Home | Topics | Sybase

TRANSPARENCY - THE SIAG RISK MANAGEMENT APPROACH IFRS 7 + GRS

Printer-friendly versionPDF version

Both in terms of IFRS7 and also FSA and draft SEC regulations and of course MIFID, P2B2 and the extensive plethora of other legislation dealing with transparency, data accuracy and audit there are a number of areas where GRS could be leveraged in these scenarios opening up the potential for Back Office and Treasury function direct benefits.

 

  • GRS - Price Manager:

 

Unification and single point distribution of a unified price in an environment of diverse multi vendor incoming pricing data sources through a validation and certification tool assuring validated and certified pricing data quality. Unified pricing data from front, middle to back office.

 

Snapshot functionality providing the complete history of any price and all user interventions time stamped back over a 10 year period providing audit trail transparency.

 

The calculation of unobservable variables to a unified risk metric methodology of all incoming market prices from whatever source reducing data acquisition costs significantly. Greeks, curves, surfaces, TSIR's, matrices, volatilities etc.

 

Pre-defined and user definable business rules for application to all incoming pricing data assuring the processing of pricing data through definable business filters and the segregation of suspect data outside the data distribution chain. This prevents suspicious pricing data that does not comply with defined parameters from being distributed and allows the client to define how incoming market pricing data will be filtered and processed. The assigned business rules may be easily updated or changed to adapt to market conditions or regulatory norms.

 

Rapid deployment and installation, configuration and parameterisation with excellent cost value relationship in both the acquisition, installation and on cost dimensions compared with comparable solutions for Tier 1 portfolios. Stable and reliable being programmed in C++ and orientated to mass volume data handling requiring real time and on demand performance.

 

Available as a rental business model in addition to as an acquisition option converting an asset purchase into an operational revenue cost which may provide tax liability benefits in addition to cash flow benefits.(Minimum contract period 1 year).

 

  • Calculation Engines - GRS - Market VaR

 

  • The accurate calculation of VaR and ES within the portfolio has a direct impact on the requirement for reserve capital under Basel II, such funds are in effect inactive reserves, currently under pressure from regulators to be amplified, and being calculated as a multiple of portfolio VaR results dependent upon the the forward values and risk characteristics of the equities within the portfolio and the overall portfolio risk exposure. The objective is clearly to maintain the assets under management to produce portfolio VaR's within the green zone as defined under Basel II thus minimizing the multiples of VaR to be held as reserve capital. The differences between the multipliers applicable to reserve capital ratios depending on overall risk exposure within the portfolio are substantial and this has a direct impact on treasury. The reduction of risk exposure through portfolio position management, whilst managed by the trading function resultant from the VaR results predicted within a 95% - 99% probability range has a direct impact on the treasury function with regard to the need for regulatory reserve capital management. For this reason; effective portfolio position management and accurate forward VaR projection information via scenario modelling have a direct impact on Treasury in terms of reserve capital ratio management.

 

  • In extreme volatility market conditions such as we have experienced over the last 15 months, a portfolio VaR sub calculated at instrument level and aggregated to provide overall portfolio risk exposure, as calculated on the previous day's T-1 market close prices and only available once daily is insufficient for effective asset management and control of overall risk exposure. This is the current Tier 1 situation in most investment clients owing to the extremely slow performance of current legacy systems depending on system architecture which is sub optimal with batch processes taking 6 to 15 hours to produce a VaR figure after the close of trading at T-1. Intraday VaR and on demand calculation is highly desirable for effective asset management with its inherent impact on reserve capital ratios, balance sheet and P&L, and trading decisions for portfolio position adjustments require intraday management and not daily management based upon yesterdays computations as is the case. This again impacts directly on Treasury.

 

  • The cost value relationship between our calculation engines in terms of cost effective solutions at the point of purchase, deployment and consequent operational costs; whilst delivering Tier 1 historic, parametric and Monte Carlo VaR's with full back testing and stress testing to full portfolio revaluation intraday and on demand, and also identifying expected shortfalls (ES) allow cost effective position management which can be entirely cost justified on the basis of risk pricing competitiveness, effective asset management position performance, reduced liquidity risk, and optimised regulatory reserve capital management.

 

  • This system is capable of offering deployment in a multi site environment and aggregating and consolidating overall multi entity risk management based upon a common methodology and via an integrated risk management system compiling and consolidating multi site data via an administration layer aggregating the results of multiple engines. This provides CFO's and Audit Managers with a clearly defined and coherent intraday and on demand risk management platform and system which eliminates the current single site approach and delays in data acquisition and consolidation and operates with minimal latency behind market movements and volatilities. Again this impacts directly through an organisation from front to middle to back office functions via risk management and has direct impact on treasury management and audit procedures.

 

  • Scalability is provided along with hardware cost investment minimisation by adapting to multiple system architectures and platforms via full GRID enabled technology controlled and managed by a task manager within the engine nucleus managing task assignment via data packets to the number of nodes within the GRID. The reduction in deployment costs and the fully scalable nature of the system provides a technology leading solution which adapts to changing market and our clients computational requirements. This solution not only limits actual deployment costs of the system but also limits forward investment costs as system demands increase over time.

 

  • Calculation Engines - GRS - Bypass Circuit

 

  • This provides all the benefits of GRS-Market VaR but may be applied to existing core legacy systems to move overnight batch processing into the intraday and on demand spaces.

 

  • The added value of this extremely cost effective solution is that it does not require core system replacement and is an enhancement to existing architecture and systems; whether external legacy providers or client in house systems. It is a complement to, and not a replacement of, existing client infrastructure and risk management systems.

 

  • SybaseSYBASE LOGO

 

  • The optimal performance of all of these solutions is based upon minimising system latency between the data storage and management system and our calculation engines. We have demonstrated that optimal system performance and maximum latency reduction is achieved by harnessing GRS technology to Sybase RAP data management systems which are endorsed, approved and highly recommended for performance optimisation of all GRS solutions.

 

Short URL
Asymptotix on Twitter

Are the key legislative pillars such as Basel II & III, UCITS IV and Solvency II forcing you to re-examine how you identify, measure and manage risk and capital?

Asymptotix work closely with our partners to help clients develop a more proactive, systematic and integrated approach to governance and risk management to deliver proper value.

Asymptotix can offer the support you need to deliver on time. Read more...
 

Is the goal of your website to sell services or products, educate, or collect data?

A positive customer experience is vital to conversion, no matter what your conversion goals may be. Our designers and developers will create a positive experience to maximize your conversions and deliver the optimal return on your investment. We strive to find the perfect balance between the web site’s design and functionality.

Asymptotix implements interactive solutions for European companies. From corporate websites to social communities, our clients will tell you an investment in building a scalable online experience will deliver long-term tangible benefits.

Based in Luxembourg we can help you all over Europe. Our multi-lingual team can work with projects and speak your language! Read more...