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To calculate 'impact of prices' the formula is: Impact of prices = option delta × price move; so if the price moves $ 100 and the option's delta is 0.05% then the 'impact of prices' is $ 0.05. To generalize, then, for example to yield curves:
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because of the common practice of representing the sensitivities using Greek letters. For example, the delta of an option is the value an option changes due to a $ 1 move in the underlying commodity or equity/stock. See
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is a critical metric that regulators and product control within a bank alike pay attention to. Any residual P&L left unexplained (PnL unexplained) would be expected to be small
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is the day-over-day change in the value of a portfolio of trades typically calculated using the following formula: PnL = Value today − Value from Prior Day
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This method calculates the value of a trade based on the current and the prior day's prices. The formula for price impact using the revaluation method is
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Depreciation = value at the beginning of the year (opening balance) + purchases in the year − value at the end of the year (closing balance)
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classified for a risky position are incomplete, or the models used for sensitivities calculations are incorrect or inconsistent. See
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Column 5: Impact of prices – This is the change in the value of a portfolio due to changes in commodity or equity/stock prices
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A PnL explained report will usually contain one row per trade or group of trades and will have at a minimum these columns:
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There are two methodologies for calculating Pnl
Explained, the 'sensitivities' method and the 'revaluation' method.
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Column 7: Impact of volatility – This is the PnL due to changes in volatilities. Volatilities are used to value
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Column 3: PnL unexplained – This is calculated as PnL minus PnL explained (i.e., column 1 minus column 2)
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Column 9: Impact of cancellation / amendment – PnL from trades cancelled or changed on the current day
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the daily fluctuation in the value of a portfolio of trades to the root causes of the changes.
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Impact of prices = (trade value using today's prices) − (trade value using prior day's prices)
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The sensitivities method involves first calculating option sensitivities known as the
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Column 6: Impact of interest rates – This is the PnL due to changes in interest rates
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Information and examples from PnL Explained
Professionals Association's home page
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Column 1: PnL – This is the PnL as calculated outside of the PnL Explained report
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Impact of prices = position sensitivity × move in the variable in question
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Column 8: Impact of new trades – PnL from trades done on the current day
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is thus a metric that, when large, may highlight instances where the
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Column 4: Impact of time – This is the PnL due to the change in time.
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Column 2: PnL explained – This is the sum of the explanatory columns
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Risk factor (finance) § Financial risks for the market
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Pantz, Julien 2013 PnL prediction under extreme scenarios
398:"Why P&L Attribution? Or judging weathermen..."
281:for some small-value assets such as "loose tools".
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319:Financial risk management § Banking
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