Purpose
Produce a decision-ready base/bull/bear scenario analysis for a specific treasury exposure — showing how interest rate, FX, or commodity movements flow through to interest expense, hedge valuations, P&L, and cash — so treasury and FP&A managers can quantify downside risk and pre-plan responses instead of reacting after the move happens.
When to Use
Invoke this skill when the user asks to:
- Model interest rate exposure across rising, flat, and falling rate scenarios
- Stress-test FX hedge positions or unhedged foreign-currency exposure
- Analyze commodity price swing impacts on a hedged input cost
- Quantify how a rate or curve move affects floating-rate debt interest expense
- Build a base/bull/bear scenario deck for a treasury or board review
- Evaluate hedge effectiveness and mark-to-market swings under different market paths
Inputs Required
Before starting, collect:
- Treasury item(s): The specific exposure — e.g., $300M floating-rate term loan, EUR/USD forward hedge portfolio, jet fuel swap program
- Notional / position size: Face value or notional amount, with currency
- Current market baseline: Current rate, FX spot, or commodity price the analysis starts from
- Scenario drivers: The variable(s) being flexed and the range (e.g., ±100bps, ±10% FX, ±$15/bbl); if not provided, apply standard shocks and note them
- Hedge details: Instrument type, hedge ratio, strike/fixed rate, maturity, and hedge accounting designation (cash flow, fair value, or none)
- Time horizon: Analysis period — e.g., next 4 quarters, FY forward
- Reporting objective: Whether output feeds a board deck, risk committee memo, or internal FP&A model
If scenario magnitudes are missing, default to ±100bps for rates, ±10% for FX, and ±15% for commodities, and state the assumption. If hedge accounting designation is unstated, model on a pre-tax P&L basis and flag the OCI-vs-P&L question.
Instructions
Step 1: Define the Three Scenarios and Driver Assumptions
Establish the market path for each case before modeling any impact:
- Base (expected): Consensus or forward-curve-implied path — the most probable outcome. Anchor to forwards where available (e.g., forward FX, rate curve, futures strip).
- Bull (favorable to the position): The direction that benefits the treasury item — lower funding cost, favorable FX, cheaper input. Define the magnitude explicitly.
- Bear (adverse to the position): The direction that hurts — higher rates, adverse FX, spiking commodity cost.
State the exact numeric assumption per scenario (e.g., "Bear: SOFR +150bps to 6.3% by Q4"). Note that "bull" and "bear" are defined relative to the position's exposure, not to market direction in the abstract.
Step 2: Compute the Direct Cash / P&L Impact per Scenario
For each of the three scenarios, calculate the primary financial impact:
- Rate exposure: Δ interest expense = notional × Δrate × exposure period, adjusted for any hedged portion at the fixed rate
- FX exposure: Δ translation/transaction gain-loss = exposure amount × (scenario spot − baseline spot), netting the hedged notional at its contracted rate
- Commodity exposure: Δ input cost = volume × (scenario price − baseline price), netting hedged volume at the swap/strike price
Show the unhedged impact and the hedged (net) impact separately so the hedge benefit is visible.
Step 3: Model Hedge Valuation and Accounting Treatment
Assess what the derivative/hedge does in each scenario:
- Mark-to-market swing: Estimate the change in fair value of the hedge instrument under each path
- Accounting flow: For cash flow hedges, effective portion → OCI; for fair value hedges, → P&L offsetting the hedged item; ineffective portion always → P&L
- Effectiveness commentary: Flag any scenario where the hedge ratio, basis, or maturity mismatch could cause the hedge to under- or over-cover, or drift toward ineffectiveness
Step 4: Build the Sensitivity Table
Produce a table showing the key outputs across all three scenarios side by side. Rows should include: driver assumption, unhedged impact, hedge offset, net P&L impact, cash impact, and OCI impact (if applicable). This is the analytical centerpiece — make it clean and comparable.
Step 5: Quantify Downside Risk and Coverage
Summarize the risk position:
- Worst-case exposure: The net bear-case hit in dollars and as a % of the relevant benchmark (EBITDA, interest coverage, or budgeted cost)
- Residual (unhedged) risk: How much exposure remains uncovered after existing hedges
- Breakeven / trigger points: The rate, FX, or price level at which the position becomes materially painful
Step 6: Recommended Actions per Scenario
Give a specific, pre-decided response for each case:
- Base: Monitoring cadence and any incremental hedge to consider
- Bull: Whether to lock in favorable levels, extend maturities, or de-hedge
- Bear: Concrete mitigation — increase hedge ratio, add collar/option protection, reprice, or escalate to risk committee — with a trigger level that activates it
Be directive. State a recommended primary action, not a menu of equal options.
Output Format
- Structure: Scenario definitions → per-scenario impact walk → hedge/accounting treatment → sensitivity table → downside risk summary → recommended actions
- Length: 900–1,300 words plus the sensitivity table
- Format: Structured document with a central comparison table; prose is analytical and tight, not narrative
- Sections: Scenario Assumptions → Direct P&L/Cash Impact → Hedge Valuation & Accounting → Sensitivity Table → Downside Risk & Triggers → Recommended Actions
- Tone: Treasury manager to CFO — precise, numerate, conservative on risk, direct on recommendations
Quality Checklist
Before delivering output, verify:
- [ ] All three scenarios have explicit numeric driver assumptions — no vague "rates rise" language
- [ ] Hedged and unhedged impacts are shown separately in every scenario
- [ ] The sensitivity table contains all three scenarios as columns with net P&L, cash, and OCI rows
- [ ] Hedge accounting treatment (OCI vs. P&L, effective vs. ineffective) is stated, not assumed away
- [ ] Bear case includes a specific dollar worst-case figure and a % of a stated benchmark
- [ ] Each scenario carries one directive recommended action with a trigger level where relevant
Notes
- "Bull" and "bear" are defined relative to the treasury position, not market direction — a rising-rate scenario is bearish for floating-rate debt but bullish for cash held in money-market instruments. Confirm the orientation explicitly.
- Anchor the base case to forward-curve-implied levels where available; a base case built on flat spot assumptions understates expected drift and weakens the analysis.
- Basis risk and maturity mismatch are the most common reasons a hedge that looks fully covering under-performs — surface these in the effectiveness commentary rather than assuming a perfect hedge.
- For board or risk-committee use, lead with the sensitivity table and bear-case exposure figure; the driver mechanics support the decision but shouldn't bury the headline risk.
How to use this skill
This file is a Claude Code skill in Anthropic's standard format — markdown with YAML frontmatter at the top.
Installing in Claude Code:
~/.claude/skills/<folder-name>/SKILL.md— auto-loads in every session anywhere on your machine (recommended for skills you'll use across multiple projects)<your-project>/.claude/skills/<folder-name>/SKILL.md— auto-loads only when working in that project (recommended for project-specific skills)
Restart Claude Code or open a new session to register.
Using in Claude.ai, ChatGPT, Gemini, or other AI tools:
- Drag this file into a new chat, or copy and paste its contents
- Send your task or request as your next message — the AI will apply the skill where it fits
For Claude Code skill details: https://docs.anthropic.com/en/docs/claude-code/skills