Risk Management Framework

This is my idea of a generic infrastructure for Realtime Risk (RR).

Ideas are not entirely mine and have been gathered through several

assignments I have held in Capital markets.

If I had my way with sufficient funding this is how I would implement

A financial risk management environment for an enterprise.

I have tried to build a case around basic and essential requirements

to achieve seamless integration within the orgamization and with external

parties.

customers have a different view of risk. I also believe it is

hard to capture what exactly customers mean. Best practice in my opinion

is to allow them to interact, discover and set their own risk parameters.

Given all the data that is available from Yahoo and other internet outlets and

given technologies like R and XML, Unix it is possible to engineer an easy to

install, customize and create value. Free Software (GNU Style).

Key Concepts

• Portfolios

• Instruments

• Market Data Providers

• Risk Analytics

• Reports

• Interactive Experimentation

Key Drivers

• Flexible PF Specification

• Uniform Standard Instrument Definition

• Rapid MDV Integration and Validation

• Rapid Model/Analytic Integration

• Report Generation

• Delivery

• Job Schedule and Monitoring

• Security and Access Control

Instrument Services• Instrument Management

– MultiAsset

– Instrument Statistics+

• Standard Deviation, Closing Price– TimeSeries given Customer, DateRange

– Daily,Monthly or other custom period

• Beta against different benchmarks

• Correlation and covariance with other instruments

– Customer Independent

– Customer Specific Attribution

– Market Value and Customer Override

– Notification and Access Control

Portfolio Services

• MTM given date, Instrument Values

• MTM Time Series, Return Time Series

• Standard Deviation

• Excess Return given Benchmark

• Return per unit of Standard Deviation

• Other statistics Sharpe,Sortino,Omega etc

• MLE, VaR estimates, cVaR or other extensions

• Customer Specific Uploads

MDV Service

• Daily Upload

• Symbology Mapping

• Simple Validation

• Error Report

– No Change

– AbnormalChange

• Corporate Events

• Analyst Override

• Conflict Resolution

Analytics

• Statistics given PF, Customer Specification

• Key Statistics Persistence

• AsOf Computation

• Computation Given Alternate Valuation/Price

• Exception Handling

Report Generation/Delivery

• Flexible Specification

• Flexible Rendering

• Customization

• Multiple Delivery Platforms

• Security (Encryption)

• Resource/Usage Meters

Customer Specific Dashboards and OnDemand Services over secure channels

Management

• Job Schedule Maintenance

• Calendar, ReRun, Reporting

• Access Control/Web Portals

• Custom Deployment

– Customer Can lease whole framework

– Remote Administration

– SAAS/AppServer

Generic Architecture

RRRRR ESB(XML/XBRL/JSON/FIX)

MDS

WAN

RAS RPTS PFS SM

JMonSecSvcAnalystDBMS Customer

WAN

RAS – Risk Analytic Server

SM – Security master

PFS – Position/Portfolio Server

RPTS – Report Server

MDS – Market Data Server

Things To Do

• Instrument Specification

– Input/output, DBMS

• PF Specification I/O, DBMS

• Analytics Catalog – Reuse, I/O

• Report Specification I/O, DBMS

• Job Monitor Requirements

• WAN Transport Specification (FTP/SMTP/HTTP)

• Customer Specifications