composite currency corresponding to the ID of the always have non-
the receipt of an Scholes method, position in the and not for representation is futures position provided by the user zero economic
equity or an index of value and can be
stocks or a currency using the futures underlying currency futures needed to render options - a and extension .hld. listed with it in a
further than the price instead of spot futures, which options. Proper appropriate specific record to be datafile or a
options maturity and in the formula. entails that the specific risk 2. CompFile.csv - a set of composite assets
obligation to pay for Please see exposures of the representation is risk in situations appended to records to be appended to the file.
the received asset at descriptive underlying are needed because where a constituent the exposures main composite asset file.
the same time.
of the index file.
attachments on scaled by the ratio equity and equity underlying the
derivative analytics. 2. For equity 3. DataFile.csv - exposure file
of the delta times index futures is also held futures apendate where currency
the underlying constituents, and separately in the options - a futures options are listed.

futures price over hence their portfolio. holding file
the option price, futures
(extension hld)
and the exposures embodiment do
of the underlying have non-factor to be placed in
the Northfield
futures are explained risk.
derived from a Optimizer
inputs
future value
directory, plus
modified version
of the asset a record in the
composite
underlying the
futures as well as assets file.

some interest rate
factor exposures

from the futures
price obligation.

55 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Basic Long side in a Please see Effectively, a Yes for equity For equity index 1. For 1. A holding file with a name Not needed
Options On contingent claim on a descriptive because options
Quantos position that entails attachments on delta-neutral sized futures options options composite currency corresponding to the ID of the always have non-
the receipt of an derivative analytics position in the and not for representation is futures position provided by the user zero economic
equity or an index of for pricing formula value and can be
stocks or a currency used. underlying currency futures needed to render options - a and extension .hld. listed with it in a
further than the futures, which options. Proper appropriate specific record to be datafile or a
options maturity and entails that the specific risk 2. CompFile.csv - a set of composite assets
obligation to pay for exposures of the representation is risk in situations appended to records to be appended to the file.
the received asset at underlying are needed because where a constituent the exposures main composite asset file.
the same time.
of the index file.
scaled by the ratio equity and equity underlying the
2. For equity 3. DataFile.csv - exposure file
of the delta times index futures is also held futures apendate where currency
the underlying constituents, and separately in the options - a futures options are listed.

futures price over hence their portfolio. holding file
the option price, futures
(extension hld)
and the exposures embodiment do
of the underlying have non-factor to be placed in
the Northfield
futures are explained risk.
derived from a Optimizer
inputs
future value
directory, plus
modified version
of the asset a record in the
composite
underlying the
futures as well as assets file.

some interest rate
factor exposures

from the futures
price obligation.

56 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Barrier Long side in a Please see Effectively, a Yes for equity For equity index 1. For 1. A holding file with a name Not needed
Options On contingent claim on a descriptive because options
Futures position that entails attachments on delta-neutral sized futures options options composite currency corresponding to the ID of the always have non-
the receipt of an derivative analytics position in the and not for representation is futures position provided by the user zero economic
equity or an index of for pricing formula value and can be
stocks or a currency used. underlying currency futures needed to render options - a and extension .hld. listed with it in a
further than the futures, which options. Proper appropriate specific record to be datafile or a
options maturity and entails that the specific risk 2. CompFile.csv - a set of composite assets
obligation to pay for exposures of the representation is risk in situations appended to records to be appended to the file.
the received asset at underlying are needed because where a constituent the exposures main composite asset file.
the same time.
of the index file.
scaled by the ratio equity and equity underlying the
2. For equity 3. DataFile.csv - exposure file
of the delta times index futures is also held futures apendate where currency
the underlying constituents, and separately in the options - a futures options are listed.

futures price over hence their portfolio. holding file
the option price, futures
(extension hld)
and the exposures embodiment do
of the underlying have non-factor to be placed in
the Northfield
futures are explained risk.
derived from a Optimizer
inputs
future value
directory, plus
modified version
of the asset a record in the
composite
underlying the
futures as well as assets file.

some interest rate
factor exposures

from the futures
price obligation.

