Managing credit complexity
Credit derivatives are as complex as they are popular. Calculating their price and risk is a constant challenge, and an unprecedented level of computing is required.
We re-engineer your credit trading, pricing and risk systems to help you:
- validate and integrate your pricing models
- orchestrate pricing and risk processes
- manage expanding data volumes
A typical structured product has hundreds of parameters covering thousands of risk factors. These create millions of paths for calculation.
Throwing more hardware at the problem is not enough. Before pricing and risk calculators can be scaled up, we analyse them in detail to optimise their efficiency. This boosts the performance of your credit technology by:
- slashing the time taken to calculate price and risk
- removing redundant processes
- managing data efficiently
Multiply your possibilities
To achieve faster processing times, we combine financial engineering with advanced software design and data management.
1. Model refactoring
On a micro level, we ensure calculations are efficient and data is manageable. We refactor your pricing models to:- eliminate inefficient and unnecessary calculations
- benefit from vector and parallel processing techniques
2. Data scaling
We orchestrate your pricing and risk processes to:- minimise load times for market data
- scale across multiple hosts
- enable enterprise-wide deployment
3. Data management
On a macro level, we use state-of-the-art database technologies and design techniques to:- handle the volume of data generated
- efficiently store large data volumes
- achieve extremely fast data access
- enable data to be interrogated through interactive reports
Our credit products experience
Our highly-skilled consultants have exceptional business understanding and technical skills, including advanced C++ programming.
- We integrated CDO pricing libraries from Reoch and NumeriX into a risk management platform (Algorithmics RiskWatch). By streamlining the calculations required, we minimised the time needed to price the most sophisticated products, including tradable synthetic CDOs.
- We enhanced a correlation desk reporting infrastructure by improving data management and integrating the latest pricing libraries. The new system handles millions of risk factors, and the time taken to mark-to-market and calculate exposure was reduced from days to hours.
- To meet our clients' exact requirements, we built a bespoke trading and risk management system that covered a wide range of credit products. A single front-end provided trade execution, risk and P&L reporting and a suite of servers provided pricing, analytics and external connectivity.
Our technology services
- Design, build and validation of pricing models
for example using Monte Carlo, semi-analytic, Gaussian copula and intensity techniques - Refactoring existing models
for improved performance and scalability - Design and scaling of pricing and risk systems
for example using CPPI techniques - Database design and realisation
- Parallelisation and grid computing techniques
Our expertise extends across flow trading products
- Total return swaps (TRS) and credit default swaps (CDS)
- CDOs (cash and synthetic, index and bespoke tranches, CDO², variable subordination, long short, zero coupon, forward starting LSS), CPPI, CPDO, FTD and NTD baskets
- And other securitisations (ABS, MBS products) or hybrids (credit derivatives with FX and IR structures)
More information
Meet growing credit challenges
with creative technology consulting - View PDF
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