Problem Note 43049: PM_FORWARD calculates forward contract value incorrectly when MARGINING_VARIATION_RT is not equal to 0
In SAS® Risk Management for Banking and SAS® Risk Management for Insurance, the MARGIN_VARIATION_RT in the FINANCIAL_EXPOSURE data set specifies the margining rate to use in the valuation of forward contracts. A contract that is not purchased on margin uses a MARGIN_VARIATION_RT of zero, and in this case PM_FORWARD calculates the forward value correctly. However, for contracts purchased on margin (that is, where MARGIN_VARIATION_RT is not equal to zero), the forward value computed by PM_FORWARD is incorrect.
The correct calculation for the value of a long forward, taking margining into consideration, is (ignoring cost-of-carry, dividend, or yield):
In this formula, f is the contract value, S is today's spot price, K is the delivery price for the contract, T is the contract date of delivery, r is the T-year risk-free rate, and MVR is the value of MARGIN_VARIATION_RT.
PM_FORWARD uses this calculation, which is incorrect:
Click the Hot Fix tab in this note to access the hot fix for this issue.
Operating System and Release Information
SAS System | SAS Risk Management for Banking | Microsoft® Windows® for x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
Microsoft Windows Server 2003 Datacenter Edition | 3.1 | 3.11 | | 9.3 TS1M0 |
Microsoft Windows Server 2003 Enterprise Edition | 3.1 | 3.11 | | 9.3 TS1M0 |
Microsoft Windows Server 2003 Standard Edition | 3.1 | 3.11 | | 9.3 TS1M0 |
Microsoft Windows Server 2003 for x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
Microsoft Windows Server 2008 | 3.1 | 3.11 | | 9.3 TS1M0 |
Microsoft Windows Server 2008 for x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
Microsoft Windows XP Professional | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows 7 Enterprise 32 bit | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows 7 Enterprise x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows 7 Home Premium 32 bit | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows 7 Home Premium x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows 7 Professional 32 bit | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows 7 Professional x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows 7 Ultimate 32 bit | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows 7 Ultimate x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows Vista | 3.1 | 3.11 | | 9.3 TS1M0 |
Windows Vista for x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
64-bit Enabled AIX | 3.1 | 3.11 | | 9.3 TS1M0 |
64-bit Enabled HP-UX | 3.1 | 3.11 | | 9.3 TS1M0 |
64-bit Enabled Solaris | 3.1 | 3.11 | | 9.3 TS1M0 |
HP-UX IPF | 3.1 | 3.11 | | 9.3 TS1M0 |
Linux | 3.1 | 3.11 | | 9.3 TS1M0 |
Linux for x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
Solaris for x64 | 3.1 | 3.11 | | 9.3 TS1M0 |
SAS System | SAS Risk Management for Insurance | Microsoft® Windows® for x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Microsoft Windows Server 2003 Datacenter Edition | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Microsoft Windows Server 2003 Enterprise Edition | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Microsoft Windows Server 2003 Standard Edition | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Microsoft Windows Server 2003 for x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Microsoft Windows Server 2008 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Microsoft Windows Server 2008 for x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Microsoft Windows XP Professional | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows 7 Enterprise 32 bit | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows 7 Enterprise x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows 7 Home Premium 32 bit | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows 7 Home Premium x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows 7 Professional 32 bit | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows 7 Professional x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows 7 Ultimate 32 bit | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows 7 Ultimate x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows Vista | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Windows Vista for x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
64-bit Enabled AIX | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
64-bit Enabled HP-UX | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
64-bit Enabled Solaris | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
HP-UX IPF | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Linux | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Linux for x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
Solaris for x64 | 2.1 | 2.1_M1 | | 9.2 TS2M3 |
*
For software releases that are not yet generally available, the Fixed
Release is the software release in which the problem is planned to be
fixed.
Type: | Problem Note |
Priority: | high |
Date Modified: | 2011-04-27 14:38:18 |
Date Created: | 2011-04-22 12:00:26 |