Universal risk machine
"Frankly its stunning...the most powerful risk
management tool I have yet seen..." FOW
A superbly engineered interest rate and financial derivatives risk engine featuring the AAA HedgeTM for Windows 95/98 and NT.AAA HedgeTM : Supreme hedge flexibility
AAA HedgeTM is based on a radically different method of processing risk known as risk keeping, meaning that instruments are processed as pure risk elements. All risk problems are solved in one integrated process, regardless of the portfolio's complexity. The result is a very accurate and supremely flexible hedge . . . the nearest thing to risk alchemy.
- AAA HedgeTM The ability to hedge Anything with Anything to achieve Anything within mathematical limits. It is an automatic feature of Ristek's Universal Risk AlgorithmTM, which solves every imaginable hedge situation. This is a very powerful feature. It enables the most liquid and efficient hedge instruments to be used at all times. Just specify the preferred hedge instruments: the AAA HedgeTM formulates the hedge parcel that aligns the portfolio with the desired risk target. This is not a fuzzy correlation based hedge, rather, it is based on rigorous arbitrage principles. For example, bond portfolios can be hedged with short-term discount futures, bond futures, FRAs, swaps, short-term securities, exchange traded or OTC options, cashflows or any arbitrary mixture of these different instruments.
- AAA HedgeTM incorporates MultiriskTM which controls all major forms of market risk simultaneously. It overcomes the "bumps in the risk carpet" problem. For example, yield curve shifts, gap or gamma risks, tilt and flex risks, volatility shifts and time lapse risks are all managed simultaneously using MultiriskTM. It does so by formulating risk reshaping hedge parcels that manage the complex interrelationships between the different types of market risk.
Instruments
- Short term interest rate & bond futures
- Short term interest rate & bond options on futures
- Swaps - generic & non-generic
- FRAs
- Bonds
- Discount securities
- Caps & floors - generic & non-generic
- Cashflows
Other features
- Risk levers: Detect unwanted risk holes and seal them too! A Risk Control panel provides separate control levers for each major risk type. These levers are used to guide or steer the efficiency of management of each risk type. This is a big advance on the simple measurement of risk.
- Stress testing: Analyse the entire portfolio, selected instrument types or arbitrary trade parcels in one hit! Yield and yield volatility curves can be moved simultaneously. Importantly, movements include uniform shifts as well as tilts in the zero curves. Sensitivity to any type of discrete rate or the continuous rate may be analysed. Change in present value or actual present value may be observed. All analyses are compared with the corresponding change in, or value of, the specified target or benchmark portfolio. All rate movements are normalised to ensure consistency between different compounding frequencies and quote types.
- Bin analysis: Determine exposure to arbitrary tilts and flexs in yield curves. An extremely powerful risk analysis feature showing the present value sensitivity of designated bins or maturity gaps to isolated movements in bin forward rates. The bin analysis often highlights large risk holes in portfolios that otherwise appear robust when stress tested using more basic uniform yield shifts or even tilts. All bins, representing the entire yield curve, are displayed simultaneously. The number of bins and the placement of their walls may be tailored individually. The sensitivity in both directions is displayed simultaneously. The bin risks for any target or benchmark portfolio and anticipated hedge transactions are also displayed. All rate movements are normalised to ensure consistency between different compounding frequencies and quote types.
- Payoff graphs: Graph exposure to uniform shifts. These may include the entire portfolio or selected instruments. Both the yield and yield volatility payoff curves are produced. Graphs are generated to ensure consistency between different compounding frequencies and quote types.
- Risk target: Integrate target or benchmark risk into all aspects of the analysis and hedging. For example, all risk analysis features such as sensitivity, bin analysis and payoff graphs automatically compare actual risk performance with the target. Also, the AAA hedgeTM aligns risks automatically with the designated target risk. Any instrument type or combination of instrument types can be used in the target.
- HyperiskTM This means very fast calculation speed.
- Instrument filter: Enables sophisticated instrument tagging and isolated analyses based on the algebra of sets.
- Sub-portfolios: Designate individual instruments or instruments parcels to one or many sub-portfolios. All forms of risk analysis may be restricted to a designated sub-portfolio or combination of sub portfolios.
- Futures and ETOs: Configure futures and ETOs contract specifications through a convenient menu driven contract set-up. All popular interest financial futures and ETO contracts can be reliably managed. Allowing contract specifications to change through time as dictated by exchange rules.
- Yield curves: Generate yield curves from short-term securities, swaps and futures. Many different yield curves can be generated and grouped in sets and used, as required, in portfolio analysis.
- Defaults: Set day count and quote type defaults for each instrument type for each currency.
Contact
phone: +61 2 9281 0533
fax: +61 2 9281 6393
email: ristek@ristek.com
website: www.ristek.com
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