Stress Test¶

Stress Test calculates the expected behavior of the portfolio under different scenarios, including extreme events. Everysk API calculates the probabilities of extreme events happening and factors those probabilities into the calculations. For example: it takes into account that correlations and volatility tend to increase in periods of market distress, resulting in large price oscillations for securities.

This API call returns 3 main measures for the specific scenario requested, namely:

Conditional value at risk at the left tail of the distribution (CVaR-): The average of the worst (1-confidence) percentile outcomes from the forward looking P&L distribution of the portfolio.
Expected profit and loss (EV): The average of the full forward looking P&L distribution of the portfolio.
Conditional value at risk at the right tail of the distribution (CVaR+): The average of the best (1-confidence) percentile outcomes from the forward looking P&L distribution of the portfolio.

To compute CVaR-, EV, CVaR+ for a portfolio, make an HTTP POST to your calculation resource URI:

HTTP Request

POST /calculations/stress_test

HTTP Parameters

Parameter	Description
`portfolio_id` string	optional It is the ID of an existing portfolio. When passing a portfolio's ID as parameter the calculation will be performed using the given portfolio's securities, date, base currency and nlv. The `securities` parameter is no longer required.
`securities` array	REQUIRED * An array of objects to describe the securities in the portfolio. Each object represents a security with a unique id, symbol, quantity and label. For more details click here. * Not required if `portfolio_id` is provided.
`date` string date	optional, default is `null` (today) Portfolio date in the format: `YYYYMMDD`. The Portfolio Date instructs the API to use the market conditions and security prices prevailing on that date. Historical portfolios will be calculated without look ahead. To run using today’s conditions, use `null`.
`base_currency` string	optional, default is `USD` 3-letter ISO 4217 code for currency. Changing the base currency introduces new currency risks automatically. See all supported currencies here.
`nlv` file	optional, default is `null` (calculated) The net liquidating value (NAV). If not supplied, the API calculates it from all cash securities. Margin-traded securities are assumed to have NLV zero. Supplying an NLV reconciles the margin.
`horizon` integer	optional, default is `5` Simulation horizon. Accepts: `1`, `5`, `20` or `60`. Passing `null` instructs the engine to extend horizons until the shock magnitude is observable. More info here.
`sampling` integer	optional, default is `1` Sampling frequency of historical data. `1` = daily, `5` = weekly (non-overlapping).
`aggregation` string	optional, default is `position` (no aggregation) Aggregates individual security MCTR’s by criteria such as: `custom`, `position`, `country`, `sector`, `gics_sector`, `market_capitalization`, `liquidity`, `implied_rating`, `duration`, `security_type`, `security_type_refined`, `dividend_yield`, `exposure`, `currency`, `fixed_income`, `total_esg`. See Risk Aggregations.
`projection` array	optional, default is `["IND:SPX"]` Array of securities to be used as a top-down factor model. Max: 15.
`volatility_half_life` integer	optional, default is `2` Volatility half life in months: `0`, `2`, `6`, `12`, `24`, or `48`.
`correlation_half_life` integer	optional, default is `6` Correlation half life in months: `0`, `2`, `6`, `12`, `24`, or `48`.
`shock` string	optional, default is `"IND:SPX"` The security used for the stress test.
`magnitude` file	REQUIRED The magnitude of the shock. See more here.
`confidence` string	optional, default is `"95%"` Confidence level for CVaR calculation. Accepts: `1sigma`, `2sigma`, `3sigma`, `85%`, `90%`, `95%`, `97%`, `99%`. Details here.
`filter` string	optional, default is `null` (use the whole portfolio) Filter expression to pre-select identifiers (e.g., only fixed income). Calculations are run on the whole portfolio but only displayed for the filtered subset. See Filter Expression.

To calculate the CVaR-, EV, CVaR+, run the following:

Curl

curl https://api.everysk.com/v2/calculations/stress_test \
  -H "Content-Type: application/json" \
  -H "Authorization: Bearer <ACCESS_TOKEN>" \
  -d '{
        "securities": [
          {
            "id": "id1",
            "symbol": "AAPL",
            "quantity": 1000.0
          },
          {
            "id": "id2",
            "symbol": "SIE:XETR",
            "quantity": 750.0
          }
        ],
        "date": "20210622",
        "projection": ["SPY"],
        "shock": "IND:SPX",
        "magnitude": -0.1
      }' \
  -X POST

The above call returns the following JSON object:

{
  "stress_test": {
    "magnitude": -0.1,
    "extrapolated": false,
    "out_of_range": false,
    "implied_magnitudes": [-0.1],
    "results": [
      {
        "ev": [
          {
            "projection": "SPY",
            "value": -0.05381884985690465
          },
          {
            "projection": "residual",
            "value": -0.00029460954393996727
          }
        ],
        "cvar_neg": [
          {
            "projection": "SPY",
            "value": -0.09483311872511944
          },
          {
            "projection": "residual",
            "value": -0.024535867284700787
          }
        ],
        "cvar_pos": [
          {
            "projection": "SPY",
            "value": -0.009455158729183554
          },
          {
            "projection": "residual",
            "value": 0.029583437854230045
          }
        ],
        "id": "id2"
      },
      {
        "ev": [
          {
            "projection": "SPY",
            "value": -0.08655629290002333
          },
          {
            "projection": "residual",
            "value": -0.0001557620360950901
          }
        ],
        "cvar_neg": [
          {
            "projection": "SPY",
            "value": -0.15251911222218337
          },
          {
            "projection": "residual",
            "value": -0.0412765118097164
          }
        ],
        "cvar_pos": [
          {
            "projection": "SPY",
            "value": -0.015206632816483687
          },
          {
            "projection": "residual",
            "value": 0.061881587296071544
          }
        ],
        "id": "id1"
      }
    ],
    "dynamic_range": [-0.11251559173161693, 0.12721726088932167],
    "unmapped_tickers": [],
    "implied_horizon": 90
  }
}