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Jul 9, 2021

A late revival of counterparty credit risk modeling

Counterparty Credit Risk (CCR) modeling became popular in the early 2000s as B2 entered into its final phase. Many banks rushed to develop their own approaches or acquire third-party vendor solutions for counterparty credit risk exposure measuring and management. 

Jun 11, 2021

Managing energy risk in the new normal post-COVID-19

The energy sector is as complex as the different forms of energy required to power our modern lives. According to the U.S. Energy Information Administration (EIA),  “The May Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty because responses to COVID-19 continue to evolve. Economic activity has increased significantly after reaching multi-year lows in the second quarter of 2020. The increase in economic activity and easing of COVID-19-related restrictions have contributed to rising energy use.”

May 21, 2021

ETFs: a case for “look-through” data in risk management and beyond

For more than 25 years, exchange-traded funds (ETFs) have transformed the global investment landscape. Born out of US equity market efficiency assumptions and computer advancements, these low-cost investment vehicles are found today in many institutional portfolios. Investors use ETF products well beyond original US equity bounds. These liquid beta instruments seek to replicate performances of international equity indices, commodity indicators and selected fixed-income universes. Considering the continuous growth in assets allocated to ETFs—ESG-tilted ones in particular—this blog looks at some analytics consequences on institutional investors’ asset allocation and risk management processes.

May 13, 2021

Moving to the cloud – it’s a risky business

Technology and IT management have become second nature for many financial firms. There is no shortage of anecdotes from the last decade where C-Suite executives anticipated the changes. One such CEO of a Tier 1 European Bank back in 2015 foretold, "In the future, we will be a software company.” Our view, as a software company, was that we felt confident that there would continue to be a greater reliance on IT infrastructure. The emphasis on infrastructure remains, although the business challenges are evolving.

Apr 29, 2021

Risk management and lessons learned from GameStop

The most important lesson to learn from the recent GameStop event is the importance of risk management. But the point is not to try to forecast such an event. For the most part, GameStop being selected by the public for this wave of buying was more or less a random event. There are thousands of stocks that could have experienced the same thing—in fact, there are large stock price swings every day, just with less volume and publicity. Regardless of whether you are an individual or a large mutual fund, knowing if you have a “GameStop Candidate” in your portfolio is critical.

Sep 3, 2020

Onboarding new asset types: a case for flexible risk model integration

For wealth managers and institutional asset allocation specialists exploring long-term investment opportunities, the onboarding of new financial instruments presents both data and risk modeling challenges. This investigation journey can be illustrated using a hypothetical cryptocurrency fund example as part of a broadly invested financial portfolio. This example also advocates the need for analytics to enable upstream data investigation, flexible risk model mapping and support for a broad range of simulation techniques within a cost-controlled environment.

Jul 15, 2020

Negative oil futures and the impact on risk management

April 20 marked a new event in the history of crude oil prices when the WTI May futures that were about to expire the next day traded in the negative territory at a historic low of $ -37.63. This was the result of a very low demand for oil as the global lockdowns to mitigate the effects of the pandemic brought economic activity to a standstill. This in turn resulted in a huge surplus of oil that has left oil producers and traders scrambling for storage.  The fear is that, if forced to accept delivery of crude oil upon the futures expiration, it would leave the party with the long position of having nowhere to store it, as the excess supply has already filled up the storage tankers across the US. This explains the negative May futures price.

Apr 13, 2020

Frontline lessons: Providing outstanding customer service amid the COVID-19 crisis

As we confront the reality of evolving our personal, professional, and organizational lives in the face of pandemic conditions, we must continue to keep our businesses running and our customers satisfied.  While many organizations have invoked their business continuity procedures, many did not account for the magnitude of the transition to remote conditions over an extended period. Combining a near 100% remote workforce with the physical quarantine of employees, COVID-19 highlights the need to evaluate our collective organizational resilience continuously. 

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