Quantifi Survey Reveals Industry-Wide Move to Overhaul Counterparty Risk Systems

May 26, 2011
  • All respondents have or plan to implement major changes in their counterparty risk systems
  • Data management and integration is a significant challenge

London and New York (26th May 2011) - Quantifi, a leading provider of analytics, trading and risk management solutions for the global capital markets, today announced the preliminary findings of its counterparty credit risk survey. Quantifi recently participated at the Global Derivatives and Risk Management conference in Paris and surveyed a cross section of financial firms to gain an insight into the various approaches and timing in implementing counterparty risk management processes.

The survey revealed:

  • All respondents have or plan to implement major changes in their counterparty risk systems. 41% of respondents plan to complete major changes in 2012 or beyond.
  • 31% of firms are currently implementing or evaluating vendor counterparty risk and CVA systems.
  • The largest challenge within existing counterparty risk systems is data management and integration (64%). The next largest challenge is the calculation of CVA sensitivities.
  • 27% of firms actively manage and hedge CVA. 59% of firms use exposure limits and 50% use counterparty selection as their primary method for counterparty credit risk management.
  • 64% of respondents calculate CVA on new trades. 50% of these use an integrated calculator with netting and collateral.

 


 

"The standard is being set by the largest global banks which now actively manage counterparty risk, calculate sensitivities, and price CVA for new trades using integrated solutions based on netting and collateral agreements."

Rohan Douglas, CEO of Quantifi


 

Rohan Douglas, CEO of Quantifi, comments, “Regulatory and market changes are driving an overhaul of how all banks calculate and manage counterparty credit risk. The standard is being set by the largest global banks which now actively manage counterparty risk, calculate sensitivities, and price CVA for new trades using integrated solutions based on netting and collateral agreements. Given the portfolio level scope and the analytical complexity, existing technology infrastructures have constrained many banks from achieving best practices.”

David Kelly, Head of Credit Products, Quantifi, notes, “There isn’t necessarily a ‘one size fits all’ approach to counterparty risk management due to the unique aspects of bank’s respective portfolios and supporting systems. Many firms are choosing vendor systems that already embed industry best practices and offer a faster and more cost-effective solution.”

Quantifi’s offering in this space, Quantifi Counterparty Risk, is a high-performance platform for managing counterparty credit and market risk that is flexible, scalable, rapid to implement, and intuitive to use. Incorporating high-performance, multi-factor Monte Carlo simulation, coupled with our powerful grid computing architecture, Quantifi Counterparty Risk can support even the largest most complex portfolios, including those with significant wrong-way risk or volatility. Reflecting industry best-practice, Quantifi Counterparty Risk supports calculation of CVA sensitivities and incremental deal pricing, enabling institutions to proactively manage counterparty risk and address regulatory and accounting requirements.