Waters Rankings 2017: Best Market Risk Solution Provider—RiskVal Financial Solutions

Jennifer Yang Li, Amanda Hu, Ksenia Dominova, Alexa Mura, Teresa Contla
Jennifer Yang Li, Amanda Hu, Ksenia Dominova, Alexa Mura, Teresa Contla

In last year’s Waters Rankings, RiskVal Financial Solutions caused something of an upset by becoming the first recipient of this award other than FinAnalytica (acquired by BISAM in March 2016) or SunGard (now FIS) in the last six years.

Well, last year’s win has now become two on the bounce for RiskVal, thanks to its Relative Value Fixed-Income (RVFI) platform. Initially launched in 2003, RVFI is a real-time, fixed-income, pre-trade analytics application that incorporates more than 200 relative value trading strategies, with a user-base comprising 70-80% buy-side firms—most of which are hedge funds—with the balance hailing from the sell side, “because they still manage some inventory,” according to Jordan Hu, the firm’s founder and CEO.

RiskVal’s clients’ most pressing day-to-day challenge is that relating to managing their risk (and specifically their profit and loss [P&L]) on an intra-day basis. “Most of the market risk solutions are being managed on an end-of-day basis—they don’t manage it in real time,” Hu says. “What we are trying to address is real-time market risk management, but not just Value at Risk (VaR)—we also try to explain the P&L and how it is derived. We can link information about the risks clients are willing to take with their P&L so that they are comfortable about why they are taking risks and whether those risks are working for them.”

RiskVal’s strategy focuses on calculating intra-day P&L numbers rather than the traditional approach of extrapolating a single, end-of-day VaR number, which becomes increasingly complex (and unreliable) when using it to express a firm’s total risk exposure. “VaR is just a single number—it’s difficult to link that number to a complex portfolio. And so there has to be an element that sits between the VaR and the actual risk. Some people use Monte Carlo [simulations], but we use a historical factor-based methodology, which allows us to go back in history and calculate the aspects of clients’ portfolios that can potentially hit them badly by various market factors,” Hu says. 

And what is the firm’s strategy going forward in terms of delivery and differentiation? Affordability is the key, according to Hu. “We are trying to make market risk affordable,” he says. “A lot of conventional market risk solutions are enterprise platforms that require heavy lifting and in-house integration. What we are trying to do is make it into an ASP-based solution that uses the software-as-a-service model and makes the platform as lightweight as possible, allowing users to upload their portfolios and leverage our solution without having to do the heavy lifting and technology integration.” 

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