Market scenario generator of the year: Conning

Market scenario generator of the year: Conning
Risk Markets Technology Awards 2024 Winner

Conning once again collects the Market scenario generator of the year award for its GEMS® Economic Scenario Generator platform. A multi-period, multicurrency stochastic simulation platform, GEMS generates probabilistic distributions of possible future states of the global economy and financial markets, including unlikely but plausible scenarios that could prove disruptive to business. 

In doing so, it provides clients with a clearer understanding of market risks and enables them to test business models and investment strategies under a wide variety of conditions. GEMS offers both real-world and risk-neutral functionality, with real-world scenario parameterisations provided through Conning’s quarterly GEMS Service. GEMS can produce unlimited scenarios and it can be run with a choice of time steps. Key use cases of GEMS include strategic asset allocation analysis, economic capital modelling and stress‑testing, climate risk analysis and investment performance management. 

Judges said:

  • “Best in the business.”
  • “Going from strength to strength.” 
  • “They obviously take the business seriously. Lots of changes in the past 12 months.”

GEMS covers a wide range of financial, economic and macroeconomic variables. In terms of asset classes, this includes government and corporate bonds, alternative investments and mortgage-backed bonds. It is particularly noted for the breadth of its derivatives coverage, which encompasses inflation, interest, credit, equity and foreign exchange. Users can incorporate additional and bespoke asset classes in line with their specific needs. 

The financial models that underpin the GEMS platform are a key differentiator. Produced by Conning’s quantitative finance team, they are considered some of the most technologically advanced models in the industry and are noted for their ability to credibly simulate realistic tail events.

As an investment manager for institutional clients worldwide, Conning combines the quantitative expertise of its financial engineers with the market views of investment professionals in its economic model calibrations. It regularly updates its calibration methodology and offers recalibration tools, which allow clients to alter the base calibration to fit their internal company view. The recalibration tools cover a broad range of metrics and are fully integrated with the GEMS platform so they do not require any manual processing. 

Conning uses an agile development approach and delivers updates to software every few weeks. It has made a number of notable updates over the past 12 months. These include correlating equity returns with interest rates to help a client comply with a request from a European regulator, as well as the addition of a full equity option implied volatility survey when running in real-world calibration. For many other vendors, this feature is normally only available under a risk‑neutral calibration. 

Conning has also made a number of improvements to the GEMS recalibration tool – for example, the ability to fit initial equity volatility to equity option prices, as well as an FX and equity correlation. It has also introduced a neural network modelling approach for modelling dynamic liabilities that move with portfolio performance, and/or inflation, within GEMS’ strategic asset allocation module. The neural network model approach has proved superior to other methodologies, with improved accuracy of the fit and faster run times.

Mark Saunders, director, risk solutions at Conning, says: ​​​​​

Mark Saunders, Conning

“We are thrilled to have won this Markets Technology award for Market scenario generator of the year. It is great to be recognised for our continued investment in the research and development of our software. We would also like to thank our clients for their continued support and invaluable feedback, which enables us to deliver a product that remains at the cutting edge of risk management.”

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