Analytics with depth COMPATIBL XVA PLATFORM & ANALYTICS XVA CVA FVA KVA MVA AAD

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1 Analytics with depth COMPATIBL XVA PLATFORM & ANALYTICS XVA CVA FVA KVA MVA AAD

2 The CompatibL development team has demonstrated extraordinary commitment, skill and flexibility, and it has been a pleasure for us to do the project and go live with this excellent XVA platform. Maciej Winnicki, Head of the XVA project, European Investment Bank As well as delivering a robust and flexible XVA / Capital platform, CompatibL has provided excellent implementation and support. The CompatibL and RMB teams synchronise their daily work seamlessly and we are very pleased to have the CompatibL XVA platform as an integral part of the bank s Trading and Risk activities. Robert McIntyre, Head, XVA trading, Rand Merchant Bank The Compatibl Platform is very flexible and easily customizable to our needs. CompatibL has consistently provided us with excellent support and new quantitative solutions for our XVA challenges across pricing and risk management and we view our relationship with Compatibl as much more than just with a software and solutions provider. Alexey Trofimov, MD and Head of Risk Modelling, Sberbank of Russia CompatibL products reach map 2

3 ABOUT THE COMPANY CompatibL Technologies was founded in 2003 to offer risk technology solutions to banks and asset managers. Since then CompatibL has established itself as the leading provider of quantitative software and solutions for XVA, limits, and regulatory capital. CompatibL has over 200 experienced developers and financial engineers and boasts a client base of over 50 banks, central banks, supranationals and asset managers in the US, EMEA and Asia, including 4 out of 5 largest derivatives dealers. Over 70 major projects have been implemented across this client base. CompatibL is headquartered in the United States and United Kingdom. WHY COMPATIBL? CompatibL offers turnkey solutions for XVA and regulatory capital as well as full support, implementation and customisation services by experienced XVA quants and development teams. In a similar vein, CompatibL s consultancy teams look beyond the delivery of the requisite report and bring practical enhancement to the clients operation, often incorporating the delivery of working code with source. CompatibL is at the forefront of many important industry innovations and trends around the trading and risk space, including adjoint algorithmic differentiation (AAD), a technique that has the potential of delivering massive performance gains for the calculation of sensitivities and capital measures, real world measure modelling for more accurate limits and capital, and the quantification of settlement risk as part of the overall counterparty credit risk. 13 years of experience in trading and risk management 52 clients banks, central banks, supranationals and asset managers in the US, EMEA and Asia 4 out of 5 largest derivatives dealers use CompatibL platform 76 major projects implemented 3

4 COMPATIBL XVA SOFTWARE An advanced software platform for XVA, capital, initial margin and regulatory calculations, using a choice of CompatibL engine, in-house or external analytics REGULATORY AND FAIR VALUE MEASURES All major regulatory calculations within Basel II and Basel III, SA- CCR, and FRTB. All major types of XVA including CVA/DVA/FVA, KVA, COLLVA. P&L predict and explain reports advanced predict reporting to calculate PnL expectations based on T-1 scenario results using real time market data feed. QUANTITATIVE FEATURES Dynamic model calibration a flexible framework to tune calibration of IR/FX/Commodity/ Inflation/Equity/Credit models based on trade attributes. Real world (capital, limits) and risk neutral (XVA) modelling combined with the choice of full repricing or AMC valuation, for IR, FX, Commodity, Inflation, Credit, Equity and other asset classes including exotics. Governance reporting to verify calculation input including trade data, market data, front office MtM reconciliation, XVA contributors. COLLATERAL MODELLING CSA modelling advanced features to model the change of collateral through time, including dynamic initial margin. Classical or advanced (Andersen-Pykhtin-Sokol) model for the margin period of risk. Quantification of trade and margin flow settlement risk as part of the overall counterparty credit risk. ADVANCED TECHNOLOGY PLATFORM Support for adjoint algorithmic differentiation (AAD) using TapeLib, CompatibL s C++ library for AAD in quant finance. As part of the application interface, users can automate any workflow step, including data loading, simulation, pre- and post-processing, by creating scripts (e.g. batch, Python bindings) or accessing it via external API including C++, C#, Java, and Python. APPLICATION ARCHITECTURE Management of complex trade, market and reference data. Flexible integration layer. Parallel computing: running user-defined calculations on a parallel cluster, cloud, or remote server. For desktop installation, utilise all cores of a local desktop. Learn more about CompatibL products and services by requesting a personal demo: info@compatibl.com 4

