FRTB product of the year and Market risk management product of the year: Murex

Mickael de Oliveira Neves, Murex

From replacing their existing value-at-risk process for a more sophisticated liquidity-adjusted expected shortfall for the internal models approach (IMA) to the Fundamental Review of the Trading Book (FRTB), to leveraging synergies in shaping global regulatory sensitivities for the standardised approach (SA) to FRTB or bilateral initial margin, Murex has accompanied and advised clients at every step of their regulatory compliance and risk management journeys.

MX.3 for Enterprise Market Risk provides risk managers with the required functionality for complete risk measurement and management. It ensures their view of trade, organisational, market data and models is in line with that of the front office and finance. Nevertheless, the system is flexible enough to give independence to risk teams if required, allowing them to perform intraday risk computations, and test different market and historical scenarios and models. This is extended by broad limit and excess management, which allows for proactive intraday monitoring and detailed end-of-day reports.

Head of market risk product management Mickael de Oliveira Neves said that MX.3 for Enterprise Market Risk stands out in a competitive landscape for three main reasons. “MX.3 aligns models and valuation between risk, front office and finance because of its sophisticated product and analytics coverage,” he explains. “A modern technology stack empowers our regulatory suite to manage the huge computational demand of different deployment models. Infrastructure can be provisioned in an elastic manner, optimising cost with a pay-as-you-go approach. Finally, it can also be implemented as a pure enterprise risk platform, enabled by highly scalable architecture with multiple integration capabilities.”

As the FRTB product of the year, the MX.3 for FRTB-SA solution handles all steps of the calculation, from generation of regulatory sensitivities (such as delta and vega) using regulatory bucketing and specific configurations (such as additional volatility dynamics), to aggregation using prescribed regulatory weightings and multiple levels of netting/offset across risk factors, buckets and risk type hierarchies.

Aggregation operates transparently on either native MX.3 produced sensitivities or externally calculated and then imported ones. Regulatory stress-testing for curvature risk, analytical and simulated jump-to-defaults for default risk charges, and residual risk add-on calculations are also handled, as well as the ultimate final capital charge computation.

The Murex FRTB solution is built into the MX.3 cross-asset integrating platform, with its sophisticated offering for consistent structuring and pricing of complex derivatives.

As these capabilities are utilised for the FRTB solution, they ensure required risk inputs can be computed for both SA and IMA methods, with models and data that are natively aligned with the front office and finance, making Murex one of very few vendors that can produce complete end-to-end calculations for both FRTB‑SA and FRTB‑IMA in one solution.

MX.3 can be positioned at an enterprise level because of the rich functional coverage of its application programming interfaces (such as trades, positions, profit and loss, and sensitivities). It enables MX.3 to fit into a client’s systems landscape and stay current with other reference data systems. Murex clients can benefit from the FRTB solution without having to upgrade. The SA package is managed like a product and delivered to clients when regulations change.

On the technological side, several performance optimisations have been developed in the FRTB context (such as the ‘never-twice’ calculation) as well as advanced orchestration features to make the process of producing daily results seamless. Additionally, MX.3 – and specifically the FRTB-IMA solution – can leverage the benefit of the pay-as-you-go model proposed by cloud vendors.

Judges said:

• “The FRTB solution from the MX.3 suite covers the SA and IMA approaches. Non-modellable risk factor improvements within the past 12 months, cloud-based service-oriented infrastructure available, performance improvement with the ‘never twice’ calculation feature.”
• “Excellent analytical capabilities, speed of product evolution bears testament to commitment to clients.”
• “Wide-ranging capabilities product with well-established base.”

Mickael de Oliveira Neves, Head of Market Risk Product Management at Murex, says:

“Firstly, this award recognises the dedication and devotion of our teams of experts worldwide. It also acknowledges our investment in the platform since the first Basel Committee on Banking Supervision consultative paper. Over the past year, we have accompanied and advised clients with European Union entities to prepare for European Banking Authority reporting requirements. At the same time, we enriched packaged solutions with the latest regulatory updates locally addressed by other jurisdictions. The next years will be an exciting new chapter for FRTB. We are very proud to offer our clients a strong experience as they move toward compliance.”

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