The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Markit Builds on Risk Expertise to Extend Functionality of Portfolio Valuations Service

Markit has added in-house risk expertise and newly developed scenario analysis to its portfolio valuations service with a view to offering users improved risk management and increased transparency around valuations. The same market data and pricing models are used to drive both risk and valuations, allowing the service to provide value at risk (VaR) and stress testing results that are consistent with mark-to-market valuations.

The risk and scenario analysis solutions are, like the portfolio valuations service, hosted by Markit. The risk solution calculates market risk within a portfolio of trades and is based on the company’s in-house built risk simulation engine that is offered as an enterprise solution to sell-side institutions and has been tailored as a service for the buy-side. The scenario analysis element allows users to stress test market data inputs used to generate valuations, with scenarios specified by users run by Markit at the same frequency as valuations.

The extended service initially supports cross-asset class vanilla instruments, but Nosheen Khan, director of portfolio valuations at Markit, says the new functionality is being extended to include more complex instruments that are already covered in the portfolio valuations service.

According to Nigel Cairns, managing director and global head of analytics and portfolio valuations at Markit, “A key challenge for buy-side firms is to ensure that the market data and pricing models driving their net asset valuations are consistent with those used as part of their risk calculations. The combination of Markit’s standardised cross-asset data sets with its powerful risk calculation engine enables customers to measure liquidity, funding and market risk more accurately and efficiently.”

The risk and scenario analysis tools are available immediately and each carry a fee on top of the cost of the portfolio valuations service. Markit points out that the extended service will help clients meet regulations such as Solvency II and the UCITS IV and Alternative Investment Fund Manager directives, and hopes the service will attract not only existing Markit users, but also additional clients looking for a single service for valuations and market risk.

A third addition to the portfolio valuations service, a profit-and-loss attribution service, will be available in the second half of 2013 and is also designed to increase transparency by providing a breakdown of any change in the mark-to-market value of a trade according to risk factors including market data, model parameters and trade events.

Khan acknowledges that many competitive software firms provide similar discrete services, but says few offer a combined, consistent and flexible service in a hosted environment.

Related content

WEBINAR

Upcoming Webinar: Managing the transaction reporting landscape post Brexit: MiFID II, SFTR, EMIR

Date: 16 March 2021 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes The transaction reporting landscape has, for many financial institutions, expanded considerably in size since the end of the UK’s Brexit transition period on 31 December 2020 and the resulting need for double reporting of some transactions to both EU...

BLOG

Deadlines and Data Management By-Products of LIBOR Transition

The Financial Stability Board (FSB) has published a global transition roadmap for LIBOR that sets out a timetable of actions financial firms should take to ensure a smooth transition from LIBOR to other risk-free rates by the end of 2021. The data management task of transition remains a huge challenge for many firms, but it...

EVENT

Data Management Summit New York City

Now in its 10th year, the Data Management Summit (DMS) in NYC explores the shift to the new world where data is redefining the operating model and firms are seeking to unlock value via data transformation projects for enterprise gain and competitive edge.

GUIDE

Regulatory Data Handbook 2020/2021 – Eighth Edition

This eighth edition of A-Team Group’s Regulatory Data Handbook is a ‘must-have’ for capital markets participants during this period of unprecedented change. Available free of charge, it profiles every regulation that impacts capital markets data management practices giving you: A detailed overview of each regulation with key dates, data and data management implications, links to...