Portfolio Hierarchies 

Definition

Portfolio hierarchies are used to arrange the characteristics of a view into a structure.

Use

Risk values can be calculated on an aggregated basis. Portfolio hierarchies are used to aggregate, on different hierarchy levels, financial transactions stored in the data pool.

Editing portfolio hierarchies

Defining and generating portfolio hierarchies

When you define a portfolio hierarchy, choose characteristics from a view, and put in the order required. When you generate a portfolio hierarchy, the system combines each characteristic value with the other characteristic values in succession until all possible combinations (base portfolios) exist. This results in a tree structure, in which larger evaluation units are divided into increasingly smaller ones.

The following example shows a portfolio hierarchy consisting in the characteristics company code and product type.

 

 

The system then creates base portfolios if transactions exist that have the relevant (new) combination of characteristic values. If the analysis structure does not contain any transactions, then there are no base portfolios, and the portfolio hierarchy consists of its overall structure only.

 

If multiple characteristic values exist, then we recommend that you use characteristic hierarchies, which you need to have already defined. You use characteristic hierarchies to group your characteristics, which makes them easier to manage. The following example shows a portfolio hierarchy consisting in the characteristic company code and product type, and a characteristic hierarchy for the product type characteristic.

 

 

Based on a view, you can create multiple portfolio hierarchies, whose structures depend upon the sequence of the characteristics, and upon the characteristic hierarchies used. If you want to analyze only certain characteristic values, then you can flag the relevant characteristic hierarchies as selective. The following example shows a selective portfolio hierarchy, which is restricted to the value Frankfurt for the characteristic company code.

 

 

When you define hierarchies, you are defining the range of options available to you in the various analysis functions in the Risk Management system. If you create a large number of hierarchies, then you can run evaluations at a relatively detailed level. However, this can lead to long run times, so you have to balance the level of detail you need with system performance.

Extending portfolio hierarchies

You can make the entities you use for evaluations smaller at any time. To do this, you insert one or more new characteristics into the lowest level of the hierarchy. You cannot change the higher levels of the hierarchy, which means that you cannot change the sequence in which the characteristics appear in the hierarchy, or delete characteristics. This would mean that the program could no longer access evaluation data.

Deactivating and reactivating portfolio hierarchies

If a portfolio hierarchy is no longer relevant for evaluations, you can deactivate it. You can even deactivate it if evaluation data based on the portfolio hierarchy is stored in the report data memory, or in the procedure for final results for a result database. Deactivated portfolio hierarchies can only be used to display existing results, and are not updated when financial objects are created. You cannot use a deactivated portfolio hierarchy to select transactions, or run calculations.

When you reactivate a deactivated portfolio hierarchy, the system regenerates it, and, in so doing, updates it. Providing that no nodes have been deleted in the current definition of the characteristic hierarchy, then the system also updates the characteristic hierarchy. It then adds all new base portfolios to the tree structure.

Deleting portfolio hierarchies

If the report data memory, or a procedure for final results for a result database, does not contain any evaluation data, and no archived evaluation data, that are based on a particular portfolio hierarchy, then you can delete that portfolio hierarchy. Otherwise, you must first delete the evaluation data that is based upon it. You do this by using the administration transaction of the respective application. When you delete a portfolio hierarchy, you delete all components of the hierarchy. These include the link between the portfolio hierarchy and the views, the structure, and all texts and attributes.

Updating portfolio hierarchies

The system usually updates the portfolio hierarchy when an analysis structure is created for a financial object. This occurs during data transfer. However, this automatic update is not possible if another user is editing the portfolio hierarchy (in change mode) at the same time. In this case, the system informs you that the portfolio hierarchy has to be updated manually at a later point in time.

For more information about updating and generating portfolio hierarchies, and about reorganizing base portfolios, see reorganization tools.