Actively manage counterparty credit risk within the trading book
Algo Credit Exposure enables banks and financial institutions to actively manage counterparty credit risk and help reduce regulatory capital. It offers support for the real-time demands of trading desks, with front office interfaces that deliver “what-if” simulations at the pre-deal speeds needed to test potential trades against credit limits and assess the impact to return on capital.
Algo Credit Exposure features include:
- Front office interfaces deliver simulation-based risk measures at pre-deal speeds for competitive risk-based pricing.
- Advanced stress testing helps reduce regulatory capital held against counterparty defaults under Basel III.
- Dashboard views support comprehensive understanding of current and Potential Future Exposure (PFE).
- Centralized quantification of exposures helps reduce operational costs by centralizing and simplifying limits administration.
Front office interfaces
- Provides the front office with interfaces that highlight incentives for more proactive management of counterparty credit risk, including real-time risk analysis that accurately shows the impact of potential trades to key credit measures like Credit Valuation Adjustments (CVA).
- Helps ensure that front office risk measures for traders are consistent with middle office measures for risk managers through its advanced Mark-to-Future methodology and Real-Time Credit Engine.
- The combination of speed and accuracy enables traders to price risk-reducing trades more aggressively, and firms to use credit lines and capital more efficiently than overly conservative add-on approaches, allowing for growth in trade volumes under existing limits.
Advanced stress testing
- Advanced support for stress testing strategies for reducing regulatory capital held against potential counterparty defaults under Basel III, and supports approaches to help firms qualify for the advanced CVA capital charge method.
- Delivers simulation-based risk measures with a consistent methodology for statistical aggregations of stress test results that properly accounts for netting and collateral.
- Provides critical insights into how adverse market events or liquidity shocks might impact your firm’s exposure, and supports risk-informed strategies for achieving sustainable growth and return on capital.
- Algo Credit Exposure offers dashboard views of credit risk measures that enable advanced credit risk mitigation approaches. Calculation methods align with Basel requirements for credit measures, such as Exposure at Default (EAD), Expected Positive Exposure (EPE), and the mark-to-future methodology properly accounts for netting and collateral.
- Offers dashboard views of current and Potential Future Exposures (PFE), with tools for custom reporting and drill-down analysis on key contributing risk factors.
- Provides insights into calculations of PFE and EPE values, based on full forward valuations across scenarios and time to maturity, for over-the-counter (OTC) derivatives and securities financing transactions.
Centralized quantification of exposures
- Helps reduce operational costs with a centralized quantification of exposures across asset classes and business lines. It supports centralizing and simplifying limits administration enabling results to be aggregated at any level in the hierarchy. This extends from individual traders and business lines on up the entire trading book, where individual limits across multiple risk types can be set at the desired level.
- Enables your firm to significantly reduce technology costs that can arise from business and regulatory requirements for enhanced computational power to cover more positions, time steps and scenarios. Algo Credit Exposure offers a patented optimization methodology that helps you reduce these costs by more efficiently running the same level of risk analysis on less hardware, or more advanced risk analysis on existing hardware.
Algo Credit Exposure resources