Validation Task Force 16 August 2001 Curve Validation

Validation Task Force, 16 August 2001 Curve Validation Process CRG & GRMO Curve Selection Commodity Risk Groups (CRG) Curve Data Gathering Curve Comparisons Delta Analysis P&L or Position Subjective attributes New curves List of curves to validate Curve data @ comparison date Curve Grabber tool Curve data @ validation date CRG & Trader Explanation & Reporting CRG validation report Curve @ comparison date vs. Curve @ validation date P&L Variance Explanation for significant delta Broker quotes True. Quote Amerex Explanation for staleness Stale Curve Report 1 Evaluation & Summary Review CRG reports Visual inspection Regression Curve vs. Broker quotes GRMO Prepare summary validation report

Validation Task Force, 16 August 2001 Curve Selection Functionalities n Stale curve report (initiating development) – – n Historical band (initiating development) – n Listing of curves associated with a portfolio/book Also shows whether the curve is a primary or a secondary curve (and which primary curve it is mapped to) By trader (next phase) – n Same as P&L sensitivity above but using positions (benchmark, delta, gamma, gross) Curve mappings (in testing) – – n ranking of curves based on P&L contribution to a portfolio Option to look at full term, or by reference date Position sensitivity (initiating development) – n Shows max and min historical boundaries P&L sensitivity (initiating development) – – n Listing of curves unchanged for X number of days Option to specify which part of the curve to examine Implementable on current tools but will have to structure portfolios by trader “Big” shifts (next phase) – Visual inspection for now 2