How Warning Thresholds Work

Warning alert thresholds, as a percentage, can be defined on a portfolio or entity level, as well as a rule level, allowing users to adjust the number of warning alerts generated by FundApps to suit the business. More information on how to set warning thresholds can be found here.

Depending on the rules within FundApps, the warning percentage value will be applied using different approaches.

Disclosure Rules (ApproachingThresholdRelative)

Due to the fact disclosure thresholds spreads increase towards 100%, warning values are best represented as a percentage of the spread of the previous and next thresholds for a position. Our algorithm is thus:

Abs(Next Higher Threshold - Next Lower Threshold) * (Warning % / 100)

Consider the thresholds 2%, 5%, and 10%. A result value between the 2% & 5% thresholds will set warning alert trigger values of 'below 2.3%' and 'above 4.7%.' This is based on the warning percentage being set to the default 10% and the spread between the previous and next threshold is 3. As a worked example:

Threshold Spread = Abs(Next Higher Threshold - Next Lower Threshold)

Threshold Spread: 5 - 2 = 3

Percentage of Spread = Threshold Spread * (Warning % / 100)

Percentage of Spread: 3 * (10 / 100) = 0.3

Previous threshold warning: 2 + 0.3 = 2.3     AND     Next threshold warning: 5 - 0.3 = 4.7

Given a result between the 5% and 10% thresholds warnings will be triggered at below 5.5% and above 9.5%. Updating the warning percentage from the default 10% to 20% will mean warnings are triggered below 6% and above 9%.

Using a percentage of the spread between thresholds allows users to define a simple warning percentage across all disclosure rules without worrying about different threshold values – like those of EU short selling in comparison to major shareholding rules.  

Please note, warning alerts only trigger for fixed thresholds so will not trigger for any swinging thresholds that use a previously disclosed value in subsequent threshold level calculations. 

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