57 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Barrier Long side in a Please see Effectively, a Yes for equity For equity index 1. For 1. A holding file with a name Not needed
Options On contingent claim on a descriptive because options
Quantos position that entails attachments on delta-neutral sized futures options options composite currency corresponding to the ID of the always have non-
the receipt of an derivative analytics position in the and not for representation is futures position provided by the user zero economic
equity or an index of for pricing formula value and can be
stocks or a currency used. underlying currency futures needed to render options - a and extension .hld. listed with it in a
further than the futures, which options. Proper appropriate specific record to be datafile or a
options maturity and entails that the specific risk 2. CompFile.csv - a set of composite assets
obligation to pay for exposures of the representation is risk in situations appended to records to be appended to the file.
the received asset at underlying are needed because where a constituent the exposures main composite asset file.
the same time.
of the index file.
scaled by the ratio equity and equity underlying the
2. For equity 3. DataFile.csv - exposure file
of the delta times index futures is also held futures apendate where currency
the underlying constituents, and separately in the options - a futures options are listed.

futures price over hence their portfolio. holding file
the option price, futures
(extension hld)
and the exposures embodiment do
of the underlying have non-factor to be placed in
the Northfield
futures are explained risk.
derived from a Optimizer
inputs
future value
directory, plus
modified version
of the asset a record in the
composite
underlying the
futures as well as assets file.

some interest rate
factor exposures

from the futures
price obligation.

58 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Asian Long side in a Please see Effectively, a Yes for equity For equity index 1. For 1. A holding file with a name Not needed
Options On contingent claim on a descriptive because options
Futures position that entails attachments on delta-neutral sized futures options options composite currency corresponding to the ID of the always have non-
the receipt of an derivative analytics position in the and not for representation is futures position provided by the user zero economic
equity or an index of for pricing formula value and can be
stocks or a currency used. underlying currency futures needed to render options - a and extension .hld. listed with it in a
further than the futures, which options. Proper appropriate specific record to be datafile or a
options maturity and entails that the specific risk 2. CompFile.csv - a set of composite assets
obligation to pay for exposures of the representation is risk in situations appended to records to be appended to the file.
the received asset at underlying are needed because where a constituent the exposures main composite asset file.
the same time.
of the index file.
scaled by the ratio equity and equity underlying the
2. For equity 3. DataFile.csv - exposure file
of the delta times index futures is also held futures apendate where currency
the underlying constituents, and separately in the options - a futures options are listed.

futures price over hence their portfolio. holding file
the option price, futures
(extension hld)
and the exposures embodiment do
of the underlying have non-factor to be placed in
the Northfield
futures are explained risk.
derived from a Optimizer
inputs
future value
directory, plus
modified version
of the asset a record in the
composite
underlying the
futures as well as assets file.

some interest rate
factor exposures

from the futures
price obligation.

59 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Asian Long side in a Please see Effectively, a Yes for equity For equity index 1. For 1. A holding file with a name Not needed
Options On contingent claim on a descriptive because options
Quantos position that entails attachments on delta-neutral sized futures options options composite currency corresponding to the ID of the always have non-
the receipt of an derivative analytics position in the and not for representation is futures position provided by the user zero economic
equity or an index of for pricing formula value and can be
stocks or a currency used. underlying currency futures needed to render options - a and extension .hld. listed with it in a
further than the futures, which options. Proper appropriate specific record to be datafile or a
options maturity and entails that the specific risk 2. CompFile.csv - a set of composite assets
obligation to pay for exposures of the representation is risk in situations appended to records to be appended to the file.
the received asset at underlying are needed because where a constituent the exposures main composite asset file.
the same time.
of the index file.
scaled by the ratio equity and equity underlying the
2. For equity 3. DataFile.csv - exposure file
of the delta times index futures is also held futures apendate where currency
the underlying constituents, and separately in the options - a futures options are listed.

futures price over hence their portfolio. holding file
the option price, futures
(extension hld)
and the exposures embodiment do
of the underlying have non-factor to be placed in
the Northfield
futures are explained risk.
derived from a Optimizer
inputs
future value
directory, plus
modified version
of the asset a record in the
composite
underlying the
futures as well as assets file.

some interest rate
factor exposures

from the futures
price obligation.

