Risk Dimensions V3 Overview

Transcription

1 Risk Dimensions V3 Overview Rik van de Weerthof

2 Introduction! Purpose of this presentation

3 Enterprise wide risk management Risk management is the process of identifying, measuring and controlling the effect of internal and external factors that (can) negatively affect the value of a company

4 The Big Issue(s)! Combining different risk types! Timeliness of figures! Guaranteeing accuracy of figures! Interpreting the analytical results! Running out of (computer) steam! Qualified personnel

5 Combining different risk types? Different risk types: credit risk market risk FX risk IR risk legal risk operational risk etc. Different risk factors: counter party default market risk FX rates Interest rates legal structure fraud, human errors Different risk measures: Credit VaR Market VaR Total risk < sum of all risk types

6 Timeliness of figures Main Entry: time ly Pronunciation: 'tim-le Function: adjective Inflected Form(s): time li er; -est 1 : coming early or at the right time 2 : especially suitable for the time <a timely book> - time li ness noun

7 Guaranteeing accuracy of figures VaR = 150 Mln with 95% confidence VaR = 400 Mln with 98% confidence

8 Guaranteeing accuracy of figures 1,000, , ,000 VaR 700, , , ,000 95,0% 99,9% Confidence level

9 Interpreting the analytical results Dear CEO: Our Value at Risk is USD 5,000,000! Dear Risk Analyst: What the xxx does that mean for the company?

10 Running out of (computer) steam! 5,000 trades per day! 100 positions! 100 risk factors! Suppose you want to do a Monte Carlo simulation with 100,000 replications! 100 * 100 * 100,000 = 1,000,000,000 calculations

11 The Big Issue(s)! Combining different risk types! Timeliness of figures! Guaranteeing accuracy of figures! Interpreting the analytical results! Running out of (computer) steam! Qualified personnel

12 Design specifications! All major analytical techniques, within a single environment! Full parametrisation of analysis attributes! Portfolio-driven data model! Full Repricing! Incorporate new instruments and pricing models! Create and adapt instrument and model attributes! Analyses integrate different risk types! Traceable calculation processes with user intervention! Market modeling! Clear and concise drill-down reporting! Web reports / GUI! Data Management

13 Design specifications! All major analytical techniques, within a single environment! No need to jump between specialist packages..! Any number of different analyses can be performed in a single run.

14 Design specifications! Full parametrisation of analysis attributes! Users must be able to customize the specifications of the various parts of the risk analysis process.! Users must be able to mix and match different specifications as needed for different analysis projects.

15 Design specifications! Portfolio-driven data model! No fixed data model.! Ability to configure data model from an existing database schema.! Ability to process data as is.! Ability to pull data together from numerous heterogeneous data stores.

16 Design specifications! Full Repricing! All instruments in the portfolio repriced to determine portfolio value at every market state considered by the analyses performed.

17 Design specifications! Incorporate new instruments and pricing models! New instrument types configured easily.! User selects and installs pricing models.! No restrictions on pricing models.! Any number of vendor supplied or user written pricing libraries can be installed.

18 Design specifications! Analyses integrate different risk types! Market risk and credit exposure handled within the same framework.! A unified and logical architecture: Consistent use of data definitions, calculation methods, representation of figures,! New COPULA functionality! (Un)conditional risk measures

19 Design specifications! Trackable calculation processes with user intervention! Not a black box.! User can define and control key calculations.! Intermediate calculations can be stored and examined for additional processing or validation checks.

20 Design specifications! Market Modeling! Powerful nonlinear statistical modeling features of SAS software can be used to specify and fit models of market dynamics.

21 Design specifications! Market Modeling! User can specify and fit models for different risk factors and then mix and match models for full multivariate Monte Carlo simulation.! Joint model-based simulation of large numbers of risk factors.

22 Design specifications! Clear and concise drill-down reporting! All analytical results can be broken down or aggregated.! You can slice and dice the risk measures for a portfolio across any set of dimensions that you choose to define (by region, counterparty, instrument type, ).! Marginal and Conditional risk measures.

23 Design specifications! Web reports / GUI HTTP SAS Connect HTTP SAS Connect Java-enabled web browser Web Server Risk Server

24 Design specifications! Data Management! A Risk Dimensions risk management solution takes full advantage of the data access and data processing power of SAS software.! Risk Dimensions includes the industry leading back-end data warehousing software, the SAS/Warehouse Administrator.

25 True differentiators...! Openness, extensibility, flexibility! SAS data management! Clear and concise reports! State of the art risk engine! Market modeling leading to true business advantages

26 Differentiators versus business pains! Openness, extensibility, flexibility! SAS data management! Clear and concise reports! State of the art risk engine! Market modeling! Combining different risk types! Timeliness of figures! Guaranteeing accuracy of figures! Interpreting the analytical results! Running out of (computer) steam! Qualified personnel

27 Architecture (simplified) Var. defs. Filters Viewers Input function Fin. Instr. Position data Data sets Pricing function Specs Risk engine Reports Cross class. MDDB s Raw m.d. Market models Market data

28 Summary! A software suite that solves business and IT pains in enterprise wide risk management! Differentiators! Openness, extensibility, flexibility! SAS data management! Clear and concise reports! State of the art risk engine! Market modeling