Volatility and correlation have reached unprecedented levels, and liquidity and counterparty credit risk have skyrocketed. Now, more than ever, traders and risk managers need answers they can trust. "An integrated trading, risk and operations system is vital in this kind of market environment," says Ken Knowles, executive vice president of financial and risk solutions at leading vendor, OpenLink
It is no exaggeration to say that few, if any, current market participants have experienced times like these. Whether we're considering the extreme, persistent volatility across asset classes, atypical inter- and intra-asset correlations, illiquidity or heightened operational and credit risk, this is, in many ways, uncharted territory for the financial markets.
This challenging environment has highlighted that, during crisis, market risk, liquidity risk and credit risk overlap greatly and what starts out as one form of risk can quickly transform into another. Examples of this are everywhere: banks have found that systematic concerns about credit risk can unsettle once-stable sources of funding; hedge funds have suffered as heightened market risk prompts hitherto successful investment strategies to unravel, their prime brokers to reel in credit and their investors to scramble for the exits; meanwhile, counterparty credit concerns have risen in key energy and commodity markets as spot market prices have collapsed amid fears of global recession.
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