Sensitivity Analysis Sensitivity Analysis is a library of algorithms enabling analysis of a financial model in n dimensions. A selection of inputs is varied according to a chosen function, and the effect on a selection of outputs is observed. Manipulations can involve anything from a single scalar value to a list of matrices. Calculations may be performed on the local workstation or transmitted to the Grid for remote, parallel processing.

Analysis Engine

The Sensitivity Analysis Engine is an abstract, platform independent library of algorithms for varying the inputs of a function and observing the change in the outputs. Objects in the library are defined as Factors, Tweaks, and Targets, which are collected into an Analysis that can be defined, executed, stored, and transmitted.

Factor

A Factor is a value to be varied. A Factor is implemented as a list of data elements, each of which can be a scalar, vector or matrix. A Factor is supplemented with additional attributes such as Flags (allowing the individual data points in the Factor to be calibrated) and Labels (displayed when the Analysis output is formatted).

yield curve

volatility grid

FX spot rate

Tweak

A Tweak is an algorithm for varying a Factor. On each iteration of an Analysis, the Tweak's variation of the Factor can be

• Parallel - all data points tweaked simultaneously
• Axis - Factor tweaked on one axis, e.g. by row or column
• Bucketed - each point in the Factor tweaked in turn

Target

A Target is a value to be observed. A Target typically comprises a PV calculation and may correspond to a single instrument or a portfolio of deals. Sensitivity Analysis records delta in the Target's value after each iteration of the Tweak.

NPV

Spreadsheet Addin

The Sensitivity Analysis Spreadsheet Addin (for Microsoft Excel or OpenOffice.org Calc) exposes Sensitivity Analysis functionality for use in the spreadsheet environment. Sensitivity Analysis contains no business logic, and the Addin is implemented as an extension to the functionality of the spreadsheet - any data which can be modelled in the spreadsheet can be processed by Sensitivity Analysis.

A site-specific configuration file defines rules for identifying selected ranges of business interest, these are displayed in a tree view with appropriate icons and captions. For example a user may drill down through a hierarchy of markets and currencies to specific objects such as zero curves or volatility grids.

Distributed Computing

Sensitivity Analysis can be used as a standalone tool on the client workstation, alternatively Sensitivity Analysis can serve as a client to Nazcatech's Distributed Computing environment, with Analyses transmitted to the Grid for remote, parallel processing, and results transmitted back to the client for local display in the spreadsheet.