OTP Bank – Hungary’s largest independent retail bank, with subsidiaries in eight other European countries – has implemented the Numerix CrossAsset analytics platform to support its derivatives analytics.
The bank selected the CrossAsset platform on the basis of its independent library of market-tested pricing models and comprehensive instrument coverage. CrossAsset replaces other types of libraries with limited functionality and fulfils the bank’s requirement for a market standard product. The platform will be used for model validation, pricing complex derivatives and drilling down to pre- and post-trade risk analysis, including Greeks, scenarios and stress testing.
According to Krisztian Kovacs, head of middle office at OTP Bank, “Numerix CrossAsset is a highly flexible tool that provides us with complete model coverage in all relevant asset classes. It enables insight into the risk of structured products and improves our ability to provide more reliable mark-to-market prices for these instruments. We now have the tools needed to assess model risk and reduce operative risks in complex financial products. We can validate prices on structures, helping to improve profitability and produce fully transparent reporting.”
The bank and Numerix started to work together in July 2012 before implementing the CrossAsset platform, initially as a standalone solution for the bank’s asset liability management department. It is being used by a few employees, but the bank is building expertise around the product with a view to using it in other departments.
OTP Bank is a sophisticated technology user in Central and Eastern Europe, a region that is keen to catch up with the capabilities of the Western world. Numerix CEO and president, Stephen O’Hanlon, describes the OTP deal as an important win in the region. From OTP Bank’s perspective, he concludes: “With Numerix, OTP can increasingly be seen by market participants and customers throughout the region as an innovator and sophisticated user of exotics, substantially improving its overall value proposition going forward.”