Infinity Launches New Product Line Targeted At Global Risk Management

VENDORS & SERVICES

INFINITY Financial Technology has launched a new series of products designed specifically for enterprise-wide market and credit risk management at financial institutions.

The Mountain View, California-based software vendor has also announced partnership deals with two market data vendors: Olsen & Associates and Interactive Data Corporation (IDC).

Infinity's new product line of risk systems will be marketed under the name Riskview. The vendor has released two initial Riskview products: Riskview Mapper and Riskview Objects. Infinity officials promise that more will follow.

Data translation

Riskview Mapper is essentially a data translation engine that imports trade details from external applications, reformats the data, then exports it to a relational database built using the Infinity Data Model.

The mapper application's roots lie in tools developed by Infinity to aid systems integration efforts at its risk management client sites. "Over 90 per cent of the effort is data translation," says Till Guldimann, Infinity's head of product development.

Though Infinity started life selling derivatives trading applications, in recent years it has shifted its focus towards enterprise-wide risk systems (Derivatives Engineering & