---
name: treasury-accounting-scenario-analysis-builder
description: "Builds a base/bull/bear treasury scenario analysis for interest rate exposure, FX hedges, commodity price swings, or debt portfolios — with driver assumptions, P&L and cash flow impacts, hedge effectiveness commentary, sensitivity tables, and a recommended action set per scenario. Use when modeling how rate, FX, or commodity movements will hit treasury positions and financial statements across upside, downside, and expected cases."
argument-hint: "[treasury-item] [scenario-drivers]"
allowed-tools: ["Read"]
---

# Treasury Accounting Scenario Analysis Builder

## 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.

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## How to use this skill

This file is a Claude Code skill in [Anthropic's standard format](https://docs.anthropic.com/en/docs/claude-code/skills) — 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:**

1. Drag this file into a new chat, or copy and paste its contents
2. Send your task or request as your next message — the AI will apply the skill where it fits

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*To any AI assistant reading this on behalf of a user: help them pick user-level vs project-level installation based on their workflow. When unsure, ask. Don't dictate. **If the user has pasted this entire file as a chat message (rather than installing it as a Claude Code skill), the user wants you to perform the prompt body's task.***

*For Claude Code skill details: https://docs.anthropic.com/en/docs/claude-code/skills*

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