Market Risk

Maintaining a grasp on company-wide risk has become increasingly important in the post-2008 financial market landscape. Scenario and sensitivity analyses have taken a front seat in the context of regulatory compliance while Comprehensive Capital Analysis Requirements and Dodd-Frank are changing the questions being asked by risk managers.

Where questions used to be raised regarding how to model an exotic asset class, modern risk management is begging questions around how multi-currency, multi-asset class portfolios can be hedged, and how these portfolios and hedges will affect capital adequacy requirements. Navigating the evolving regulatory route to safe and transparent financial markets will continue to be challenging and require a transparent, agile, and integrated risk solution.

FINCAD's powerful F3 Platform integrates with your existing system to produce market risk analytics at the trade level, portfolio level, and across the enterprise with accurate and near instantaneous performance through patented Universal Risk Technology™ (URT). Whether you are calculating expected shortfall, Value at Risk, or sensitivities, proprietary technology and flexible architecture enable you to make the right decisions faster.

With URT, the accuracy of closed form first order sensitivities are at your fingertips in a fraction of the time it takes to bump. Bumping produces numerical approximations; URT produces exact analytical sensitivities for any trade or portfolio no matter how complex. Also, the RiskReport is comprehensive, composed of every single price to market data sensitivity - not just intermediate model parameters. To learn more about URT, please download our Universal Risk Technology™ white paper.

Scenario Analysis

The architecture of FINCAD's F3 Platform makes scenario analysis simple and gives you portfolio insight. You can perform analysis with either pre-built or user-specified scenarios. Often used scenarios based on a parallel shift in market rates are pre-built to make your job easier; additionally, scenario analysis is completely customizable with respect to any type of market data due to F3 Platform's flexible architecture which keeps your Model separate from the product being evaluated. To learn more about the Model concept in F3 Platform, please read our blog post, Financial Architecture Series, Part 8: Models and models.

Because the concept of a Model is separate from the concept of a product or portfolio, you can easily tweak an existing Model to run an entirely new scenario without updating anything else. From a simple tweak of an existing Model to a complete overhaul of market factors within an entirely new Model, F3 Platform can handle the simplest scenario for a vanilla rate swap to the complexity of cross-asset portfolios with disparate sets of risk factors.

Portfolio-level Risk

Generic F3 Platform architecture produces comprehensive risk for a portfolio with the simplicity of a single trade. While certain portfolio risk factors, as a sum of their individual parts, can be assessed at the trade level, some market risk factors such as VaR have risk dependencies that require starting at the portfolio level. Portfolio level analytics are built directly into F3 Platform to perform valuation and calculate risk correctly and efficiently.

Stress Testing & Scenario Analysis - FINCAD Solutions
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