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Product Model - Commodity Payout Underlier

Background

The Asset Refactoring initiative (see #2805) is seeking to improve the Product Model to address some long-standing issues and to ensure the continued extensibility to additional financial products and markets. A proposal has been agreed - through a cross-industry Task Force - to implement this remodelling in the CDM.

This release includes an adjustment following three planned major tranches of work in CDM 6 to implement the refactored model.

What is being released?

In the original Asset Refactoring scope, the underlier on CommodityPayout was changed from being type Product to type Commodity.

This has proven to be too restrictive in DRR, where Commodity Payout can operate on a basket or index. Therefore, the data type of the underlier has been updated to Underlier with the added benefit of making it consistent with the other payouts.

To ensure that the underlier is indeed commodity-related, conditions have been added to force the underlier attribute to reference a commodity-related underlier. The CommodityUnderlier condition uses a switch statement to evaluate whether the underlier is an Observable or Product, and to assess it accordingly. A new function ObservableIsCommodity is used to standardise this and handles the different choice types of observables and the potential recursive nature of baskets.

Backward-incompatible changes

The change to the data type of the underlier attribute is not backward-compatible.

Review directions

The changes can be reviewed in PR: #3277 or in Rosetta.

Infrastructure - Dependency Update

What is being released?

This release updates the rune dependencies.

Version updates include:

Review directions

The changes can be reviewed in PR: #3302

CDM Model - Collateral Criteria AND/OR Logic

Background

This release enhances the modelling of Eligible Collateral Criteria to enable the use of complex AND, OR and NOT logic in the combination of terms within a criteria.

Eligible Collateral is currently modelled using the data type EligibleCollateralSpecification which can contain many EligibleCollateralCriteria, which are themselves constructed from CollateralTreatment, IssuerCriteria and AssetCriteria. The attributes isIncluded (true/false) and qualifier (all/any) can be used to model some simple cases of and / or logic in the construction of certain parts of the criteria (eg AgencyRatingCriteria).

Members of the CDM Collateral Working Group have requested that the functionality is extended to enable more complex combinations of AND and OR logic across multiple terms. This has been implemented by combining all the criteria terms in a single new data type CollateralCriteria. This is a choice data type that includes all the criteria terms that previously appeared in AssetCriteria and IssuerCriteria. As each term can only occur once, in its simplest form, only one criteria can be specified. If more than one criteria is required, it is necessary to specify whether the terms are all required or only that any of them are required. The two new data types AllCriteria and AnyCriteria also appear on CollateralCriteria to enable this. If all terms are required, ie AND logic, then the terms should be linked in a parent AllCriteria. If any of the terms are required, ie OR logic, then the terms should be linked in a parent AnyCriteria. These two terms can be used iteratively to create complex logic between terms. Additionally, the data type NegativeCriteria can also be used in the logic to apply a NOT function to a single term.

What is being released?

This release implements AND, OR and NOT logic between the Collateral terms.

There is no longer a separate data type for each of asset and issuer criteria; they have been combined in a single new data type called CollateralCriteria.

  • The new choice data type CollateralCriteria replaces the removed AssetCriteria and IssuerCriteria data types as the combined type.
  • The attributes issuer and asset on CollateralCriteriaBase have now been replaced with the single one collateralCriteria which is the specific criteria that applies. It can be created using AND, OR and NOT logic, and both asset and issuer characteristics.
  • The conditions on CollateralCriteriaBase have been updated and now use the new CriteriaMatchesAssetType function.
  • The data type ConcentrationLimit has been refactored to reduce the cardinality of concentrationLimitCriteria to 1 and the condition is updated accordingly.
  • The condition on ConcentrationLimitCriteria has been updated to reflect the combined CollateralCriteria.
  • Three new logic data types have been introduced to support the AND, OR and NOT logic of terms and are used in CollateralCriteria:
    • AllCriteria
    • AnyCriteria
    • NegativeCriteria,
  • The following new data types have been introduced and are used in CollateralCriteria:
    • IssuerCountryOfOrigin
    • AssetCountryOfOrigin
    • IssuerName
    • IssuerAgencyRating
    • SovereignAgencyRating
    • AssetAgencyRating
    • AssetMaturity
    • ListingExchange
    • ListingSector
    • DomesticCurrencyIssued.

Changes to remove the old model:

  • The data types AssetCriteria and IssuerCriteria have been removed.
  • The qualifier attribute has been removed from AgencyRatingCriteria as it is now redundant.
  • The data type ListingType has been removed.

In addition, the following functions have also been updated to reflect the new modelling:

  • CheckEligibilityByDetails which now references a new function CheckCriteria which takes a single criteria and evaluates it against the criteria. This function handles the recursive use of AND and OR logic.
  • CheckAssetCountryOfOrigin has been made more generic as the country of origin can apply to both an Issuer and an Asset; it has been renamed to CheckCountryOfOrigin.
  • CheckMaturity has been updated to reflect the new modelling of AssetMaturity.
  • CriteriaMatchesAssetType has been implemented to enable the enforcement of conditions on AssetType to be evaluated correctly.

Previously, the function Create_EligibleCollateralSpecificationFromInstruction enabled some limited automation of the creation of multiple Criteria with slightly differing logic. As this function no longer aligns to the new design, it has been deleted. The following new functions have been added in its place:

  • CloneEligibleCollateralWithChangedTreatment: Creates a new Eligible Collateral Specification based on an input specification but with one changed criteria with a changed treatment.
  • CreateAndCriteria: Combines multiple CollateralCriteria together using AND logic.
  • CreateOrCriteria: Combines multiple CollateralCriteria together using OR logic.

Some changes have been made to the Java supporting code behind this functionality; see the changes in the following files:

  • rosetta-source/src/test/java/org/isda/cdm/functions/FunctionInputCreationTest.java
  • rosetta-source/src/main/java/org/finos/cdm/CdmRuntimeModule.java
  • rosetta-source/src/main/java/cdm/product/collateral/functions/MergeEligibleCollateralCriteriaImpl.java.

Finally, the CDM documentation has been updated to reflect all the above changes.

Backward incompatible changes

Most of these changes are not backward compatible as they remove or significantly alter data types and attributes.

The expectations have been regenerated. In addition, the test files used for the Check Eligibility and Merge Critera functions have also been updated.

Review Directions

Please inspect the changes identified above for the functions and types in the Textual Viewer Rosetta.

Please inspect the changes to option samples using the Ingestion Panel in Rosetta.

The changes can also be reviewed in PR: #3296.