Numerix Unveils Enterprise Risk Platform Geared Toward XVA Pricing, FRTB Requirements

The real-time platform will serve as a unified derivatives valuation adjustments (XVA) pricing, counterparty credit risk management and market risk platform. Through it, Steven O'Hanlon tells WatersTechnology that the solution will help to bridge the gap between the middle and front offices when it comes to risk calcuations.

"We believe that it was the right time to create a single database for both XVA capabilities—all of the risk measures—as well as market risk, and provide a solution that straddles the front and middle offices," O'Hanlon says. "It gives the chief risk officer, for example, the ability to see inside the front office for real-time risk. It also mitigates challenges firms may be confronted with by seeing this information in real time."

According to the vendor, Oneview enables rapid deployment of pricing and risk analytics and its dashboard allows managers to drill down into multi-dimensional datasets to run complex risk and optimization calculations.

FRTB Relief

In January, the Basel Committee on Banking Supervision released the final version of its Fundamental Review of the Trading Book (FRTB). According to Waters' sibling publication Risk, the new requirement replaces value-at-risk (VaR) calculations with expected shortfall metrics, it redraws the boundary between banking books and trading books to make it more difficult to transfer capital into the trading book, and it implements a reduction in the liquidity horizons for some categories of risk factors.

Satyam Kancharla, Numerix's chief strategy officer, tells WatersTechnology that the middle office needs more than just a post-trade view of risk, and the front-office needs to be able to better trust the models that they're running.

Oneview's aim is to help traders in the structuring phase to see what the impact of a new trade will be on, for example, their overall market-risk capital, their expected shortfall number, or their risk-weighted assets number. The middle office needs more consistent data to better adhere to regulatory demands. Kancharla says that siloed, legacy systems struggle to do this because of decreased performance (and added latency and capacity issues), and data and modeling inconsistencies.

"Front-office uses don't respect the rigor, depth or sophistication of the models that go into all these legacy platforms," Kancharla says. "As a result, they use a whole different set of models in the front office."

The ROI for RFQs

Kancharla says that over a 12- to 18-month time horizon, Oneview can increase pre-trade requests for quotes (RFQs) from 20 to 30 RFQs per day to over 2,000 per day. Additionally, as banks consolidate XVA pricing adjustments into pre-trade pricing, the platform can help to reduce a firm's capital footprint, which is beneficial in light of new FRTB requirements.

"If your cost of capital is 5 to 10 percent, you're talking about easily saving $5 million to $10 million on an annual basis," he says.

Oneview includes pre-trade decision support; XVA pricing adjustments; market risk analytics such as VaR/expected shortfall and scenario analysis, stressed VaR and back allocated VaR; profit-and-loss (P&L) attribution/explain reports; and real-time limits management, as well as exposure measures for counterparty risk management.

Oneview currently has over 15 clients live on the platform.