Change of base currency

With the system design that we have described, a change of base currency is relatively
simple. First of all, since the DEAFs are defined independently of base currency, these remain unchanged. The only aspect of the fundamental assets that needs to
be changed is the FX rates. The FX rate for the new base currency is removed from
the set of risk factors and replaced by the FX rate for the old base currency. In
addition, the definition of all FX rates used in the system need to be changed so that
they are relative to the new base currency. Thus the rates in the FX table need to be
recomputed. In addition, the volatilities of the FX rates and the correlations of FX
rates with all other risk factors need to be recomputed. Fortunately, no new information
is required, the necessary volatilities and correlations can be computed from the
previously ones. The justification for this statement is given later in this chapter.