Simm-Lib

Simm-Lib is an implementation of the value at risk Standard Initial Margin Model (SIMM™) developed by ISDA. It has been built to be compatible with the Common Risk Interchange Format (CRIF) and it's correlation parameters and risk weights are interfaced to allow them to be easily exchanged. This makes Simm-Lib easy to deploy, as most users of Simm-Lib will already be generating CRIF files; easy to maintain, as the yearly updates to SIMM™ can be handled with only minor changes to Simm-Lib; and easy to experiment with, as custom model parameters can be created for Simm-Lib and implemented with the same minor changes as the yearly updates.

Users of Simm-Lib who wish to deploy it for commercial purposes will need to obtain a license from ISDA to use ISDA SIMM™ to calculate initial margin for their or their clients’ non-cleared derivatives transactions. Please contact isdalegal@isda.org for more information on licensing the ISDA SIMM™.

Getting Started

Simm-Lib is built with Apache Maven, so one must get Maven installed on their machine.

Ubuntu users need only run in a terminal:

$ sudo apt-get install maven

Similarly, Mac users who have Homebrew installed can run:

$ brew install maven

All others can go to the Maven homepage for specific instructions on how to download and install Maven with any operating system.

To confirm that Maven has been successfully downloaded, check the Maven version on your machine by running:

$ mvn -version

If Maven has been successfully installed, this command should return something like:

Apache Maven 3.5.0 (ff4wa5hff; 2017-04-03T15:39:06-04:00)
Maven home: --MavenHomeDirectory--
Java version: 1.8.0_91, vendor: Oracle Corporation
Java home: --JavaHomeDirectory--
Default locale: en_US, platform encoding: UTF-8
OS name: "mac os x", version: "10.11.6", arch: "x86_64", family: "mac"

Installing

Simm-Lib's sources have to be moved onto a local machine. This can be accomplished by either downloading them as a zip file from GitHub, or by running in a terminal:

$ git clone <repo> simm-lib

Next, the code's artifacts need to be built. As Simm-Lib is a Maven project, this process is simplified to running:

$ mvn compile

After this, Simm-Lib should be fully ready to run in a local environment.

Testing

To run all of Simm-Lib's tests, simply run:

$ mvn test

If one wants to run individual tests, or an individual test module, the easiest way is to open Simm-Lib in some IDE and run the tests from that.

Testing Breakdown

While there are simple tests to check the functionality of the individual methods of Simm-Lib, the main focus of the test suite is to confirm that the outputs of SIMM and Simm-Lib match. To accomplish this, the tests take in sensitivities and then run Simm-Lib's calculation, checking the result against SIMM's result:

@Test
public void test() {
    Sensitivity IR1 = new Sensitivity("RatesFX", "Risk_IRCurve", "GBP", "1", "6m", "OIS", new BigDecimal("200000000"));
    Assert.assertEquals(new BigDecimal("13400000000"), simm.calculateStandard(Arrays.asList(IR1)).setScale(0, RoundingMode.HALF_UP));
}

SIMM Class

This section focuses on the tests for the top level functionality of the SIMM class, as the methods of this class directly consume CRIF formatted data and return the calculated IM of those inputs. There are three methods in the SIMM class: calculateStanard(), calculateAdditional(), and calculateTotal(). The first method returns the IM of the input sensitivities, the second returns the Additional IM generated by regulatory restrictions (this includes additional value created from product class multipliers), while the last is the sum of the previous two methods. All three methods return the calculated value in US Dollars, so users of Simm-Lib working in other currencies should be sure include the "amountCurrency", and "amountUSD" columns in their CRIF files.

The inputs to these three methods are CRIF formatted data-types where all amounts are stored as BigDecimal and all other values as String:

AddOnNotionalFactor(product, factor)
ProductMultiplier(productClass, multiplier)
AddOnFixedAmount(amount, amountCurrency, amountUSD)
AddOnNotional(product, notional, notionalCurrency, notionalUSD)
Sensitivity(productClass, riskType, qualifier, bucket, label1, label2, amount, amountCurrency, amountUsd)

For Sensitivity, AddOnFixedAmount, and AddOnNotional the "currency", and "amountUSD" can be omitted; however, the currency in this case will be assumed to be US Dollars.

osx2000 / simm-lib