Estrat%E9gia de TI Para Gest%E3o de Riscos Empresariais - Thierry Truche

7/28/2019 Estrat%E9gia de TI Para Gest%E3o de Riscos Empresariais - Thierry Truche

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IT STRATEGY FOR ENTERPRISERISK

erry ruc eHead of Product Management, Enterprise Risk

Misys


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AGGREGATION: SILOS PRESENT CHALLENGE

ut are st very va ua e

ImportManual

Capture

Feed

EnhanceStatic

Reference

Market Corrections

Bad Prices

Mis-keyed

TradeIssuer

esults Corrections

ue

3

ModelsValuation

Models

CurveModels C

orrectionsModel

Error

CurveError

RawR

Overrides

Enhancements

Val


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RISK MONITORING: WHAT IS YOUR VISION? AND

YOUR RISK STRATEGY?

NASA's Shuttle Flight Control Room in Houston, TexasSource: Wikipedia4


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RISK ARCHITECTURE: YOUR VISION

Your definition of Risk Architecture in your organisation

Goal? Scope? Key indicators

Quality and truth

What RA should allow you to do Serve business purpose

Test assumptions Adapt to changing market conditions

Risk team

Risk Framework5


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ENTERPRISE RISK ARCHITECTURE DESIGN

DataMana ement

Aggregation

Valuation &Stress

Culture

DocumentStorage

Reporting


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DataManagement

Aggregation

Valuation &Stress

Reporting

More than integration Real time

Pervasive quality from endto end

Data cleansing

DocumentStorage

Manage exceptions Manage workflows


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Data

Aggregation

Valuation &Stress

Reporting

Document Storage Model Pervasive from end to end Sub-second aggregations

DocumentStorage

Scales linearly


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DataManagement

Aggregation

Valuation &Stress

Reporting

Aggregation isnt enough Real time

On the fly stress risk Bring together all risks inone place

DocumentStorage

engine or risk independent

pricing engine?


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VALUATION IN THE CONTEXTOF RISK

MARKET RISK

VersusCREDIT RISK


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TECHNICAL AND PERFORMANCE CHALLENGE

For 10,000 deals, computing the following measures means:

Impact on hardware and time if brut force with trading pricing engine

Scenarios Dates in the future Number of PVs to be computed

Historical VAR 250 1 2,500,000

MC VAR 10,000 1 100,000,000EPE 10,000 50 5,000,000,000

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Flow business Derivatives

Products 9,500 500

Nb of PVs 4,750,000,000 250,000,000

Speed of the pricing (in sec) 0.001 0.1

Time required for full pricing in hour 1,319 6,944

Nb of servers (with 32 cpus) required for aprocess running in 10 hours 4.1 21.7


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MARKET RISK LEVERAGE THE SILOS BY DISTRIBUTING

THE COMPUTATIONS TO THE FO PRICING ENGINE

e concep : leverage the Front-Office pricing engine

Send scenarios

Aggregate PVs

Benefit

Share the same pricing models: no pricing

Risk Systems

Value at Risk

Stress testing

Backtesting

Scenarios

PVs

RatesRates

Source

Front Office

Systems /

Pricing engines

Sensitivities

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No reconciliation of transaction data

Risk factors approach

Easier IMA compliance

Easy to cope with new FO or acquisition

Easy introduction of new products (time tomarket)


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CREDIT RISKSmart Hardware: Parallelization with GPUs

To benefit from GPUs, the application code must be

aware of parallelization

The business logic code itself must internalize parallelization This means code has to be vector-oriented

Particular sweet spot: flow products and vanilla products

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Case Study CVA for FX, Money-Market and derivatives books Brut force with traditional pricing engine: 2 h on 10 servers

GPU risk engine: 10 min on one GPU card


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UNDERSTAND YOUR RISK

Big data

Aggregation

DataManage

ment

Valuation &Stress

DocumentStorage

Reporting


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REPORTING VERSUS UNDERSTANDING Big data

Market Risk (VAR)

How have your risks evolved? How to drill down when using

sophisticated and non additive measures?

Where to look at when things look wrong?

Internal model: 1000 scenarios Total of PVs computed: 100M Checking all figures = 3 years

Credit Risk

10 k deals EPE: 10000 scenarios, 50 dates in the

future

Total of PVs: 5 billions Checking all figures = 150 years


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CONCLUSION


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RISK ARCHITECTURE

Technology is there

So risk architecture is about

A clear articulated long term strategy Risk architecture for easy merging of data

Risk architecture to support future needs

Risk measures are not risk management

Estrat%E9gia de TI Para Gest%E3o de Riscos Empresariais - Thierry Truche

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