Arguably one of the most quantitatively demanding requirements from BIS.
CRM (Comprehensive Risk Measure) required a 99.9% tail risk to be calculated on complex structured assets. It was an immense challenge for the affected trading desks, as well as for the local regulator teams.
Industry: Investment Banking
Developing and Implementing the Solution
We supported the development and determination of the methodology for the 99.9% simulation of correlation credit instruments.
We carried out analysis and review of historical market data, including cleaning routines, for simulations.
We developed a testing framework and suitable test portfolio that fairly represented the client’s portfolio risk.
Analysis & Reporting
Analysis of output of market evolution programs to ensure validity of results and market realism.
We carried out an assessment of the drivers of the calculated CRM figure.
We supported the design and production of the reporting requirements for CRM including diagnostics and CRM-explain reports.