Numerix’s prowess at pricing even the most complex products has often seen it chosen when firms need technological support for their structured products business. But the company had to take its place alongside other vendors that offered support for the rest of the workflow – product distribution, valuation, risk analysis and data management. At the time its pricing libraries came as add-ins, and so Numerix relied on one of these other systems to actually deliver its analytics. However, over the past few years the company has extended its capabilities so that it now offers the full package.
“Our differentiator – and what continues to get us invited to the table – is our analytics,” says Jim Jockle, chief marketing officer at Numerix. “Where we once sat inside the system responsible for workflow, today we offer the full system.”
This chimes well with the current desire among banks to consolidate their technology and reduce the number of vendors they deal with in order to simplify their infrastructure and cut costs. The trend is exemplified by a large regional European bank’s attempt to build a structured products desk around Numerix’s technology. The company is providing a system that will cover pricing, quoting, risk analytics, and monitoring of products and market events, along with all the workflow to support these activities.
“It also reduces operational risk for the client as it is dealing with one best-of-breed vendor,” says Jockle.
A fear that plagues financial institutions when consolidating their systems is that of losing the ability to tailor the technology to their particular needs. It is something that Numerix has strenuously avoided as it has built out the functionality of its Oneview platform.
“Numerix has always been known for the flexibility of the analytics – that flexibility is in our DNA,” says Jockle. “We realise that people want to work in a way that is best for them. We originally provided for this with access to our analytics through scripting languages and application programming interfaces for other tools like reporting applications. The question was how to effectively maintain this flexibility throughout all the levels of a system’s architecture?”
One solution was to provide access to Oneview via Python, now the programming language of choice for many quants and in-house developers. “With Python, clients can rapidly incorporate new features or address complex requirements, giving them agility in a constantly evolving global financial market,” says Jockle. It also allows users to interrogate all the pricing and risk data that Oneview generates. “Our goal is to empower our clients with tools to perform bespoke analysis of the data that is generated in their systems so they can get better insights into their markets.”
Our goal is to empower our clients with tools to perform bespoke analysis of the data that is generated in their systemsJim Jockle, Numerix
Another of the company’s answers to the flexibility question is the loose coupling of the component parts of its system. Traditional IT architectures can integrate components so tightly that it is impossible to change an individual part without affecting the whole. One example of the difference that Numerix’s approach can make is in the new user interface for its risk management component, which it introduced this year. Based on the latest HTML5 technology, the modular, widget-based interface is fully decoupled from the back end of the platform using standard web services technology. This gives users the ability to add as many widgets – sections of software that perform various functions or access services – as desired to create a customised dashboard for their risk analysis.
Furthermore, Numerix has also decoupled the analytical calculations from the user interface to improve performance. “This has made the applications much faster, more usable and easier to scale,” says Jockle.
The performance improvements mean significant memory is saved during calculations, which can reduce the amount of hardware needed, and therefore reduce costs. This is particularly helpful in functions such as the calculation of the various derivatives valuation adjustments (XVAs) required for accurate credit and other risk measures.
One institution taking advantage of this functionality is Russia’s Sberbank. Over the past few years, the bank has been building an enterprise-wide automated financial market risk system. As part of the project, it is incorporating Numerix analytics for calculating, analysing and managing exposure limits for complex deals, including pre-trade XVA calculations, such as incremental credit valuation adjustment and funding valuation adjustment.
In retaining its system’s flexibility while broadening the functionality and improving its performance, Numerix is opening new opportunities for itself across the European structured products market, while cementing its position in areas such as Switzerland, where some of the most important issuers continue to rely on its technology for their strategic operations. As the judges say, Numerix deserves this year’s award for “continued innovation and product development in evolving a comprehensive menu of technology solutions well aligned to regulatory developments and clients’ needs.