Welcome to Flametree Investment Analytics
FIA VERSION 2.0 RELEASED
FIA v2 offers the following new functionality:
USER-DEFINED RISKS AND RETURNS
FIA calculates all returns due to yield curve levels, including carry, parallel and non-parallel curve shifts, and sector spread changes. However, we recognise that many portfolios show returns from other market risks, including optionality and inflation.
To measure these effects, FIA now uses external risk functions to calculate return from additional sources of risk. Flametree provides a comprehensive set of risk libraries that provide a wide range of additional attribution returns available to all our users, including optionality, inflation and paydown.
These libraries are called via the OpenRisk interface and may be defined and extended by our users. For instance, your preferred approach to embedded option pricing can be integrated into FIA’s attribution reporting by defining suitable risk functions.
The ability to use user-defined risks is perhaps the most far-reaching improvement to FIA, as it future-proofs the system and ensures that FIA will continue to mirror your risk management process, both now and in the future.
For first-principles attribution, FIA makes extensive use of security-level pricing routines. These are now called from external libraries via the OpenPricing API, rather than being part of the core application.
This carries several major advantages for our clients:
- Security pricing can be updated and extended without a new release of the core program.
- New security types may be quickly defined and used in attribution reporting.
- Proprietary or third-party pricing libraries can quickly be integrated into FIA for use in attribution reporting.
Naturally, perturbational (risk-number driven) attribution is still supported, as is a combination of both approaches.
FLEXIBLE YIELD CURVE HANDLING
Any security in your portfolio can now use any combination of yield curves for attribution. FIA allows the user to mix and match swap curves, risk-free curves, credit curves and sector curves.
In addition, you can now use par curves or zero curves for attribution, depending on the type of pricing to be performed. In either case, FIA’s unparalleled range of attribution capabilities remains available.
We have also made a wide range of smaller improvements and upgrades. These include automatic calculation of z-spreads, Brinson interaction, and the ability to use file header labels – as well as a revamped GUI and a wider range of demonstration portfolios.
In addition, a combination of code refactoring and new compiler technology means that the program shows a substantial increase in speed.
Welcome to Flametree's web site
This website contains information about Flametree Investment Analytics Ltd and our flagship fixed income attribution product, FIA.
Attribution continues to be a leading topic in fixed income management. Attribution has enormous value in generating profits and increasing funds under management. Yet existing systems are expensive, difficult to use, and require major investments in time, money and expertise to set up and run.
FIA provides a powerful new approach to solving this problem using the least amount of data possible without compromising on depth of analytics or instrument coverage. Designed by a leading industry expert, FIA's capabilities equal or surpass those of any other attribution system in the marketplace.
Best of all – it’s straightforward to use. A typical first report takes less than 30 minutes to set up and run. FIA
- is designed to leverage established performance measurement systems, not to replace them;
- does not require price, duration, yield or other time-dependent security data;
- has a zero deployment footprint and no software setup or external data integration, resulting in minimal setup and running costs;
- is usable by non-specialists;
- supports attribution at daily, weekly or monthly intervals;
- handles a wide range of security types, risk types and attribution options;
- supports carve-outs and subportfolios to any depth and complexity;
- supports both yield curve pricing and perturbational attribution models;
- offers extensive reporting options, ranging from raw numbers to pre-formatted reports – all generated for you on our server;
- is affordable, quick to set up, and has very low data requirements. You can run FIA from a netbook.
- is extremely fast. On a typical customer-supplied portfolio FIA ran in 4 seconds, compared to the 20 minutes required by a leading industry competitor's product - a speed increase of 300 times.
The result is that FIA allows you to focus on your core portfolio management skills, instead of becoming bogged down in technology issues.
Not sure if FIA will meet your needs? Try the system out on-line for free for 30 days without obligation. Or contact us for a demonstration, using your portfolio data.
New features (May 2016)
FIA now calculates DTS attribution
FIA can now calculate Duration Times Spread (DTS) attribution. DTS is a measure of spread risk for credit portfolios that is proportional to the volatility of a corporate bond. FIA now allows investment decisions made in terms of this quantity to be measured.
A white paper on how FIA implements DTS is available here.
New features (September 2015)
FIA now calculates security-specific returns
If your weights and returns files contain values for YTM (Yield To Maturity), FIA can now calculate return generated by changes in the spread between this quantity and each security's pricing curve.
Such return is generated by security-specific factors; hence it is called security-specific return.
Security-specific return was previously assigned to Residual return.