60 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Lookback Long side in a Please see Effectively, a Yes for equity For equity index 1. For 1. A holding file with a name Not needed
Options On contingent claim on a descriptive because options
Futures position that entails attachments on delta-neutral sized futures options options composite currency corresponding to the ID of the always have non-
the receipt of an derivative analytics position in the and not for representation is futures position provided by the user zero economic
equity or an index of for pricing formula value and can be
stocks or a currency used. underlying currency futures needed to render options - a and extension .hld. listed with it in a
further than the futures, which options. Proper appropriate specific record to be datafile or a
options maturity and entails that the specific risk 2. CompFile.csv - a set of composite assets
obligation to pay for exposures of the representation is risk in situations appended to records to be appended to the file.
the received asset at underlying are needed because where a constituent the exposures main composite asset file.
the same time.
of the index file.
scaled by the ratio equity and equity underlying the
2. For equity 3. DataFile.csv - exposure file
of the delta times index futures is also held futures apendate where currency
the underlying constituents, and separately in the options - a futures options are listed.

futures price over hence their portfolio. holding file
the option price, futures
(extension hld)
and the exposures embodiment do
of the underlying have non-factor to be placed in
the Northfield
futures are explained risk.
derived from a Optimizer
inputs
future value
directory, plus
modified version
of the asset a record in the
composite
underlying the
futures as well as assets file.

some interest rate
factor exposures

from the futures
price obligation.

61 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Lookback Long side in a Please see Effectively, a Yes for equity For equity index 1. For 1. A holding file with a name Not needed
Options On contingent claim on a descriptive because options
Quantos position that entails attachments on delta-neutral sized futures options options composite currency corresponding to the ID of the always have non-
the receipt of an derivative analytics position in the and not for representation is futures position provided by the user zero economic
equity or an index of for pricing formula value and can be
stocks or a currency used. underlying currency futures needed to render options - a and extension .hld. listed with it in a
further than the futures, which options. Proper appropriate specific record to be datafile or a
options maturity and entails that the specific risk 2. CompFile.csv - a set of composite assets
obligation to pay for exposures of the representation is risk in situations appended to records to be appended to the file.
the received asset at underlying are needed because where a constituent the exposures main composite asset file.
the same time.
of the index file.
scaled by the ratio equity and equity underlying the
2. For equity 3. DataFile.csv - exposure file
of the delta times index futures is also held futures apendate where currency
the underlying constituents, and separately in the options - a futures options are listed.

futures price over hence their portfolio. holding file
the option price, futures
(extension hld)
and the exposures embodiment do
of the underlying have non-factor to be placed in
the Northfield
futures are explained risk.
derived from a Optimizer
inputs
future value
directory, plus
modified version
of the asset a record in the
composite
underlying the
futures as well as assets file.

some interest rate
factor exposures

from the futures
price obligation.

62 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

IR Futures A long position in a Pricing involves Resulting Since these are No need for A record to be 1. IRCRDErivMMDD YYYY.csv Yes. Given that
composite the price of the
future payment of independent pricing exposures are exchange traded representation, due appended to (exposures record). instrument in the
interest rate applied of a long and short those of long and and bear to no specific risk. the master EE exposure file is the
exposures file. 2. PortFile.csv (offsetting futures price, an
onto a set notional, side as bonds are short side, and are negligible credit "cash" to be added to main offset in zero risk
and a short position in priced in a binomial exclusively risk, no specific security has to be
portfolio file). added to the main
the interest rate level lattice assuming exposures to term risk is assumed. portfolio file to
set by contract, lognormal interest structure of bring the
economic value of
applied to the same rates. interest rates the position to its
notional. factors. actual level
(possibly zero).
EENIAC calculates
a summary
offsetting cash
amount for all
positions requiring
this adjustment
within each
uploaded request.

63 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

IR Options Long side in a Priced on a binomial The contingent No specific risk. No need for A record to be 1. IRCRDErivMMDD YYYY.csv Not needed
contingent claim that tree assuming claim will exhibit composite appended to (exposures record). because options
entails the receipt of lognormal interest sensitivities to representation, due the master EE always have non-
an interest rate rates. term structure of to no specific risk. exposures file. zero economic
applied onto a set interest rates value and can be
notional and so factors. listed with it in a
contingent obligation datafile or a
to pay for the composite assets
received interest file.
payment.

64 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Bond A long position in a Pricing involves Resulting Underlying bond Composite 1. A holding 1. PortFile.csv (offsetting Yes. Given that
Futures future bond, the independent pricing representation is the price of the
subject of the of a long and short exposures are carries some needed to render file (extension "cash" to be added to main instrument in the
contract, and a short side as bonds are those of long and credit risk, and appropriate specific hld) to be portfolio file). exposure file is the
position in the priced in a binomial risk. futures price, an
obligation to pay for lattice assuming short side, and are with that some placed in the 2. A holding file with a name offset in zero risk
that bond. lognormal interest exposures to term asset specific Northfield corresponding to the ID of the security has to be
rates. Optimizer position provided by the user added to the main
structure of risk. inputs and extension .hld. portfolio file to
interest rates directory bring the
economic value of
factors as well as the position to its
credit factors. actual level
2. A record in 3. CompFile.csv - a set of (possibly zero).
the composite records to be appended to the EENIAC calculates
assets file. main composite asset file. a summary
offsetting cash
amount for all
positions requiring
this adjustment
within each
uploaded request.

