Case study portfolio risk management application banking luxoft for top10 global investment bank
For more information about Luxoft, visitwww.luxoft.comwww.luxoft.com/financial-services/case studyPortfolio Risk Management ApplicationSummary13.09.2012Develop a comprehensive portfolio risk management application thatsupports multiple business units in a global investment bank.uu Client: A top ten global investment bankuu Business Area: Multi-asset class trading, performance management,position monitoring, structured finance, regulatory reporting andcompliance, market risk management, middle office, front officeuu Asset Classes: Equities, equity derivatives, fixed income,FI derivatives, FXuu Technology Set: Sybase, J2SE, Core Java, JMX, Swing, RMI, iBATIs,JUnit, proprietary risk calculation libraryuu Integration: Market data providers; instruments and trades dealingapplications; risk data consumers, including trading and control systemsuu User Profile: Traders, market risk and business unit control, generalledger accounting, operations (1000 users)uu Geography: US, APAC, EMEAuu Relationships Status: Ongoing ODC, T&Muu Services Provided: Development, maintenance and productionsupportuu Team Size: 4 team membersuu Duration: 3 years
Business ChallengeA top ten global investment bank needed a comprehensive solutionfor portfolio risk management that integrated the data across businessunits and around the world. The portfolio instruments for risk calculationincluded bonds, derivatives, foreign exchange, OTC, and stocks.The solution for the risk calculation and reporting application had toachieve four main objectives:1. Timely reporting and 24/7 availabilityThe ability to provide portfolio risk reports in a timely fashion is of criticalimportance from both an economic and a regulatory point of view.2. Advanced risk calculation and analysisThe solution had to provide views of the positions and portfolios withthe risk values, including Greeks, calculated for the correspondinginstruments, as well as the implementation of scenario analysis forstrategic risk management and daily P&L statements.3. On‐demand, historical and forecasted risk reportingNear-real-time risk data, as well as historical data, for thousands offinancial instruments and millions of trading transactions is required foron-demand reporting, regulatory compliance reporting, and scenario-based forecasts.4. Multiple views for multiple rolesThe solution had to provide for the unique reporting needs of traders;market risk and business unit control teams; general ledger accountingstaff; and operations personnel.02Luxoft - Case StudyLuxoft Delivered SolutionLuxoft’s team extended the bank’s resources for the development andimplementation of an integrated, global risk management application. Inaddition to advanced systems development knowledge, the complexity ofthe business portfolio required that each team member have a firm grasp ofthe various types of vanilla derivatives and complex OTC exotic instrumentsthat are traded all over the world.
03Luxoft - Case StudyLuxoft’s development team successfully implemented the following keysystem capabilities to meet the bank’s objectives:uu 24/7 availability for approximately 1,000 users in 20 countriesuu The system supports over 3,000 concurrent calculationsuu Market risk, P&L and trading risk calculation and analysis is supportedfor all equities and equity derivatives, ranging from stocks to exotic-structured productsuu The system efficiently meets the demand for Monte Carlo valuationwithin level-of-service and performance guidelinesuu The system effectively exploits the hardware resources with the averageCPU usage at 80%uu Automatic system recovery processes maintain system reliability withno fault-tolerance overheadFigure 1:Portfolio RiskManagementSystem ArchitectureLuxoft’s engineers developed an innovative and advanced systemarchitecture that significantly improved system performance and stability,giving the application the infrastructure needed to support complexcalculations and on-time reporting. A powerful valuation grid with parallelcalculation capabilities provides complex analysis results in a fraction of thetime needed by standard models.VALUATIONGRIDCACHINGSERVICESDB ABSTRACTION/CACHING LAYERLIVEMARKETDATASECONDARYSERVERPRIMARYSERVERVALUATIONSERVERDATANORMALIZATIONGUI
03Luxoft - Case StudyCustomer FeedbackBenefitsWith Luxoft’s technical expertise and advanced business domainknowledge, the client realized the following benefits:uu System performance significantly improved in the first year of theinvolvement, providing the additional system resources needed fornext-day reporting for forecasts and historical analysisuu Luxoft drove a number of critical functional initiatives, including changesto the swap valuation model, detailed and product-level P&L reports,and the migration to strategic valuation librariesuu Luxoft delivered the services, including the features development, ontime and within the budgetuu Luxoft improved the overall code quality with consulting services in bestpractices for testing and codeuu System stability, measured by monthly reports, greatly increased overthe years of the Luxoft team involvement and multiple architecturalimprovements were implemented to decrease maintenance costsuu System performance improvements allowed increase in the forecastinghorizons and valuation precision without incurring the cost of additionalhardwareuu The flexible and scalable system architecture provides the client with theability to expand the current application to support increased tradingvolumesDetailed feedback is available on request.