To enable security-specific returns in your reports, use the Security-specific check box in the GUI, or enable the SecuritySpecificReturns switch in your configuration file or API call.
New features (June 2015)
API now allows FIA to be called from multiple languages
Version 1.13 of FIA now has a full programming API that allows the attribution engine to be embedded in other applications. Using supplied wrappers, FIA can be called from C++, C-Sharp, Python and Java.
Please refer to The Flametree API guide for more details and examples.
New features (May 2015)
Ex-post tracking error
FIA now generates ex-post tracking error reports.
If the TrackingErrorReport switch is on, FIA calculates a report that shows the ex-post tracking error contribution of each security to portfolio and benchmark, aggregated by sector. Relative tracking error is also displayed at the same levels.
Tracking error is also decomposed at the risk level, so that contribution to TE from the current risk decomposition is shown.
New features (March 2015)
We have now posted our development roadmap to show what future enhancements and features are planned for FIA.
Please contact us if you have particular requirements that you would like to see implemented.
New features (February 2015)
User-defined pricing functions
Versions 1.13 and beyond of the Flametree attribution engine now offer the capability to use user-supplied pricing functions.
This enhancement significantly expands the range and depth of attribution analyses available to our users, and allows proprietary pricing models to be run in conjunction with Flametree’s wide range of attribution reports.
Please contact us for more information, technical specifications, and sample code.
New features (December 2014)
FIA can now calculate inflation returns directly from CPI and RPI indices. Inflation indices are supplied in a CSV file specified using the CPIFile parameter. Indices are then linked to particular inflation-linked bonds by setting the CPIIndex security definition. This substantially reduces the data maintenance requirements for such securities.
Ex-post risk analysis
FIA now calculates a wide range of ex-post risk statistics, including volatility, tracking error, information ratios, Jensen alpha, beta, Sharpe, Treynor, Calmar and Sortino ratios, omega, skewness and kurtosis.
New features (November 2014)
Yield curve report
FIA can now generate a new yield curve report CurveReport, showing how the sovereign curve for each market used for attribution has changed over time.
Movements in the sovereign curve are decomposed using the same decomposition as the attribution analysis. For instance, if shift, twist and curvature have been selected, the change due to each is displayed at each sample date.
The user can customize which tenor points along the curve are shown by using the TenorList setting.
New features (June 2014)
To complement the availability of our various top-down attribution models, FIA now also offers hybrid attribution.
For market value attribution, the system firstly calculates the return made by asset allocation decisions. All bottom-up returns are then rescaled and treated as stock selection returns. This allows the user to measure the combined effects of both allocation decisions and interest rate (duration, credit, etc) decisions on the same portfolio.
For duration allocation attribution, a slightly different calculation is used. The duration allocation algorithm firstly calculates a global direction return, then one or more sector allocation returns, and a selection return. The selection return is regarded as the sum of all bottom-up fixed income returns.
Whichever attribution model is used, the sum of all attribution returns is the total active return of portfolio over benchmark.
Please refer to our white paper for more information.
New features (April 2014)
The new SmoothingModel switch now allows the user to select between the two most commonly used attribution smoothing algorithms: Carino and geometric aggregation.
New features (December 2013)
Duration and market allocation attribution
FIA can now perform duration allocation attribution, using a generalization of the van Breukelen model. This allows returns due to credit spread allocation to be calculated and decomposed into market direction, duration asset allocation and duration stock selection returns.
Both market allocation and duration allocation attribution can now be run at any number of levels. For instance, if your investment process involves allocation decisions at the country level, and then at industry sector level within each country, then there are two levels of allocation decision in action. FIA allows you to measure the return made by each decision in order, correcting the industry sector return to remove the effect of the country allocation decision.
FIA even allows you to run both types of analysis simultaneously. For instance, you might wish to run market value allocation attribution on return arising from carry, and duration allocation attribution on return driven by curve and credit spread movements, in order to examine trade-offs made by seeking duration return at the expense of carry (or vice versa).
If you are a registered user, please contact us to request a copy of our white paper on market and duration allocation attribution. Comprehensive worked examples are included.
New features (September 2013)
The FAQ page now provides a large amount of extra information about FIA.
New features (May 2013)
FIA now calculates paydown returns for sinking securities such as MBS and ABS.
FIA can now run either with or without futures offset cash holdings, depending on the holdings data supplied.
In addition to the running yield/pull-to-par decomposition of carry return, FIA also offers a credit carry option in which carry return is decomposed into risk-free carry and credit carry.
Attribution editor utility
FIA now includes a graphical interface that allows the user to
- set up attribution analyses using a point-and-click interface
- run attribution
- define and execute complex batch jobs.
