RiskVal Financial Solutions is on a roll this year, having already bagged a number of awards, including best market risk solution provider and best portfolio management system provider at this year’s Waters Rankings. Now it claims the best buy-side risk management initiative over the last 12 months, knocking off last year’s winner BISAM, acquired by FactSet earlier this year.
Over the last 12 months, RiskVal has enhanced its real-time risk and P&L portfolio management system, RiskVal Portfolio, to address current risk management challenges faced by buy-side clients. The company, led by founder and CEO Jordan Hu, took a couple of months to construct the initial factor-based value at risk (VaR) offering, and a few more to calibrate and back-test the market result. Apart from regulatory and compliance requirements, an acute challenge faced by buy-side clients is consistently managing intraday and end-of-day portfolio P&L and risk. While most have back-office systems to manage those functions, Hu says what is lacking is true intraday P&L and risk management. “This is particularly true for global macro funds, as they have complex portfolios covering various market sectors and regions,” he says. “We construct real-time intraday P&L and risk [profiles] by leveraging Bloomberg for most of our real-time market data, as well as utilizing our in-house model.”
RiskVal approaches traditional VaR calculations uniquely: Rather than relying on a single VaR number, it incorporates front-office portfolio strategies and sub-strategies into the portfolio hierarchy. This allows both the front and middle offices to drill-down into P&L and VaR at the strategy level. It also applies P&L factors to VaR calculations, which allows it to explain each position’s daily P&L according to various market factors. Portfolio managers can use this information to track the performance of each trading strategy and improve the portfolio risk-reward ratio. “More importantly, the time-series of historical factor-based P&L enables truly transparent and auditable VaR calculations, avoiding conventional black-box VaR management,” Hu says.
Looking toward 2018 and beyond, RiskVal will expand its fixed-income product coverage to include munis, corporate bonds and mortgage-backed securities. It also plans on expanding coverage of non-fixed-income products such as foreign exchange, equities and commodities, to become a full-service solution, while simultaneously moving to 100 percent FIX protocol for STP communication, enabling it to provide a single interface to interact with other financial systems.
RiskVal is keen to work with traders to develop the next round of analytical tools tied to execution, as the fixed-income market moves further toward electronic trading. Hu believes that execution combined with relative-value analytics can provide traders with an edge in the market.
Anthony and James examine some of the key themes that will be on display at the inaugural North American Innovation Summit.Subscribe to Weekly Wrap emails