Scope

  • Multi-strategy, Multi-fund Environment
  • 30,000+ OTC Credit, Interest Rate and Equity Derivatives
  • Internal Risk Management

Requirements

  • Integrate internal market data and pricing analytics
  • Market Data Management
  • Fixed and User-Driven Stress Tests
  • Historical Value at Risk (VaR)
  • Risk aggregation and interactive analysis

Delivery

  • On premises PoC delivered in less than 2 weeks

Benefits

  • Demonstrated significant saving and acceleration on multi-year in-house development plan
  • Highlighted cost saving and ability to switch off external / expensive black-box pricing services
  • Visualisation of existing market data which was previously a black box
  • More transparency for Risk Managers

Use Case Details

A leading multi-strategy hedge fund were looking to improve their stress testing and VaR capabilities. Their existing reporting was in sophisticated spreadsheets managed by a control function. They were hard to change and maintain.

Their existing tools were a mixture of in-house calculations running alongside a risk calculation service from a major vendor. The client wished to reduce dependence on this expensive and inflexible service.

The firm had built up a library of pricing models over a number of years which were used for front office trading. They wished to use this analytical library for risk computation and stress testing as well.

There was also a database of market data that they wished to use for risk computations where possible, but did not have the tools to assess the quality and usability of this data.

RiskMine Chronos was used to collect and visualise the contents of the market data database. For the first time the Risk Management team had a way to graphically view the contents of that database, easily search for data series, run quality checks and search for data exceptions.

RiskMine Scenarios generated scenarios for:

  • Risk sensitivities
  • Historical VaR
  • What-if stress test specified by Risk Management

RiskMine Wildfire was used to wrap the firm’s existing pricing analytics to create a distributed parallel risk computation “calc farm”. Wildfire then orchestrated the various pricing requests across the distributed calc nodes.

The results of these calculations were fed into RiskMine Cube for interactive slice and dice in Excel as well as canned visual dashboards.

The implementation of the PoC took less than two weeks of on-site work, with two of Percentile’s team and two technologists from the hedge fund.

The ability to produce true firm-wide, cross-asset risk from a centralised platform was something the firm estimated would take them 5 man years to develop. With RiskMine that estimate was reduced to less than six months.