Flexibility for Front Office & Risk, Transparency for Management, Performance for the Enterprise
Numerix, the leading provider of cross-asset analytics for derivatives valuations and risk management, today announced its latest innovation – Numerix CrossAsset Server (CAS). Numerix CrossAsset Server extends the rich features of Numerix CrossAsset – the widest commercially available library of market standard valuation and risk models – into an in-memory, gridded server platform that both sell-side and buy-side firms can use to compute pre-trade pricing, Mark-to-Market, Greeks, sensitivities, cashflows as well as Market Risk and Counterparty Credit Risk measures.
Implementation of best practices in terms of risk management and collateral optimization continue to stress internal operations and IT infrastructures. Not only is there a demand for real-time valuations and aggregate risk analysis – especially in managing counterparty credit risk – but there are significant requirements for efficient, consistent and transparent price calculation, control and risk reporting. The Numerix CrossAsset suite provides the flexibility for granular instrument design through to the real-time calculation for revaluation and aggregated risk analysis that can be delivered to every level of the organization.
“Over the past year we have continued to hear the same challenge from our clients – we require the flexibility and transparency to define instruments, curves and risk scenarios, but we need to scale the performance in real-time. Flexibility is typically the Achilles heel to accelerated performance, when you think about the terabytes of data that need to be generated for revaluations and risk on a real-time basis,” said Steven R. O’Hanlon, Chief Executive Officer & President of Numerix. “We took on this challenge and through our CrossAsset Integration Layer and the CrossAsset Server; have been able to preserve the flexibility that front office quants require while meeting the performance benchmarks for traders and risk management operations.”
Meeting the New Market Standard for Speed & Accuracy
Driven by regulatory compliance, a large well-known Asian bank and development partner of Numerix began to implement CrossAsset Server in the Fall of 2012, to run the valuations on over 40,000 exotic FX options and vanillas, in addition to calculating pre-trade limits and Potential Future Exposure (PFE). With Numerix CrossAsset Server, the bank achieved real-time pricing on its entire portfolio of trades, half of which were exotic instruments requiring hybrid modeling to capture the necessary risk parameters. Recent benchmarks testing CrossAsset Server performance demonstrate the same scalability on portfolios comprised of over five million trades.
“Increased regulatory pressure requires an enterprise perspective of risk management and this impacts the valuation process, from vanillas to exotics as well as hybrid cross-asset derivatives. However, this imposes an implementation problem for portfolio modeling and risk analytics, due to the distributed nature of the data required for analytics,” said Satyam Kancharla, Chief Strategy Officer & SVP of the Numerix Client Solutions Group. “CAS solves this problem by consuming data from multiple source systems and any third party systems without imposing constraints on the data, a critical requirement for large-scale derivative valuations and risk-related calculations such as PFE, CVA and VaR.”
The Path to Standardization
CAS is based upon the Numerix CrossAsset Integration Layer which is a data driven API into a set of pre-defined templates of validated financial instrument definitions, models and curves. Custom templates can be easily and independently defined via the Integration Layer, extending deal coverage across asset classes. Through the rapid integration of new financial instrument types or models and reuse of definitions across various technology platforms, Numerix CrossAsset Integration Layer enables improved control over model risk management and supports Product Control functions by allowing only authorized individuals to edit and publish new financial instrument types and models.
“Clearly we’ve been focused on flexibility and performance as we’ve moved toward the introduction of CrossAsset Server, but the other key item in focus was ‘time to market’. By focusing on a data driven approach, an institution can deploy a new pricing model, standardized curve set-up or create bespoke stress tests without adding new code or recompiling the software,” Kancharla added. “Once the financial configuration work is complete, the solution can be deployed within the CAS architecture in minutes.”
CrossAsset Server Architecture and Cloud Enablement
Numerix CrossAsset Server utilizes best of breed open source components and market standard interfaces to make it adaptable to any client infrastructure. CrossAsset Server can be consumed from standalone desktop installations for small hedge funds that require fast pricing and vol surface creation for options, to enterprise-wide deployments at asset management firms and banks. Numerix CrossAsset server can also be run on internal grids or via public or private clouds.