Portfolio Analyzer Configuration 101

3 Li kes 770 Views 1 C omment

When I was asked “How can I measure my investments in TRM ?”, I didn’t know where to start.

The answer is Portfolio Analyzer (FIN-FSCM-TRM-PA).

Finding information on what it does and how to interpret its result was kind of tricky. There is not too
much information on the analysis methods and a lot of new Financial terms. A reference of a
document from Gopa Kumar and sap note 803510 with little information made me do this series of
documents which I expect to describe the solution.

Portfolio Analyzer (FIN-FSCM-TRM-PA) calculates and monitors the Rates of Return (yields) on your
Financial Assets.

The Portfolio Analyzer allows you to measure the profits from investments from different
perspectives and using different methods. The calculations are based on the structure of your
portfolio in the portfolio hierarchy. You use characteristics to define the tree-like structure. For
example, you can choose the sector, country, trader, department, or product type to define the
hierarchy. In this way, you can organize your portfolio flexibly in different aggregation levels and
calculate rate of return key figures for each of these levels. With the reporting functions, you can
display results for each node that you have defined in the portfolio hierarchy. You can drilldown to
the data stored at the single transaction level.

Official Product documentation SAP Help Portfolio Analyzer

There are different ways to calculate Rates of Return.

 Dietz
 Modified Dietz (MDietz)
 Money Weigthed Return Rate (MWRR)
 Time Weighted Return Rate (TWRR)

Each method analyzes yields from different perspective. They all consider inflows and outlfows in
the investment but the analysis method differs.

 Dietz analyzes inflows and outlofws

 MDietz analyzes inflows and outflows but considers the point of time (date) they occurred
 MWRR analyzes anual investment (Internal Rate of Return – IRR)
 TWRR analyzes investment from the point of view of the Market

A more detailed descripcion of each method is on Yield Rate Analysis and Debug

These series of document describes a real scenario configuracion for Portfolio Analyzer. It is divided
in 4 documents

Base Analyzer Configuration

Portfolio Analyzer Configuration

Portfolio Analyzer Usage

Yield Rate Analysis and Debug

We start configuration with Base Analyzer.

The configuration in Base Analyzer applies to Market Risk Analyzer (FIN-FSCM-TRM-MRA) as well.

Base Configuration for Analyzer

IMG: Financial Supply Chain Management -> Treasury and Risk Management -> Basic Analyzer
Settings -> …..

1) Activate Analysis Characteristics and Structure

… -> Reporting Characteristics -> Copy Sample Customizing Settings -> Analysis Characteristics
and Structure: Activate Sample Settings

2) Define Analysis Characteristics

… -> Reporting Characteristics -> Define Analysis Characteristics

After characteristics have been defined, Activate them

All fields can be defined as characteristics

3) Define Analysis Structure

… -> Reporting Characteristics -> Define Analysis Structure

Sometimes you need to generate Program Enviroment, specially after you apply some notes to
correct functionality on Portfolio Analyzer

After the Strcuture is defined, you must Activate it. Only 1 structure could be active at one time.

4) Edit Segment-Level Characteristics

This is the Segment Level Reporting and will be used in Portfolio Hierarchy

…-> Reporting Characteristics -> Edit Segment-Level Characteristics

5) Define Characteristic Values

You set the allowed values for Characteristics (in case needed)

…-> Reporting Characteristics -> Define Characteristic Values

6) Transport Characteristic Values

Transport Structure and Characteristics to other Client

…-> Reporting Characteristics -> Transport Characteristic Values

7) Maintain General Derivation Strategy

Define Values that are filled on all transactions, ie: Analysis Active Indicator , Currency, Country, etc

… -> Automatic Integration of Financial Objects in Transaction Master Data -> Maintain General
Derivation Strategy

8) Define Derivation Characteristics for OTC, Securities, ForEx

… -> Automatic Integration of Financial Objects in Transaction Master Data

…. -> Money Market

…. -> Activate/Deactivate Financial Object Integration

…. -> Define Derivation Strategy

…. -> Foreign Exchange

…. -> Activate/Deactivate Financial Object Integration

…. -> Define Derivation Strategy

…. -> OTC Derivatives

…. -> Activate/Deactivate Financial Object Integration

…. -> Define Derivation Strategy

…. -> Securities and Listed Derivatives

…. -> Activate/Deactivate Financial Object Integration

…. -> Define Derivation Strategy for Class Position in Securities Account

…. -> Define Derivation Strategy for Security

…. -> Activate/Deactivate FO Integration for Securities

…. -> Subledger Positions and Subpositions

…. -> Activate/Deactivate Financial Object Integration

…. -> Define Derivation Strategy for Subledger Positions and Subpositions

Activate/Deactivate Financial Object Integration

All these Derivation have options for BADIs which could improve the logic for rules

Derivation-type-enchancement

In Securities you have to consider a derivation strategy for transactions and for Securities itself,
FTR_CREATE & FWSO/FWZE. Fields with information for derivation are not the same, so you may
need help of BADIs.

