Algorithmics, the worldâs leading provider of risk solutions, today announced that it has received a patent for its Algo Scenario Engine, a scenario generation framework that is already in production at over 100 Algorithmicsâ clients.
Algo Scenario Engine is a key component of Algorithmicsâ risk analytics solutions. It allows for the generation of risk-related scenarios using a variety of techniques ranging from statistical, market implied, historical and user-defined covering a wide range of risk factor types. Its unique âunified frameworkâ provides clients with the flexibility to model their risk factors (interest rates, FX etc) in as many different ways as they require while still allowing for proper simulation and correlation across all variables to produce a single, consistent simulation. The framework is also self-documenting, allowing users to quickly determine the modeling assumptions that are made at each step of the scenario generation process. The end result is a transparent process for generating scenarios to assist in fulfilling regulatory requirements.
Ben De Prisco, Senior Vice President of Research and Financial Engineering at Algorithmics said: âAt Algorithmics, we believe that scenarios represent the language of risk. The ability to communicate this risk and uncertainty through scenarios has been central to our thinking for the last 20 years. In developing the technology for Algo Scenario Engine we wanted to create a scenario generation framework that would allow for the maximum degree of flexibility and transparency in generating market-relevant and consistent scenarios â one that would allow for a range of scenario generation techniques spanning the broadest collection of asset classes and risk factor types.
âThe resultant technology and framework has proved to be effective in addressing the needs following the financial crisis. We have noticed many financial institutions wanting to expand their risk factor modeling to cover newer areas such as liquidity risks and wrong-way risks as well as re-thinking how they simulate and calibrate their current risk factors. All these changes can be incorporated quickly and consistently into the framework leading to timely and relevant risk analysis.â
Dr Michael Zerbs, President and COO at Algorithmics, added: âIf we look at the lessons learnt from the recent turmoil, we find that all regulators agree on the importance of stress testing. Our patented scenario generation framework provides maximum choice and flexibility to institutions in generating their scenarios for every type of risk. We will continue to invest in cutting-edge research and innovation to ensure we provide risk solutions that help our clients make more informed, risk-aware business decisions.â