Numerix, the leading independent provider of award winning cross-asset analytics for the structuring, valuation and risk analysis of derivatives and structured products, today announced the launch of Numerix Counterparty Risk Powered by CompatibL- its integrated solution for calculating potential future exposure (PFE) and credit valuation adjustment (CVA) for derivative portfolios- using a high performance Monte Carlo simulation engine based on the Numerix model library.
CompatibL is a provider of high end custom development services and software for trading and risk management. CompatibL's flagship software product is CompatibL Analyst, a technical computing software for quants and business analysts which also powers Numerix Counterparty Risk application. CompatibL Analyst provides sophisticated data management capabilities combined with an embedded code editor and execution environment, making it easy to write analytics code in different programming languages, including C++, C#, and Matlab, and to configure this code for multicore, cluster, or cloud execution without the need for complex database or parallel programming.
Built on the Numerix pricing and risk analytics platform, Numerix Counterparty Risk Enabling institutions to actively manage their exposure and make more informed day-to-day trading decisions. Traders and risk managers have access to a fully integrated and comprehensive platform for managing counterparty risk and measuring future exposure during pre-trade discovery, for all major asset classes and an infinite variety of instruments, including complex deals.
Numerix Counterparty Risk can be linked to any trade management system and if the user already employs Numerix Excel or Numerix Portfolio solutions, deal data may be exported via XML and imported directly to Numerix Counterparty Risk.
"The launch of Numerix Counterparty Risk positions Numerix solidly at the forefront of all counterparty risk management service providers," said Numerix President and COO Steven R. O'Hanlon. "Our goal was to provide our clients with the trading tools and risk controls they need to ultimately make better day-to-day trading decisions. Building our service on the Numerix 7 pricing and risk analytics platform provides access to the extensive Numerix model library which allows clients to perform complex real-time Monte Carlo simulations."
"We are pleased and excited to be such an integral part of the Numerix Counterparty Risk product launch," said CompatibL Founder and CEO Alexander Sokol." "CompatibL has had a unique and long standing working relationship with Numerix to provide custom development, risk and model validation services. Having Numerix Counterparty Risk-powered by CompatibL represents a solid milestone in that relationship."
Simulation Methodology- Monte Carlo
With Numerix Counterparty Risk users can now access the extensive Numerix model library as well as a variety of acceleration methods for performing real-time Monte Carlo calculation of PFE and CVA, including deal price, deal aging, collateral posting and netting agreements- and can be accelerated with fast algorithms, Windows HPC Server GRID computing or an NVIDIA Tesla processor. With Monte Carlo, users have the ability to perform the following key calculations:
- Calculate PFE and actively manage counterparty risk across an entire portfolio
- Accurately price CVA, leading to better trading decisions
- Conduct stress tests and scenario analysis
Accurate calculations of PFE and CVA require the handling of a vast array of inputs, so Numerix Counterparty Risk aggregates several modeling methods to produce the final simulation output. Sample simulations include: Market Evolution Model, Counterparty Default Model, Pricing Model, Deal Aging Model, Cash flow Reinvestment Model.
Numerix Counterparty Risk uses consistent calibration for both pricing and market evolution modeling, ensuring that CVA calculations accurately reflect credit-risk hedging. This will enable traders to precisely account for the cost of counterparty risk (CVA) in a deal's net valuation.
Enterprise Risk Analysis and Reporting
Numerix Counterparty Risk also provides access to robust analytic and reporting capabilities, enabling institutions to actively manage intra-day reporting of counterparty risk across the entire enterprise. Users can access drill-down reports providing a view of exposure by business, desk, instrument type, position, risk factor, maturity bucket or other factors. The new platform also works with multiple trading and structuring platforms and data vendors to integrate trades into a single PFE and CVA report.
Making Better Trading Decisions
To aid traders in the decision making process, Numerix Counterparty Risk computes the incremental effect of a potential new trade on a portfolio's total counterparty exposure, allowing traders to determine which trading partner will provide the best balance of overall risk.