For more information on Derivation TRM Derivation Index

9) Define Exception Handling for Characteristics

Some fields can not be filed at time of creation (like Transaction Number). they cna be filled later
with derivation

…. -> Automatic Integration of Financial Objects in Transaction Master Data -> Define Exception
Handling for Characteristics
10) Define Valuation Rule

It configures Valuation Rule which can be derived with logic or set manually. It could be assigned
per Product Type, Transaction Type, etc

…. -> Valuation -> Define Valuation Rule

11) Define and Set Up Evaluation Types

…. -> Valuation -> Define and Set Up Evaluation Types

trx: CFMEVAL
You can configure General Rules for all transactions/securities or pero Valuation Rule.

Each Valuation Rule has its Curve Types, in the case of Portfolio Analyzer we will use Yield Curve
Type. We will analyze interest in the next step.

IMG: Financial Supply Chain Management -> Treasury and Risk Management -> Basic Functions -
> Market Data Management -> Manual Market Data Entry -> Interest
Evaluation Controls define parameters for Evaluation.

Sec.Price Type: Security Type Price (trx: FW17)

Maximum Age of Price: Maximum days between a price is entered in FW17

Include CashFlow on Horizont: Include the day of the Horizont in Analysis

Accrued Int.Calc: Include Hor: Include the day of horizont in Accrued Interest
Starting ECC 6 Ehp4, in Money Market Transactions NPV can be calculated by Nominal + Interest
instead of Yield Curve. Also you can include scheduled flows, but it would be a theoretical analysis
as in OTC transactions there could be delays in repayments and it will affect yield.

On the Valuation Rule, for the Securities you define to Calculate Accrued Int on the Security or
not. Calculate Theorical Price is used to read Interest Yield Curve instead of Security Prices for
determination of NPV.
12) Define Yield Curve Type

Define Interest Yield Curve for NPV calculation

IMG: Financial Supply Chain Management -> Treasury and Risk Management -> Basic Functions -
> Market Data Management -> Master Data ->Settings for Ref. Interest Rates and Yield Curves

->Define Reference Interest Rate

-> Define Yield Curve Type

Define Reference Interest Rate

All values are important for Yield Curve Interest

Define Yield Curve Type

13) Assign Cash Flow Indicator for Securities with Update Types

…. -> Valuation -> Cash Flow Indicator -> Assign Cash Flow Indicator for Securities with Update
Types
Each Update Type in Security Management must have a CashFlow Indicator

14) Transactions with Flow Types

Assign Flow Types to Transactions. You can generate them automatically and then check
for transaction types

….-> Valuation -> Cash Flow Indicator -> Transactions with Flow Types

-> Generate Default Automatically

-> Define Assignment Manually

A Fictitiuous Cashflow is not considered in NPV Calculation.

It is considered in FRA, Swaps, Derivatives

15) Define Filters for Portfolio Hierarchy

IMG: Financial Supply Chain Management -> Treasury and Risk Management -> Market Risk
Analyzer -> Results Database -> Define Filter

trx: AFWFL
You define filter for a Portfolio Hierarchy. You create filters for trx RAEP1, RAEP2, PAEP1,PAEP2
which can be transported or “Test Selections” which are for the Client and do not get transported.

16) Define Portfolio Hierarchy

IMG: Financial Supply Chain Management -> Treasury and Risk Management -> Basic Analyzer
Settings -> Define Portfolio Hierarchy

trx: AFWPH
Define the structure as the Segments in 4).

Sort is the order on which they will be grouped.

All characteristics must have values.

You could group values with trx: JBWH

Transport Hierarchy in trx JBWH

The Base Configuration for Portfolio Analyzer is complete.

You have learned to :

 Defined Data Structure for analysis in Market Risk Analyzer and Portfolio Analyzer
 Configure currencies for Yield analysis with Interest Rateds
 Define Valuation Rules which controls the parameters for analysis (Yield curves, Security
Prices, Money Market transactions
 Portfolio Structures which as used for reporting
 Portfolio Filters to narrow analysis data

The next document we will learn to

 Configure Update Types for analysis

 Configure Key Figures for analysis
 Define layouts for analysis

We continue with Portfolio Analyzer Configuration

Recomendations
 Create 1 analysis structure. You could create more than one, but only one is active at a time
and an Analysis Structure consumes data space.
 Add the Characteristics or Segments you want to report in Portfolio Hierarchy
 Test Characteristics Derivation by creating a transaction and check all required fields are
filled
 Create one Evaluation Type in trx CFMEVAL with different Valuation Rules according to your
needs
 In OTC transactions, it may be wise to calculate NPV based on “nominal + interest” instead
of Yield interest Rates in trx CFMEVAL. Consider only Real flows.
 Identify all Flows and Transaction Types you need to analysis. In general they are payments
to/from the CounterParty (TR0151 BP role) or Security (TR0150 BP role, trx FWZZ)
 Create as many Portfolio Hyerarchies as reporting dimensions you need. The more Portfolio
Hierarchies, the more resources (storage/process time) needed
 Use filters to limit analysis data