Simulation is a key element in evaluating risk. The simulations in Orion provide detailed reports on what the Greek risk factors and P&L will be at different market prices and time horizons. There are three types of simulations described in this chapter: 1) Normal simulation; 2) Group simulation; 3) Value-at-Risk simulation.

The aspect of time is important with any position. By analyzing a position at different time periods and market prices, the trader can see the dynamics of the position change. The more a trader can see what may happen over time, the better prepared the trader will be.

Price movement of the underlying and implied volatility can either help or hurt positions. Simulations can be setup to analyze the portfolio through market trading ranges and implied volatility moves. The simulation can be setup to use the added dimension of implied volatility - the Skew. The skew implemented with a simulation run, gives the perspective of the dynamic change of volatility as time passes and market levels change. The Skew Batch and Skew editor are the programs that are used to setup the skews for all exchange traded instruments. Once setup, the Skew formula integrates with the simulation to give a more accurate theoretical result than if the simulation was run using a flat volatility.