All financial institutions are exposed to everyday changes in
local and global markets. Whether measuring those exposures to determine limit compliance,
to develop risk mitigation strategies, to allocate regulatory capital, or to simply evaluate
returns generated from the markets on a risk-adjusted basis, requires a comprehensive market
risk solution.
Value-at-risk (VAR) has developed as an industry and regulatory standard for the measurement
of market risk. IPS-Sendero KRM supports multiple methodologies and enables
you to compare and contrast results under each:
- Historical VAR
- Variance/Covariance (Matrix) VAR
- Monte Carlo VAR
IPS-Sendero KRM enables the user to determine the incremental VAR and VAR sensitivity for
any level of data granularity (individual transactions through to the entire balance sheet)
and for any risk factor. Risk factor volatilities and correlations can be calculated within
IPS-Sendero KRM or user-supplied.
IPS-Sendero KRM takes VAR analytics beyond the trading room. In particular, the ability to
accurately value structured banking and investment book products with embedded optionality,
and complex option-based derivatives used for hedging, means the VAR analytics can drive an
economic capital measure across the entire balance sheet.
Market risk and credit risk are fully integrated within the IPS-Sendero KRM solution. The
integrated multi-period simulation engine generates future credit default events, which in
turn drive path dependent cash flows and valuation. The result is a true credit VAR.
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. |
