Market risk insights
What if your risk managers could assess market risk exposures throughout the day - instantly run Value at risk (VaR), and marginal calculations and perform Expected Shortfall (ES) analysis and stress scenario simulations?
ActivePivot turns VaR and ES into an operational metric. Using its native ability to handle non-linear data in memory, it stores hundreds of thousands P&L vectors and aggregates VaR figures at query times based on user inputs. Risk managers can decompose VaR figures across multiple dimensions, drill down to individual P&L vectors, add trades to calculations, and make necessary adjustments during the day - all within subseconds.
The combination of predictive analytics and incremental updates offered by ActivePivot allows risk managers to get instant answers to questions they could never otherwise ask: What would be the effect of moving from a 10 day-tail ES to a 5 day ES for a type of product? Or changing the confidence level from 95 to 99? With full simulation flexibility on real-time data and instant answers, stress scenarios can be investigated and the VaR impact can be evaluated in pre-deal decisions.
Market risk certification
Risk certification offers a limited window of time to locate anomalies, understand their root cause and take corrective actions. ActivePivot accelerates risk certification, allowing risk managers to immediately identify outliers and potential errors and overcome the sheer volumes of data to be analyzed.
ActivePivot aggregates data from the lowest to highest levels and applies sophisticated dynamic scoring to identify and alert risk managers when aggregated indicators present potential anomalies. Calculations are run at the data point level, essentially eliminating the potential of missing errors and providing the assurance that all figures can be stamped and certified. With several hours cut on a daily basis, risk certification ends midday, freeing up risk managers for additional analysis.
Limit management and monitoring
Monitoring and managing limits over time can be a sisyphean task. With ActiveMonitor, limit monitoring is automated and streamlined. Once limits are defined, trading activity is constantly monitored. Outliers and activities that fall outside the limit envelopes are immediately detected and alerts are automatically sent. Escalation workflows can then be triggered with pre-defined procedures to enforce additional actions by traders, managers, or IT systems.
Risk departments get a collaborative environment for managing the endless number of limits typically defined in multiple systems. All limits are kept up-to-date in a single system used jointly by risk managers and traders.
Credit risk evaluation
With instant credit risk metrics at their fingertips, risk departments can limit exposure and optimize risk coverage strategies. Risk managers can analyze CVA, PFE, or EPE down to each individual trade level and understand significant deviations at any point in time.
ActivePivot aggregates massive amounts of individual scenario simulations across tens of thousands of time points, performing netting and delivering credit risk measures in a split second. When new trades are processed, it incrementally re-computes impacted metrics and pushes the delta update to users.
In turn, users get an immediate understanding of risk exposure by counterparty. They can precisely hedge CVA with up-to-date sensitivities, determine the cheapest CVA counterparty or simulate the impact of a rating change using ‘what-if’ analysis. Once regulation changes, new credit metrics can be easily implemented with minimal efforts.
What They Say About Us
We implemented ActivePivot in order to manage our market risk in a proactive, actionable and analytical way. We have recognized the solution’s powerful potential in helping us solve a number of other operational issues across the business at a much lower cost than the industry’s traditional approach.
Basically VAR is non linear, so the architecture of ActivePivot for aggregating the large quantities of underlying PnL vectors was perfect. The use case for ActivePivot is when you have real-time aggregation of the data, the ability to put your own code into the cube and the fact that you can handle non-linear measures.