65 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Options on Long side in a Pricing involves The contingent Underlying long Composite 1. A holding 1. A holding file with a name No.
Bond contingent claim on a interlaced claim will exhibit futures bond representation is file (extension corresponding to the ID of the
Futures combined position of discounting of sensitivities to carries some needed to render hld) to be position provided by the user
a long and short bond futures long and term structure of credit risk, and appropriate specific placed in the and extension .hld.
that comprise a bond short side as bonds interest rates with that some risk. Northfield
futures as described. are priced in a factors and credit asset specific Optimizer 2. CompFile.csv - a set of
binomial lattice factors. risk. inputs records to be appended to the
assuming lognormal directory. main composite asset file.
interest rates,
determining the 2. A record in
value of the option to the composite
hold the futures at assets file.
each node.

66 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Swaps A long position in a Pricing involves Resulting No credit risk, No need for A record to be 1. IRCRDErivMMDD YYYY.csv Yes. Given that
composite appended to (exposures record). the price of the
floating rate bond, the independent pricing exposures are and with that, no representation, due the master EE instrument in the
subject of the of a long and short those of long and specific risk is to no specific risk exposures file. exposure file is the
assumption. notional amount,
contract and a short side as bonds are short side, and are assumed. an offset in zero
position in a fixed rate priced in a binomial exclusively risk security has to
be added to the
bond. lattice assuming exposures to term main portfolio file
lognormal interest structure of to bring the
economic value of
rates. interest rates the position to its
factors. actual level
(possibly zero).
EENIAC calculates
a summary
offsetting cash
amount for all
positions requiring
this adjustment
within each
uploaded request.

67 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Swap Identical to swaps, Pricing involves Resulting No credit risk, No need for A record to be 1. IRCRDErivMMDD YYYY.csv Yes. Given that
Futures with the difference independent pricing composite appended to (exposures record). the price of the
that the cashflows of a long and short exposures are and with that, no representation, due the master EE instrument in the
until delivery date for side as bonds are those of long and specific risk is to no specific risk exposures file. exposure file is the
both long and short priced in a binomial assumption. notional amount,
side have been offset lattice assuming short side, and are assumed. an offset in zero
to zero lognormal interest exclusively risk security has to
rates be added to the
exposures to term main portfolio file
structure of to bring the
economic value of
interest rates the position to its
factors. actual level
(possibly zero).
EENIAC calculates
a summary
offsetting cash
amount for all
positions requiring
this adjustment
within each
uploaded request.

68 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Swaptions Long side in a Pricing involves The contingent No credit risk, No need for A record to be 1. IRCRDErivMMDD YYYY.csv No.
contingent claim on a interlaced claim will exhibit and with that, no composite appended to (exposures record).
combined position of discounting of a sensitivities to specific risk is representation, due the master EE
a long and short bond swap's long and term structure of assumed. to no specific risk exposures file.
that comprise a swap short side as bonds interest rates assumption.
as described. are priced in a factors.
binomial lattice
assuming lognormal
interest rates,
determining the
value of the option to
hold the futures at
each node.

69 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

CDS Short side in a Pricing involves Resulting Underlying bond Composite 1. A holding 1. PortFile.csv (offsetting Yes. Given that

corporate bond of independent pricing exposures are carries some representation is file (extension "cash" to be added to main the price of the
contract coupon of a long and short those of long and credit risk, and needed to render hld) to be portfolio file). instrument in the

amount, notional, and side as bonds of the short side, and are with that some appropriate specific placed in the 2. A holding file with a name exposure file is the
of the particular credit respective credits are exposures to term asset specific risk. Northfield corresponding to the ID of the notional amount,
Optimizer position provided by the user an offset in zero
level; long side in a priced in a binomial structure of risk. inputs and extension .hld. risk security has to
best credit zero lattice assuming interest rates directory. be added to the

coupon bond with lognormal interest factors as well as
face amount equal to rates; comprising credit factors. main portfolio file
the insured notional; portfolio components 2. A record in 3. CompFile.csv - a set of to bring the
short side in a series are weighed by the the composite records to be appended to the economic value of
of zero coupon bonds product of their assets file. main composite asset file. the position to its

representing CDS calculated price and actual level

premium payments. their risk-neutral (possibly zero).
probability as inferred EENIAC calculates

from the option a summary
adjusted spread for offsetting cash

the particular credit. amount for all

positions requiring
this adjustment

within each
uploaded request.