5 APPLICATION HIGHLIGHTS RICH VISUALISATION CAPABILITIES Specialised viewers for XVA, PFE, and trade pricing results XVA METRICS On the fly calculation of XVA metrics such as CVA, DVA, FVA, KVA, MVA and COLLVA ADVANCED AMERICAN MONTE CARLO High performance analytics makes possible real time calculation of XVA and counterparty credit risk 5

6 ADJOINT ALGORITHMIC DIFFERENTIATION From any report, the users have the ability to run AAD sensitivities on demand. Implementation is based on TapeLib, CompatibL s AAD library TapeLib supports scalar and vector AAD with tape compression, and includes a specialised API which permits effective recording of AAD tape in Monte Carlo and other calculations spanning multiple programming languages (C++, C#, and Java). Calculate AAD sensitivity by double-clicking on a calculated figure AAD sensitivities to all appropriate risk factors are calculated from the recorded tape on demand Example of AAD sensitivity of CVA calculated on demand 6

7 SOLVING REGULATORY REQUIREMENTS CompatibL Risk platform covers the current and upcoming XVA and regulatory calculation needs including FRTB and SA-CCR BASEL III Basel III S-CVA report calculates CVA Charge, Default Charge and Total Charge projections with drill-down to counterparty and trade level CAPITAL CALCULATIONS CompatibL XVA supports KVA calculations, including SA-CCR method, for EAD. The user has the ability to drill down to Asset Class, Hedging Set and Trade Level FRTB Basel FRTB Market Risk metrics, including 97.5% Expected Shortfall and MVaR, are available in the Market Risk report 7

8 CONSULTANCY AND SERVICES Quantitative consultancy CompatibL s quantitative research team led by Alexander Sokol has a track record of constructing valuation and risk models used by over 350 banks and asset managers in 25 countries MODEL IMPLEMENTATION AAD PROJECT DELIVERY TapeScript Validation of multi-asset portfolio simulation models, derivatives pricing and risk models for standardised and exotic instruments. MODEL VALIDATION Methodology review for capital and XVA simulation, and the design of reference implementations. PERFORMANCE OPTIMISATION Performance optimisation of inhouse software and analytics. Implementation of AAD for in-house analytics using CompatibL s TapeScript and TapeLib products. QUANTLIB CONSULTANCY Quantitative analytics library implementations using QuantLib, and implementation of AAD in QuantLib using QuantLibAdjoint, a CompatibL open source project. CompatibL developed specialised methodology for retrofitting AAD to existing in-house analytics libraries, and has extensive project delivery experience of working with clients to implement AAD within their trading and risk applications. CompatibL s methodology has been proven by conversion of the open source QuantLib library to support AAD, and has been presented in multiple training courses, workshops,and webinars. The pioneering approach of using vector AAD (tape compression) solves the main performance limitation of AAD excessive tape size. The use of vector AAD with tape compression reduces or eliminates the need to make extensive changes to in-house analytics that would otherwise be required with the traditional scalar AAD methodology. TapeScript is an open source library for adjoint algorithmic differentiation (AAD) developed and maintained by CompatibL. It can be downloaded from github.com/compatibl and used free of charge in academic or commercial applications, with or without CompatibL s services. TapeLib TapeLib is a commercial library and AAD application suite, delivered to as part of CompatibL s implementation services, which extends TapeScript with finance-specific functionality. 8

