TriOptima is planning a pilot programme for a counterparty credit risk analytics service for OTC derivatives called triQuantify. The solution is based on principles of massively parallel computing and is expected to be widely available later this year.
TriOptima, a specialist in OTC derivatives post-trade risk management services owned by interdealer broker Icap, has licensed software from Global Valuation Ltd. (GVL) to power the solution. GVL was set up in London in 2006 to provide bespoke software/hardware solutions for portfolio valuation and simulation to individual firms.
It will continue to do this, but is stepping up efforts to commoditise its technology, initially through partnership with TriOptima. Its technology differentiator is the use of GVL designed software and adapted graphics chips of the kind used in gaming to provide massively parallel computing that can handle huge volumes of data quickly and efficiently.
At TriOptima, the GVL-powered triQuantify service will be integrated with the company’s triResolve counterparty exposure management service that will provide data to the service to calculate counterparty credit risk metrics including credit value adjustment, potential future exposure and funding value adjustment. GVL is also setting up a service that will calibrate risk models based on market data supplied by Icap Information Services and will be used by TriOptima and made available to TriOptima clients on a subscription basis.
triQuantify will also provide initial margin calculations for bilateral trades, supporting the requirements of Basel III and avoiding potential disputes between parties making their own individual calculations.
TriOptima says the solution goes beyond traditional local risk models to allow large amounts of data from across global institutions to be analysed using the same parameters. This delivers a more granular and realistic calculation of risk exposure and, in turn, improved capital allocation.
Per Sjoberg, CEO of TriOptima, says: “The financial crisis in 2008 revealed shortcomings in risk models used at the time. Both banks and regulators are now looking for more accurate and realistic models. We are convinced that the novel approach used by GVL will mean a leap forward in the modelling of risks. We anticipate that many types of institutions with OTC derivative portfolios will find triQuantify meets both broad and specific risk modelling requirements.”
Claudio Albanese, founder and CEO of GVL, adds: “Running portfolio simulations on a global scale consistently and with high quality models is an overdue concept whose time has finally come. We are pleased TriOptima has taken the lead and leveraged its established technology for processing OTC trade data on a global scale. The GVL architecture is ideally suited for the global scale of this new service.”
TriOptima will pitch triQuantify as an outsourced risk service and as a service for institutions wanting to validate and benchmark existing risk calculations. It is planning to get its risk models and processes approved for regulatory capital calculation of counterparty credit risk.