DECIDE Market Risk
DECIDE provides you with an overview of individual and company-wide exposures caused by market changes (e.g., Brexit, the 2008 financial crisis, an interest rate hike, etc.). This allows you to achieve optimal final decision support in order to actively initiate the necessary actions to minimize exposures.
Quantitative assessment of market risks is a mathematically-demanding process, associated with high demands on the models applied and the quality of market data, which flows into the valuation of individual positions.
The "depth" of DECIDE RISK is also a crucial factor in the quality of market risk assessment. Detailed drill-downs for Value-at-Risk and profits & losses as well as comprehensible results enable a better understanding of the model. The evaluation and presentation of the component VaR per position/risk class facilitates the identification of risk drivers and hedges. The temporal progression of the risk contributions facilitates the analysis of unusual data situations. Market scenarios can be defined modularly, which simplifies ad hoc analysis and the implementation of stress tests at all hierarchical levels of the enterprise.
Options for reliable assessment of market risks
- Actively manage exposures & risk drivers
Manage exposures and risk drivers company-wide in real-time, make the necessary decisions promptly, and take the necessary action.
- Modular definition of market scenarios
Simple ad hoc analysis and the implementation of stress tests at all levels of the sector and company hierarchy.
- Scenario analysis
Respond directly and actively to changing market conditions based on scenario analysis and stress tests.
Market risks under control, at any time capable of making performance and investment decisions
Assessment of standard and complex products
Since the last financial crisis, market risks in the trading and banking book have received a particularly large amount of attention with regards to regulatory minimum requirements for performance optimizations and investment decisions in financial markets. The implementation of the regulation guidelines according to FRTB / CRR II therefore plays a major role. Continuous monitoring and limitation of risks is also required. With DECIDE RISK, you are also well-prepared and directly able to take action in this area. You analyze all standard products in accordance with mark-to-model and have the opportunity to structure complex products and perform various assessments.
DECIDE has up-to-date assessment methods and procedures for all common interest-bearing securities. A multidimensional scenario analysis enables you to test and demonstrate the various impacts of counterparty and marketplace strategies as well as across securities asset classes and instrument risks. The quantification of the exposure is based on risk measures such as Value-at-Risk (VaR) and Expected Shortfall (ES). The following methods are available for calculating them:
- Monte Carlo and historical simulation, parametric procedures
- Backtests & stress tests
- Transparency through drill downs
- Single scenario analysis for traders
Advantages of DECIDE Market Risk
- Displays current market price risks
The calculation of Value-at-Risk and expected shortfall in real-time facilitates the reliable presentation and assessment of market price risks.
- Flexible valuation of models
DECIDE RISK supports model validation via clean backtests, binomial tests, and Christoffersen's tests.
- Introduce new products rapidly
DECIDE RISK's comprehensive instrument coverage of DECIDE RISK facilitates the fast, cost-effective introduction of new products. Non-standard instruments can be structured based on cash flow structure, options, and path dependencies.
- Active trading support
Detailed scenario analysis and correlation-based hedging recommendations provide sound support for trading.
- Implement specifications completely
In DECIDE RISK, the sensitivities for FRTB (SA) can easily be exported
- Appropriately separate risks
Systemic and instrument-specific risks are reported separately.