Economic changes and events which lead to market fluctuations can leave financial institutions open to a significant combination of risks such as currency risk, interest rate risk, equity risk, property risk, commodity risk, etc.
In order to mitigate and hedge these risks, firms need to be able to conduct a consistent and comprehensive assessment of the market changes that could have adverse effects on their business. This assessment should be based on common pricing models using gap analysis and analytical/numerical stress testing analysis to ensure the most reliable results possible.
To obtain these results, Wolters Kluwer Financial Services’ market risk solution provides firms with full flexibility for stressing market risk factors using advanced gap and exposure analysis, including sensitivity gap, tenor gap, exposure, price shift and volatility shift analysis.
The solution also allows firms to perform a comprehensive range of market risk measures including value exposure, Value-at-Risk (VaR), back testing, and stress testing.
Wolters Kluwer Financial Services Market Risk solution functionality
- Comprehensive range of products and transactions (swaps, options, bonds etc.)
- Different levels of granulation
- Large market data modeling (term structure, indices, FX rates, volatilities, volatility surfaces, etc.)
- Sensitivity analysis (Greeks, time decay, etc.) and sensitivity gap
- Net present value, market fair value calculation (price observations, beta factor)
Value at Risk (VaR)
- Parametric VaR (delta-normal approach, Risk Metrics standards)
- User may influence confidence level, holding period
- Historical VaR
- User may influence the generation type (how the changes in the market are calculated) absolute or cumulative
- Monte Carlo simulation VaR (Standard model, Ornstein-Uhlenbeck, etc.)
- Ability to reuse the computing outcomes from the repository
- Perform analysis based on market prices, including time shifted markets
- Majority of market risk factors can be shifted
- Assumptions (prepayments, replication parameters, new production)
For more information on how Wolters Kluwer Financial Services can help firms to meet the Market Risk reporting requirements, please contact us.