Trade Simulator

Run "what-if" portfolio rebalance simulations with real-time factor impact

Edgar Nuñez avatar
Written by Edgar Nuñez
Updated over a week ago

Rebalance: Simulator

OP strives to bring the most relevant data to our customer's fingertips to help inform trade decisions. The simulator tool is one way for customers to understand the impact of a trade on the portfolio's risk profile, including when adding new securities or trimming an entire position.

Simulate Trades using Manual Rebalance & Risk Decomposition

Main Elements

Table Drilldown - these rows detail the values for each column as it pertains to that level of portfolio drilldown.

A. Rebalanced (R), Original (O), Delta (Δ) - Displaying the net portfolio's value for each column for the rebalanced, original portfolio, and the difference between the two portfolios.
B. Long / Short - Depending on the column, these rows display the aggregate values, or the portion of total, that come from the respective long / short book of the portfolio.
C. Individual Security - Displays the contribution of each individual security to the net portfolio. Clicking on a security displays its own rebalance, original, delta values.

  1. % Equity

    1. All security weights added up. For portfolios with equity override and long/short books, this may add up over 100%

    2. Long / Short show the aggregate weight for that leg of the book

    3. The weight of an individual security

  2. Forecast

    1. The total expected return of the portfolio as calculated by the selected forecast next to the date selection, where each provided security forecast is aggregated by a simple weighted average

    2. The long / short weighted expected return as calculated by the available security forecasts from the selected forecast

    3. The expected return provided for each security. These display as - if no forecast was provided, and are exempt from the long/short & portfolio aggregations.

  3. Total Risk

    1. The amount of total risk that comes from the entire portfolio.

    2. Long / Short show the portion of total risk that come's from either leg (i.e. the Long / Short risk decomposition, where...

    3. The risk contribution of that security. These add to up to the corresponding Long / Short risk (2B)

  4. Specific Risk Decomposition

    1. The portion of total risk that comes from specific risk (i.e. Specific Risk = 100% - Factor Risk)

    2. The portion of total long risk that comes from specific long risk (i.e. Specific Long Risk = Total Long Risk - Factor Long Risk)

    3. The contribution to the percentage of total risk that comes from each individual security. Inherently considers the weight of the position in its contribution.

  5. Factor Risk Decomposition

    1. The portion of total risk that comes from factor risk

    2. The contribution to the portion of total long / short risk that comes from factor long / short risk. (i.e. Long Specific + Long Factor = Long Total portion)

    3. The contribution to the portion of the aggregate factor risk

  6. Categorical Factor Risk Decomposition**

    1. Breaks down the portion of factor risk coming from the factor categories. (Style + Sector + Country + Currency + ... = Factor Risk)

    2. The breakdown of factor long / short risk that comes from the risk categories (as defined by the risk model. Ex. style, sector, country, currency, etc. (Long Style + Short Style = Net Style && long style + long sector + long country + ... = long factor risk)

    3. The breakdown of a particular factor category into its security contributors. (Security 1 style risk + Security 2 style risk = Long Style Risk)

  7. Individual Factor Risk Decomposition**

    1. The aggregate (net) value of all the security contributions per factor. (ex. Net Size Risk = Security 1 size risk + Security 2 size risk + ...)

    2. That factor's value that comes from the long / short let of the book (not a percentage).

    3. The breakdown of an individual factor into its security contributors.

      **Clicking on a factor category tab toggles the view between seeing all factor categories and seeing individual factors per selected factor category. I.e clicking on STYLE displays size, volatility, liquidity, etc. Clicking on TOTAL collapses the individual factors and displays all the factor categories.

      ***Click on the dropdown to switch among Factor Risk decomposition, Exposure Contributors, Beta Contributors, and any other active Content Sets, like ESG or Short Interest. Note some risk model exposures: the factor category displays the risk decomposition, only the individual factors display their exposure contributions.

      Individual Factor Exposure, Beta Contributors & Other Content Sets ***
      a. The portfolio's net exposure (z-score) of that factor
      b. The long / short exposure contribution, given the category selection
      c. A securities individual exposure contribution to the different factors.

  8. Toolbar

    Trades Panel
    When an individual security's weight has changed, a trades panel will appear that displays all your position adjustments. This includes a download icon where you can download the list of trades to achieve your manually rebalanced portfolio from the original portfolio.

    Save As Experiment
    When the satisfactory trades have been made for the date of the simulation, it is possible to save the results as an experiment and automatically populate the performance, risk, exposure, and composition characteristics of the resulting trades in the Rebalance: Experiments screen.

    Reset Trades
    Clicking on this button will reset the provided input values

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