synchronised::risk

synchronised::risk

About IMEX

IMEX is a new interbank utility that standardises SIMM calculations. It readily meets interbank and regulator needs, and provides the potential to dramatically reduce funding and operational costs with no security risks.

Feedback from early adopters is that IMEX sensitivities provide the lowest IM charges when used bilaterally, the best P&L Explained. Margin calls based on IMEX sensitivities are consistently more accurate than those derived from other methods in back-testing.

IMEX runs as an appliance – deployed locally, processing client-portfolios on site and generating sensitivities that are fed into the existing margin infrastructure. By loading the IMEX centrally calibrated market data every day and through the use of a holistic homogenous risk model, the risk calculation is standardised for each client. It therefore becomes ‘synchronised risk’.

As a result of this, the SIMM calculations reconcile completely with other counterparties using the IMEX platform.

Banks now have a choice to either cement the overheads of SIMM calculation, reconciliation and disputes into their business model, or to remove this overhead with IMEX.

IMEX BENEFITS

The IMEX methodology, technology, and deployment and business models combine to create a compelling solution for SIMM – for all IOSCO 261 phases.

IMEX METHODOLOGY

In the future there will be two types of risk model; the familiar internal bank perspective on markets and credit risks, and also the shared interbank perspective.

INSTALLING IMEX

IMEX appliances import portfolio information using a subset of the data required for existing SIMM/CCR processes, and they then return a portfolio-wide set of SIMM sensitivities.

About IMEX

IMEX BENEFITS

The IMEX methodology, technology, and deployment and business models combine to create a compelling solution for SIMM – for all IOSCO 261 phases.

IMEX PROVIDES:

METHODOLOGY;  we use all SIMM risk-factors across all assets with high-quality back testing compliance,

COLLATERAL USAGE;  accurate and reliable IM calculations,

VALIDATION;  P&L comprehensively explained by risk-factor sensitivities,

ERROR MANAGEMENT; our confidence intervals identify the source of error in non-IMEX counterparty disputes,

PHYSICAL SECURITY;  no trade data leaves the premises,

ANALYTICAL SECURITY;  no market or credit views can be implied by competitors,

OPERATING MODEL;  a small footprint within existing workflows,

ADOPTION FRAMEWORK;  light-touch data integration, objective acceptance criteria and transparent model validation,

TECHNOLOGY;  low physical footprint, deployed on a single host runtime performance – rapid intra-day re-runs, easily meeting the SIMM SLA.

the imex methodology

In the future there will be two types of risk model; the familiar internal bank perspective on markets and credit risks, and also the shared interbank perspective.

The IMEX process runs through four stages:

1.  CALIBRATION
All risk-factors are centrally calibrated to highly liquid market prices spanning FX, IR, EQ, CR, CO markets. The implied market data provides transition matrices that are subsequently used to model the risk-factors into the future – safe in the knowledge that all assets priced from them will consistently mark-to-market. This data is then pushed to each client.

2.  SCENARIO GENERATION
Future scenarios are created in accordance with the SIMM methodology. This is achieved in-memory within the IMEX appliance.

3.  SIMULATION
The portfolio is evaluated over the entire scenario set. Vanilla trades that can be priced directly from the risk-factors are priced using linear algebra; trades with a single risk-factor (such as American and European options) are priced by backwards induction, and multi risk-factor products (such as Asian options) are priced by Monte-Carlo simulation.

4.  SENSITIVITIES
Regression techniques make use of nested Monte-Carlo simulation to co-simulate the SIMM sensitivities with the risk factors used for each trade. Each sensitivity model can be chosen from a range of regression models – depending on the requirements for SIMM reconciliation and back-testing accuracy.

INSTALLING AND RUNNING IMEX

IMEX appliances import portfolio information using a subset of the data required for existing SIMM/CCR processes, and they then return a portfolio-wide set of SIMM sensitivities. This process typically runs once per day, but can be instantly re-run as required.

As a result, IMEX is installed alongside existing data flows and infrastructure. It does not require any additional data, support functions or change to procedures.

New instances of existing trades are mapped automatically. Trades requiring new pay-off scripts can be integrated into the existing pay-off script modelling process, or can be scripted as part of the IMEX service.

New trades requiring new risk factors are assessed by the IMEX central calibration team; the data is sourced and a calibration and modelling policy agreed with the client.

Under IMEX, SIMM reconciliation can be performed by one business function in isolation, with no dependency on or interaction with other organisational functions. Without IMEX collateral management often involves operations and analytical staff throughout the bank, often with large and hidden costs.

FOUNDING PRINCIPALS

IMEX was founded as a result of an eight-year collaboration between Global Valuation and Riskcare.

Claudio Albanese

chief quant and chief technology officer

Steve white

Chief Executive Officer

gary wong

Head of business relations