Market Risk
The Razor™ Market Risk module provides comprehensive market risk functionality to enable financial institutions of all sizes to meet internal and regulatory market risk management requirements. The product utilises the same scenario-based framework built on common pricing and risk modelling libraries as the Counterparty Credit Risk offering, as Razor™ is fully integrated, Market and Trading Credit Risk functionalities allow for synergies and cost-efficiencies in deployed risk technology within a financial institution.
Historical Simulation
VaR using historic scenarios
Monte Carlo Simulation
Path based simulation
Credit VaR
Modelling credit risk statistically
Stressed VaR
Shifting scenarios for tail risk events
VaR Varieties
Stressed VaR
Incremental VaR
Conditional VaR
Relative VaR
Marginal VaR
Component VaR
The Razor™ Market Risk module includes the following functionality
Reporting, Drill-down and What-if Analysis
- Extensive market risk reporting within Razor™
- OLAP reporting for sensitivity analysis
- Capability to develop external reports on the Razor™ results
- Full drill-down to the Transaction or Scenario detail to analyse all market risk results
- What-if analysis for new, amended or deleted trades
- Pre-deal check and limit monitoring
Market Risk Workflow
- Base-lining of new VaR results to a previous base-line
- Incremental processing of any amendments for real-time VaR analysis
- Full audit trail and logging of all aspects of the market risk calculation
- Integrated limit management capability to enable limits to be set on key areas of risk concentration e.g. risk factor, desk, product, trader, trade volumes or values.
Scenario Analysis
- Pre-defined historical scenarios
- User-defined hypothetical scenarios
- Stress Testing
- Sensitivity analyses including PV01, CS01, Greeks, Parallel and Non-Parallel shifts can be performed by shocking any group of risk factors.
Back-testing
- Back-testing of VaR and Stress Testing results for model assessment/validation
- against Theoretical P&L
- against Realized P&L
- P&L Attribution
Extendibility
- New pricing models or products can be added to the calculation
- Results can be aggregated externally to Razor™ and aggregated into the overall calculation