DST International (DSTi) – a leading provider of solutions to the international financial services industry - announced today that the DSTi Risk Solution is now fully in line with requirements for UCITS III compliancy, both in terms of measuring risk of securities and portfolios as well as providing the necessary analytics for reporting.
The UCITS III directives have established a European mandate; whereby any fund that meets the requirements in a given European country can be marketed in any other European country. Requirements dictate that all investment managers active in these types of funds must comply by February 2007. Under the new directives the management or investment company must employ a risk management process which enables it to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of the portfolio. A risk system based on a value-at-risk (VaR) approach is therefore required.
The DSTi Risk Solution uses the Event Simulation Methodology for VaR calculations, thereby enabling the user to understand the effect of extreme market events. It provides fair values for all securities, including complex derivatives and re-prices each one for every scenario and measures the return distributions, from which the risk statistics are derived. This in turn enables the user to model the entire distribution without assuming normality.
Paul Lawrence, Risk Consultant at DSTi states: "Our solution allows the user to define the parameters used for the measurement of risk such as the investment horizon, confidence interval and historical observation period. This means that it offers both excellent and robust risk measurement in a volatile and very open market, as well as accurate analytics for reporting. We realise that these increasing regulatory requirements, of which UCITS III is one, demand a lot from any organisation and therefore we offer the DSTi Risk Solution both on an ASP basis in order to allow for very rapid implementation cycle within the set timeframes, as well as an in-house solution."