Whitepapers

Profit and Loss Attribution Analysis

P&L Analysis for a Linear and a Non-Linear Portfolio

Overview

Most companies with a dynamic portfolio of assets usually analyze their daily / monthly P&L in great detail. One of the most commonly desired analyses is P&L Attribution – which can show the traders a breakdown of various factors which have affected the P&L.

The attribution can give a clear picture of which fundamental factors have impacted the P&L positively or negatively and by how much – and the analysis can be done for any time period. The results can then be checked against trader’s views on each of those fundamental factors before they built / changed the portfolio to its current shape. It not only acts as a check for the traders, but also as a feed-forward mechanism for the teams who can see clear patterns emerging in the underlying fundamentals and their calls on those fundamental factors.

What's Inside

This whitepaper on P&L Attribution Analysis aims to identify the factors that contribute to the change in a portfolio’s market value between two time periods. The factors could be market movements, new positions, closure of positions or contract amendments or even corrections.

Since P&L attribution gives insights into the reasons behind a certain change in the Portfolio MTM month-on-month or week-on-week etc., it gives a sort of operational control on the portfolio and also highlights any aberrations (like amendments or corrections) which may have otherwise given a false impression of a huge spike or fall in the MTM.