9 RISK AND TRADING SYSTEM PROJECT IMPLEMENTATION SERVICES EXPERTISE CompatibL s custom software development practice is trusted by the largest international banks, including several major dealers, to provide implementation services for mission critical projects. Our developers, quants, and business analysts are an integral part of our implementation team, and are well acquainted with the latest quantitative research, development technologies, and implementation practices to provide seamless, one-stop delivery of both the analytics and engineering aspects of the overall solution. CompatibL s experts will work with your management to identify and understand your business objectives and develop strategies for achieving them in a timely and successful manner. RECENTLY COMPLETED PROJECTS CompatibL provided integration and implementation services for multiple in-house systems and leading vendor solutions as well as bespoke project work that included the following: Enterprise CVA implementations at multiple leading banks. Real time PFE based pretrade limit monitor. Regulatory capital solutions for several European and US banks. Enterprise infrastructure for batch and intraday transfer of trade data from multiple trading systems into the enterprise risk platform. Collateral optimisation solution. Electronic trading platform for a major asset manager. Front-office pricing and PnL estimation tool. ELECTRONIC TRADING PLATFORM Front-office pricing and PnL estimation tool used by corporate bond traders, heads of desks, and senior managers from various credit product groups of a major international bank CompatibL is a Murex Business Partner with over 8 years of experience in Murex systems integration and a track record of successful Murex project delivery 9

10 RESEARCH AND THOUGHT LEADERSHIP Long-Term Portfolio Simulation For XVA, Limits, Liquidity and Regulatory Capital BY ALEXANDER SOKOL Published in September 2014, the book provides a comprehensive step-by-step guide to every aspect of constructing and using long-term portfolio simulation models. A comprehensive description of advanced techniques for model construction and calibration also includes examples for different asset classes. Leading Publications Rethinking Margin Period of Risk Leif B. G. Andersen, Michael Pykhtin, and Alexander Sokol, 2016 SSRN Retrofitting AAD to Your Existing C++ Library: A Case Study with TapeScript Alexander Sokol, 2015 Global Derivatives Conference, Amsterdam, 2015 Modelling the Short Rate: The Real and Risk-Neutral Worlds John C. Hull, Alexander Sokol, and Alan White, 2014 Exposure under Systemic Impact Michael Pykhtin and Alexander Sokol, 2013 Risk Magazine 26(9), pp SSRN Risk Magazine, October

11 LIBRARIES AND TOOLS FOR QUANTITATIVE FINANCE TapeScript TapeScript is an open source library for adjoint algorithmic differentiation (AAD) developed and maintained by CompatibL. It can be downloaded from github.com/compatibl and used free of charge in academic or commercial applications. TapeScript supports vector AAD (tape compression), an approach pioneered by CompatibL in which each slot of the calculation record (AAD tape) can store not only a single double number, but also an entire array of values. Vector AAD can lead to performance gain of several orders of magnitude due to the reduction of tape size. TAPESCRIPT FEATURES Scalar AAD Vector AAD (tape compression) APIs for C++, C#, and Java Complex numbers Works with Boost and QuantLib Multithreading support TapeLib TapeLib is a commercial library extending TapeScript with features specific to quantitative finance and large scale AAD programming. TAPELIB FEATURES Document database preserving AAD data Tape database Finance-specific atomics including adjointable AMC User defined atomics Tape cutting and splicing Parallel tape execution Specialised gate checking API Excel addin, desktop client, and web client with AAD capability ModVal.org is an online resource provided free of charge for regulatory and internal model validation. The repository contains validated calculation results for derivatives valuation, XVA, funding, collateral and margin period of risk, liquidity, PFE-based limits, and regulatory capital. ModVal.org includes source code used to generate calculation results. 11

12 Analytics with depth UNITED STATES UNITED KINGDOM POLAND CompatibL Technologies LLC 100 Overlook Center Second Floor Princeton, NJ Tel: +1 (609) CompatibL Technologies Lt First Floor 100 Pall Mall London, SW1Y 5NQ Tel: +44 (20) CompatibL Sp. z o.o. Prosta 32 Second floor Warsaw, Tel: +48 (22) For more information or a product demonstration, contact info@compatibl.com Copyright 2016 CompatibL Technologies LLC