Fluctuations in market interest rates have a direct impact on
the returns generated by a financial institution from their banking and investment books, through
changes in short term accrual-based income/expense or changes in the underlying value of products
and positions held.
IPS-Sendero KRM is an integrated risk management solution which will help you measure your
exposure – in income and value terms – to the different sources of interest rate risk. These
include re-pricing risk arising from the underlying re-pricing mismatch between assets and
liabilities; yield curve slope risk, basis risk arising from non-correlated movements in rates
and indices, and embedded optionality arising from customer or counterparty behaviour.
IPS-Sendero KRM contains basic building blocks of rate analysis, including:
- Market standard and proprietary yield curve smoothing techniques;
- Multiple term structure models to forecast the evolution of interest rates and yield curves;
- Unlimited formula-driven rate indices to support the modelling of discrete rates such as
base/prime or internally administered rates such as savings rates;
- Deterministic or stochastic (Monte Carlo) generated scenarios
The dynamic multi-period simulation engine within IPS-Sendero KRM is integrated into a comprehensive
stress testing environment to allow you to quantify the interest rate risk inherent in the
current balance sheet (static) and how that risk profile will evolve through time with the
incorporation of rollover and reinvestment strategies, and the inclusion of forecasted new
business (dynamic).
All flavours of banking book products – simple or structured – are supported, along with
all derivatives – vanilla or exotic – used for hedging. Banking book interest rate risk analysis
recommended under Basel II Pillar 2 is fully supported.
IPS-Sendero KRM fully integrates ALM, market risk, credit risk, liquidity risk, Basel II
and IAS 39 in a single piece of software. The integration allows correlations between risk
factors to be taken into consideration and the evolution of risk factors modelled through the
economic cycle. Maintenance and operating costs are reduced through the use of a common database
with open inputs/outputs; common financial analytics and shared assumption sets. |
