Methodology note
FX conversion and base currency
A percentage limit adds positions together, so they must all be in one currency first: the portfolio's base currency. Each foreign position is converted at a stated rate, from a stated source and time. A sum of amounts in different currencies is not a percentage of anything.
currency_exposure · Collateral, margin, repo and securities-lending limitscollateral_exposure · Derivative exposure limitderivative_exposure · Currency hedge ratiohedge_ratioOne currency before any ratio
Convert every position to the base currency at one rate set before measuring. A euro bond and a sterling gilt can only be weighed against each other once both are in the same unit.
The registry's derivative measures are stated in portfolio currency. The equivalent underlying exposure and the DV01 fields both expect it.
Choosing the rate
Use the same rate source and time as the valuation the limit relies on, usually the fund's valuation point or the custodian's close. Record both with the result.
Mixing a morning rate with closing prices creates differences that look like exposure changes but are only timing.
Pitfall: amounts counted as stated
Some inputs arrive in another currency than the book's. In the registry's collateral template, a collateral or margin figure in another currency is counted as stated, not converted. The result says how many were.
Check that count on every result, because a margin figure in yen counted as pounds is wrong by a factor of about 200.
Currency limits and the base
A currency band measures each currency's weight in the base-currency total. In the example, a 220 euro bond in a 1,000 sterling book is 22%: past a 20% warning, inside a 25% hard limit.
The base currency itself is usually left unconstrained, though a band can set a minimum for it.
Worked example
A euro bond worth 220 in a 1,000 sterling book is 22% euro exposure: past the 20% warning, inside the 25% maximum.
Rule template:currency_exposure bands: currency=EUR, hardMax=25, warnMax=20
| Holding | Currency | Market value |
|---|---|---|
| German Bund | EUR | 220 |
| UK gilts | GBP | 780 |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| EUR | Warning | 22% | ≤ 25% warning ≤ 20% | 3% -2% to warning | ABOVE_WARNING_MAXIMUM |
ABOVE_WARNING_MAXIMUM: The measured value has crossed the early-warning maximum but not the hard limit.
Largest contributors: EUR → German Bund 22%
Computed at build time by the Acclimetry rule engine (backend commit 8197063); the same code runs in the product.
Questions
Which FX rate should the policy name?
The rate used for the portfolio's own valuation, so that limits and reports agree. Name the source and the time of day.
Do hedges change the base-currency total?
Only by their market value, which is often small. Their currency effect shows in the currency bands, under the offset treatment.