Ortec Finance, the global provider of technology and advisory services for risk and return management, has announced the launch of its Dynamic Scenario Generator (DSG).
DSG is a decision-support and risk-monitoring tool which allows pension funds, insurance companies and other investors to enhance their asset-liability management capabilities by enabling risk and return trade-offs to be analysed over both long and short-term horizons.
Several existing clients are using Ortec Finance's DSG software within their strategic risk management division, following a successful testing period. Ortec Finance is now working with many pension funds and insurance companies with DSG to improve their risk management processes.
Funds are constantly trying to balance long and short-term trade-offs when determining their investment strategy. A unique feature of DSG is that chain linking of the short-term scenarios produces plausible long-term scenarios with real world characteristics.
Unlike conventional risk management tools, DSG users can assess the impact of various strategies and view them over various timeframes. This allows the effect of short-term risks on long-term strategies to be analysed.
DSG combines all features and dynamics observed in economic history into one consistent framework. This includes time horizon effects in risk and return, business cycle dynamics, varying volatilities, tail correlations and non-normal distributions. As a result this provides one common set of real world scenarios on which strategic policy decisions can be based and the strategy monitored, in order to reduce the risk of inconsistent decisions being taken. DSG has the ability to signal the likelihood of deteriorations in the economic climate and increases in risk and provides valuable insights on the current and expected future state of economies and financial markets.
Commenting on the announcement Martijn Vos, Managing Director Pension Risk at Ortec Finance, said: "The Dynamic Scenario Generator is the product of 10-years of research and development, encapsulating advanced asset and liability management techniquess for producing short-term scenarios. We expect DSG will set a new standard in the economic scenario generation field and make asset-liability modelling a more effective process, thereby increasing trust in the decisions being taken. It has galvanised significant commitment from our client base."
Lucas Vermeulen, Managing Director UK, added: "The problem with current products available to pension funds and insurers is that they are essentially quick-fixes used to address flaws in existing models which over-simplify reality whilst under-estimating the extent of fat-tails. With the DSG only one real world scenario set is required for strategy, implementation and monitoring purposes. This brings important consistency to the decision making and monitoring process, whilst enhancing ease-of-use."