SCR Calculator User Manual

The 'Settings' Tab

The 'Settings' tab provides essential parameters and controls for optimisation. It is organised into several mandatory and optional sections, as shown in the screenshot below:

(Open this image in a new tab for an enlarged view)

• Populate: Populates all input fields in this tab. Defaults are typically based on the current portfolio's values.
• Clear: Clears all input fields in this tab.
• Save: Saves the input values to a "Settings" spreadsheet.
• Load: Loads a "Settings" spreadsheet to populate the input fields.

The user must select one of the following four options:

• Maximise Yield-to-Worst: The most common fixed-income portfolio optimisation objective.
• Maximise OAS: Focuses on Option-Adjusted Spread, useful when liabilities are discounted using risk-free swap or government bond curves.
• Minimise Turnover: Ideal when aiming for higher yield than the current portfolio while limiting turnover.
• Other: Allows custom objectives based on user-defined fields, such as:
  • Maximising Book Yield by selecting it as a weighted-average objective if included in the inputsheet.
  • Maximising ESG Scores if the "ESG Score" column is provided, using the weighted-average method.
  • Maximising cashflows for a specific year by creating a custom cashflow column and using the proportional-sum method.
  • Minimising realised gain for tax purposes by maximising the Unrealised Gain/Loss column with proportional-sum selected.

This section includes two key controls:

• Min Total Weight % and Max Total Weight %:
  • Set both to 100% to maintain the portfolio size.
  • Enter a consistent value (e.g., 120%) to grow or shrink the portfolio size to a fixed level.
  • Set a range (e.g., 60%-120%) to allow the optimiser to search for an optimal portfolio size. The final weight will be displayed in End Weight % after optimisation.
• Max Turnover: Default is 30%. Defines the maximum percentage of the current portfolio that can be sold. New purchases are not counted as turnover.

This section includes commonly used constraints, such as:

• Minimum Portfolio Duration and Maximum Portfolio Duration: Weighted-average duration range. Defaults to ±0.5 around the current portfolio's duration.
• Minimum Maturity Date and Maximum Maturity Date: Asset-level maturity constraints.
• Minimum Portfolio OAS: Weighted-average Option-Adjusted Spread lower bound.
• Maximum Portfolio DtS: Upper bound for weighted-average Duration-times-Spread.
• Minimum Portfolio-Average Rating: Weighted-average credit rating minimum (notch-level).
• Minimum Rating of Each Asset: Lowest rating allowed for individual assets.
• Maximum Non-IG Assets Weight and Maximum Subordinated Assets Weight: Constraints on portfolio composition.
• Minimum Portfolio Yield-to-Worst: Minimum Yield-to-Worst of the portfolio.
• Minimum Bond Price: Filters out near-default bonds with low prices and high yields.

Applicable if the Unrealised Gain/Loss column is included in the inputsheet. This section allows the user to manage P&L crystallisation during rebalancing with Floor and Cap values.

Requires the Amount Outstanding column in the inputsheet. Constraints include:

• Min Amount Outstanding: Minimum liquidity threshold (in millions).
• Max % A.O. Bought: Maximum allowable purchase of any issuance’s outstanding amount.

• DM Country and EM Country: Allocation caps for developed and emerging market countries.
• Sector Level 1,2,3,4: Allocation caps for industry sectors.

Set concentration limits based on asset ratings or notches, if needed.

Define caps at the ticker level. The user can choose to rate issuers by the highest rating of their issues or their weighted average. Default is 'Highest.'

Applicable only if relevant columns are included in the inputsheet. Defaults are based on the current portfolio's values.

Allows constraints on arbitrary columns.

• For numeric columns, constraints can be based on weighted averages or proportional sums. The latter is suitable for cashflow constraints.
• For non-numeric columns, users can select specific entries to define constraints on their combined weights.