New features (April 2013)
New attribution models
FIA includes the ability to run attribution using the van Breukelen model, the successive portfolio model, and the mixed GRAP model.
FIA is now available on 32-bit and 64-bit Windows, several distributions of Linux (Red Hat, Centos, Ubuntu), Solaris, and Sun SparcStation.
New features (January 2013)
Reports can now be displayed in aggregated or lookthrough mode, using the new LOOKTHROUGH switch.
In aggregated mode, any subportfolios contained within your portfolio have their returns and risks displayed as if they were securities in their own right.
In lookthrough mode, holdings of securities held within subportfolios are rolled into the holdings of the main portfolio and displayed on that basis.
New features (November 2012)
FIA can now hedge benchmarks automatically. Set the HedgeCurrency field to the currency against which you wish to hedge, and the program will insert synthetic forward hedge positions so that the benchmark is only exposed to movements in that currency. Partial hedging is also available via the HedgeRatio setting.
Many benchmark vendors supply aggregated index values for hedged benchmarks, but the details of the hedging calculations are seldom published. If the user supplies these values to FIA via the HedgeFile parameter, the hedged benchmark returns will be modified slightly at the security level to ensure that overall hedged benchmark returns match the published returns exactly. The details of the calculation are available to subscribers.
Improved security setup format
In response to customer requests, the format of FIA's security definition file has been modified. The same column is now always used for similar quantities such as yield curve, coupon and maturity date, irrespective of the security type. See the revised securities page for more information.
New features (October 2012)
Embed the Flametree engine into your own application
FIA can now be linked into your in-house performance application using a simple API call.
Override local currency returns
FIA can now calculate local currency returns from supplied base currency returns and a set of FX rates. Use this option if your existing performance system does not supply local currency returns, or if the returns are unreliable.
New features (May 2012)
Asset allocation return
For top-down investment processes, FIA now makes the Brinson equity attribution model available to measure the effects of asset allocation decisions on overall portfolio return. The program supports the industry-standard Brinson-Fachler and Brinson-Hood-Beebower asset allocation models.
A common source of active return is pricing discrepancies between securities that are held in both the portfolio and the benchmark. FIA now allows the user to isolate this return and report it in a separate category.
New features (April 2012)
Custom sector allocation
FIA now allows an unlimited number of custom sectors to be defined on a per-security basis. These sector classifications can be used for asset allocation and custom reporting.
Drill-down reports in Excel
FIA now generates exposure and risk reports that use Excel's grouping capabilities to summarise reports, while making it easy to drill-down into data to identify the specific causes of investment returns without using long paper reports.
New features (March 2012)
Sector and country curve attribution
Use the new Sector curve field in the security definition file and the SpreadAttribution switch to perform country spread or sector spread attribution on your portfolio.
New features (February 2012)
FIA now has the ability to direct residuals, or security-specific returns, to custom buckets. This is accomplished via use of the new Residual field in the security master file.
Explicit credit ratings are no longer required for all securities. Securities with a blank or a space in their credit rating field are now treated as unrated.
New features (December 2011)
Interactive graphical user interface (GUI) now available
The configuration editor is a stand-alone Windows application that can be used to set up and edit attribution configuration files. If FIA has been installed on the same system, the GUI will also run FIA using the selected settings.
Par curve to zero curve conversion utility now available
FIA uses zero curves to price securities, but data is frequently only available as par curves, particularly for credit curves. We now provide a conversion utility that reads data from spreadsheets, performs the par to zero conversion automatically, and exports yield curve data in the format required by FIA.
New features (October 2011)
- Attribution calculations may now be allocated across multiple cores on the host PC
- Automatic generation of static and animated graphical reporting files from FIA output, using the free 'R' statistical package
- Comprehensive documentation now on-line
New features (August 2011)
- Principal component analysis for decomposition of curve movements
- Convexity attribution
- Optionality attribution
- Static risk reports, showing exposures, modified duration, convexity, YTM and running yield, both in absolute terms and relative to benchmark
Why a wiki?
One of our guiding principles in writing FIA was to be as transparent as possible about how the system works. In particular, we wanted to avoid a 'black box' approach to analytics provision, where the specifics of a calculation or an algorithm are treated as a trade secret. Instead, we believe a policy of openness delivers the best possible results for our customers.
We have therefore taken the approach of putting all information about the system - including documentation, white papers, and technical specifications - online, rather than using a more traditional graphically oriented website. This also allows us to ensure that the system's documentation is always up to date.