70 www.northinfo.com

The Multi-Asset Class Risk Model

Instrument A. Cashflow B. Pricing C. Factor D. Specific Risk E. Composite F. Represen- G. Output Files H. Offsetting
elements Exposures tation "cash" in main
portfolio file

Futures on Similar to CDS Pricing involves Resulting Underlying bond Composite 1. A holding 1. PortFile.csv (offsetting Yes. Given that
CDS representation, with representation is the price of the
Indices the difference that independent pricing exposures are carries some needed to render file (extension "cash" to be added to main instrument in the
cashflows do not of a long and short those of long and credit risk, and appropriate specific hld) to be portfolio file). exposure file is the
start to occur before risk. notional amount,
the delivery date. side as bonds of the short side, and are with that some placed in the 2. A holding file with a name an offset in zero
respective credits are exposures to term asset specific Northfield corresponding to the ID of the risk security has to
Optimizer position provided by the user be added to the
priced in a binomial structure of risk. inputs and extension .hld. main portfolio file
lattice assuming interest rates directory. to bring the
economic value of
lognormal interest factors as well as the position to its
rates; comprising credit factors. actual level
2. A record in 3. CompFile.csv - a set of (possibly zero).
portfolio components the composite records to be appended to the EENIAC calculates
are weighed by the assets file. main composite asset file. a summary
offsetting cash
product of their amount for all
calculated price and positions requiring
this adjustment
their risk-neutral within each
probability as inferred uploaded request.

from the option
adjusted spread for

the particular credit.

71 www.northinfo.com

The Multi-Asset Class Risk Model

Why Northfield
is right for you

Powerful, Northfield’s family of risk models has been helping clients construct and
Integrated, analyze portfolios in many countries across the world for over 20 years. The
Consistent & risk models are based on sound theoretical & academic foundations. They
Comparable Risk are clear, intuitive, informative and comparable. Diverse portfolios can be
analyzed, using appropriate metrics, relative to standard and or customised
Models benchmarks. Sources of systematic and security specific risk can be
identified quickly, clearly and easily.

Open models: open Northfield maintains a philosophy of openness and a partnership with our
systems. No Black clients. Northfield offers and supports “glass boxes” – there is nothing
Boxes! hidden. Should you want to know the full detail of how a model is put
together, we will tell you, clearly. Northfield is not in the “black box”
business.

Global, Regional, The coverage of assets in the Northfield family of risk models is huge. From
Country & Asset the Everything Everywhere (“EE”) global fixed income and equity risk model,
to the Global, Single Country / Regional, and specialist equity risk models,
Coverage coverage includes over 61,000 equities and about 450,000 fixed income
instruments. Additional EE data coverage includes 1,300,000 U.S. muni
bonds, 1,000,000 mortgage backed securities and agency pass-throughs, and
300,000 U.S. collateralized mortgage obligations and asset backed securities.
Should your portfolios contain assets not included in the system (private
equity holdings, very new IPO’s etc. etc.) we give you the tools and
understanding to add them yourself.

Sophisticated, “Just like it says on the box” - Northfield systems are flexible, robust and
flexible, robust, open. Inputs can be managed and changed to reflect your views. Output
open analytical can be saved as text files and used in any manner of your choosing.
Available on the PC, Unix, Linux and multiple partner platforms, Northfield’s
systems analytical tools are widely respected for their reliability and functionality.

Partners Northfield has partnered with selective business information services
companies to enhance clients’ ability to access Northfield analytics via
multiple platforms. Northfield partners include FactSet, ClariFi, Quantitative
Services Group, SoftPak, Thomson Reuters and others.

Innovation Northfield constantly strives to add more useful features and functions for
your use. Examples of recent innovation include: The ability to manage long-
short hedge funds appropriately as a single entity. Accurately and
conveniently managing composite assets as part of a portfolio. The ability to
manage non-linear transaction costs during the optimization process.

Excellent training, Northfield staff attentively assist customers with excellent training and
support and support, based on many years experience.
solutions

72 www.northinfo.com

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