How To Fix RY340 - Risk factor &1/&2 is ignored due to zero volatility

SAP Error Message - Details

• Message type: E = Error

• Message class: RY - Messages for RM Basis

• Message number: 340

• Message text: Risk factor &1/&2 is ignored due to zero volatility

What causes this issue?

The volatility of risk factor &V1&/&V2& is zero. Given that no risk
relates to this risk factor, this risk factor is not considered in the
calculation. Consequently, the covariance matrix is built without
considering this risk factor.

System Response

The system issues an error message and will not allow you to continue with this transaction until the error is resolved.

How to fix this error?

Procedure for System Administrators

Error message extract from SAP system. Copyright SAP SE.

Smart SAP Assistant

• What is the cause and solution for SAP error message RY340 - Risk factor &1/&2 is ignored due to zero volatility ?

  The SAP error message RY340 indicates that a specific risk factor is being ignored because its associated volatility is zero. This typically occurs in the context of financial calculations, such as those related to risk management, derivatives pricing, or financial modeling within SAP systems.
  Cause:
  
  
  Zero Volatility: The primary cause of this error is that the volatility for the specified risk factor (denoted as &1/&2 in the message) is set to zero. In financial models, volatility is a crucial input for calculating risk and pricing derivatives. A zero volatility implies that there is no uncertainty or variability in the price of the underlying asset, which is often unrealistic.
  
  
  Data Entry Issues: There may be an issue with how the volatility data was entered or calculated. This could be due to incorrect data input, missing data, or a failure in the calculation process.
  
  
  Model Configuration: The financial model or configuration in SAP may not be set up correctly, leading to the calculation of zero volatility for certain risk factors.
  
  
  Solution:
  
  
  Check Volatility Data: Review the data for the risk factor in question. Ensure that the volatility is correctly entered and reflects the expected market conditions. If it is indeed zero, update it with the correct volatility value.
  
  
  Review Calculation Logic: If the volatility is derived from a calculation, check the logic and formulas used to compute it. Ensure that all necessary inputs are available and correctly configured.
  
  
  Data Source Verification: If the volatility is sourced from external data feeds or market data, verify that the data source is functioning correctly and providing accurate data.
  
  
  Consult Documentation: Refer to SAP documentation or help resources related to the specific module you are using (e.g., SAP Treasury and Risk Management) for guidance on how to handle risk factors and volatility settings.
  
  
  Engage with Support: If the issue persists after checking the above points, consider reaching out to SAP support or your internal IT team for further assistance. They may have insights into specific configurations or known issues related to your version of SAP.
  
  
  Related Information:
  
  Risk Management in SAP: Understanding how risk factors and their volatilities are managed within SAP can help prevent similar issues in the future. Familiarize yourself with the relevant modules and their functionalities.
  Financial Modeling: A solid grasp of financial modeling principles, including how volatility impacts pricing and risk assessment, can aid in troubleshooting and understanding the implications of this error.
  Training and Resources: Consider training sessions or resources on SAP financial modules to enhance your understanding of risk management and related calculations.
  
  By addressing the root cause of the zero volatility, you can resolve the RY340 error and ensure that your financial calculations are accurate and meaningful.