Portfolio Hierarchy
Definition
A portfolio hierarchy organizes the characteristics of a view into a hierarchy.
Use
A portfolio hierarchy enables you to aggregate the financial transactions in the data pool at different hierarchy levels.
You can then calculate risk figures based on the resulting aggregated figures. To achieve this, single transactions of the same type need to be summarized into the smallest possible evaluation units. These smallest evaluation units can then be summarized further on higher aggregation levels. The following example illustrates the resulting hierarchy structure:
The three characteristics place of residence, height and hair color are successively combined with one another until all possible characteristic value combinations are represented.
When organizing transactions in this way, it is assumed that transactions with the same characteristic combinations can be aggregated to form evaluation units.
A portfolio hierarchy is always created on the basis of a view. You can create several portfolio hierarchies per view. The structure of the portfolio hierarchy depends on the order of the characteristics and the characteristic hierarchies within the set of characteristics belonging to the view. This allows you to create several different portfolio hierarchies for each view. You could create one portfolio structure that distributes the transactions in one portfolio structure to different profit centers, and a second that aggregates the transactions by product.
When you define hierarchies you are determining the range of evaluations that are possible in the different evaluation functions of the Risk Management system. By creating a comparatively large number of hierarchies, you can run evaluations at a relatively low aggregation level. This can, however, lead to a corresponding increase in runtimes, so you need to weigh the benefits of a low aggregation level against the cost in terms of performance.
Processing options for the portfolio hierarchy
The generation function recognizes which base portfolios exist within the view. Base portfolios are created only if transactions with appropriate (new) combinations of characteristic values exist. If the analysis structure does not contain any transactions, then there are no basis portfolios and the portfolio hierarchy therefore consists of the root only.
Generally, the portfolio hierarchy is updated by the system when the analysis structure for a financial object is updated. This usually occurs during the data transfer. However, the portfolio hierarchy cannot be updated automatically during the data transfer if at that particular time another user is working on the portfolio hierarchy in change mode (this results in a table lock). In this case, the system prompts you to update the portfolio hierarchy manually later on.
The delete function deletes all parts of a portfolio hierarchy. This includes the link between the portfolio hierarchy and a view, the structure, and all texts and attributes.