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Portfolio Risk Analytics

Portfolio and Security Analytics for Multi-Asset Portfolios

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Real-time Risk, Performance & Accounting Business Intelligence Dashboard

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PORTFOLIO ANALYTICS

Risk Analytics

Ex-Ante and Ex-Post Risk Analytics for both Portfolio and Security level

Overview

Risk management using forward looking (Ex-Ante) analysis helps investment firms manage portfolio risks proactively and ensures right positioning of the portfolio under its investment policy guidelines.

Advances in technology and use of modern architecture has enabled firms to calculate such complex calculations more efficiently and faster thus the demand from managers and investors for ‘real-time’ risk.

Popular forward looking risk techniques include:

– VaR Analysis
– Liquidity Analysis

– Scenario Analysis and Stress Testing and
– What-If Analysis

This together with Ex-post risk measures will provide a more complete view of portfolio risk. 

Enabling model transparency, providing for using custom models and making Risk analytics easier to use and understand are some of the other key challenges faced by buy-side firms.

THE NEED FOR RISK ANALYTICS

PROBLEM

Using the term ‘Risk’ and the need for it is not something that investors worry about when the overall market is doing well. However, as most savvy investors and risk managers know, ‘Risk’ is always present and needs to be understood to better manage the portfolio during both good and bad times. 

More recently, regulators have mandated the need for key risk analytics to be reported by registered funds and still it is one of the many ‘back-office’ only ‘to-do’ for regulations.

Conversations around ‘risk’ with wealth clients is difficult as it needs to be explained in simple easy-to-understand terms. Not only the specific numbers, but collectively what it means in the portfolio’s context becomes very important.

Given the changing demographics for the wealth management clients, i.e. the younger generation that are more tech savvy, I think strategy for this simplified version probably needs to be crafted now and the sooner the better for the advisor firm.

On the institutional side, the challenge may not be on whether the ‘risk’ capability is there – it is around whether there is the right technology to get answers to clients in real-time.

Investors and managers demand for access to portfolio data and the need for real-time portfolio analysis is driving the need for providing a more comprehensive view of risk that not only include backward looking(ex-post) but also forward looking (ex-ante) risk analytics.

In addition to access to risk analytics for users to not only be made available for access to users it should also be made easier to understand by eliminating jargon and demonstrating each analytics applicability in the portfolio context,

Technology advances including the adoption of ‘cloud architecture’ in financial firms has only helped speed up the demand for such capability for both portfolio managers and users.

 

APPROACH

Open architecture, adoption of cloud technology and data integration using API

Pay-per-use model adoption using container technology

Transparency , custom models

 

 

TARGET MARKET

Administrator, hedge fund managers, multi-asset portfolio managers

Believe in enabling pay-per-use model for operations

Already have a roadmap to adopt modern ‘cloud’ architecture if using legacy systems

 

KEY FEATURES

VaR Analysis

Historical and Parametric VaR at Portfolio/Security level. Calculate Undiversified, Marginal and Component VaR. Provide Backtesting VaR

Liquidity Analytics

Analysis of Portfolio Liquidity for various redemption/market volume scenarios

What-If Analysis

Run What-If scenarios by simulating adding/deleting portfolio positions.    

Scenario Analysis

Historical Scenario Analysis i.e. Covid-19, 9/11, 2007 financial crisis, etc

Stress Testing

Shock scenario analysis for one or more risk factors such as price, fx rates, interest rates, etc. 

Sensitivity Analysis

Interest Rate Sesnsitivities for Fixed Income/Swaps: PV01, DV01,Credit Spread (CS01), etc

Look through Analysis

For Derivative & Fund/ETF Portfolios – the ability to perform analytics/risk on underlying securities of portfolio

Exposure, EaR and EvE Analysis

Actual exposure to a security i.e. for when using derivatives, Earnings At Risk (EaR) and Econmoic Value of Equity (EvE)

Ex-Post Analytics

Tracking Error, Jensen Alpha, Sharpe/Treynor/Sortino/Information Ratio, Downside Risk, M Squared, Skewness, Kurtosis, Active Share, etc

SUPPORTED INSTRUMENTS

FIXED INCOME

  • Fixed Rate Bonds
  • Floating Rate Notes (FRN)
  • Discount Instruments (T-Bills / Zero Coupon Bonds)
  • Interest at Maturity Instruments (Commercial Paper)
  • Certificates of Deposit) (IAM)
  • Negotiable Certificates of Deposit (NCD) / Credit Linked Notes (CLN) (Fixed Rate)
  • Inflation Linked Bond(ILB)

LISTED DERIVATIVES

  • Equity Future
  • Equity Index Future
  • Equity Index Future With Constituents
  • Commodity Future
  • Currency Future

  • Bond Future
  • Bond Index Future
  • Bond Index Future With Constituents

  • Equity Option
  • Equity Futures Option
  • Equity Index Future Option With Constituents
  • Equity Index Future Option
  • Currency Future Option
  • Bond Future Option

OTC DERIVATIVES

  • FX Forward
  • CFD
  • Vanilla Swap – IRS Fixed-Float
  • Vanilla Swap – IRS Fixed-Float – Margined
  • Forward Rate Agreement (FRA)
  • Forward Rate Agreement (FRA)  Margined

ALTERNATIVE INVESTMENTS

  • Long/Shirt Equity
  • Distressed Debt
  • Private Equity
  • Real-Estate
  • Managed Futures
  • Senior Secured Loans
  • Event-Driven Credit
  • Venture Capital

FUND

  • Mutual Fund
  • Exchange Traded Fund (ETF)

EQUITY

  • Common Stock
  • Warrants
  • Rights

FAQ

Here are some answers to Frequently Asked Questions.

How is the integration done with existing client data?

Using real-time API’s to get Holdings, Reference and Market data from existing client data management system i.e from IBOR/ABOR.

 

Can we use the same market data as used by client's IBOR/ABOR?

Integration of all necessary market data is through client’s existing data management system. Therefore same data used for performance accounting will be used for calculating risk analytics.

Also, if required  system can integrate with client’s Bloomberg/Reuters or EDI data sources using API. he client’s market data license will need to be used.

How does real-time Risk Analytics work?

As the integration with data management system is using API, users can use the Vega’s ‘Dolphin’ Risk solution’s web user interface to make a calculation request.

Upon request necessary input data is obtained and calculations are performed in real-time.

What calculations/analytics are part of the Risk Module?

Please see features section about for all supported calculations/analytics

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