Credit Risk Management Sees Buildouts08.30.2011
Demands for greater transparency drive technology upgrades.
Faced with increasing demands for greater transparency and mounting regulatory requirements, firms are in need of better performance and data processing capacity.
SimCorp Dimension , for example, has launched a number of enhancements across the front-, middle- and back-office, including credit default risk calculation and collateral optimization.
“The impetus for the enhancement has to do with the challenges faced by investment managers across the globe to accurately estimate the outcome if a company defaults,” David Kubersky, managing director of SimCorp North America, told Markets Media. “There are many exposures to take into account in a multi asset class portfolio.”
The credit default risk module facilitates calculation of P/L in case of counterparty default across all holdings. Clients can combine all default exposures in one calculation without having to interface or reconcile with other systems.
“As the integrated platform holding all details about counterparties, issuers and underlying issuers, SimCorp Dimension have a unique possibility to combine all of these exposures,” said Kubersky.
By using the pricing functions embedded in the system it is also possible to include the true P/L of the derivatives and not just an approximated value.
“We are providing both the estimated P/L for all companies the user is exposed to and also the possibility to drill down into the details on many levels using SimCorp Dimension’s enterprise data management strategy,” Kubersky said.
New enhancements further standardize and automate settlement processes including reconciliation, confirmation and collateral management.
“One of the most extensive changes under Dodd-Frank will be in trading in OTC derivatives which will migrate from collateral bilateral trading into a margin-based arrangement,” said Kubersky. “This will have a profound impact on collateral optimization to meet minimum margin and capital requirements.”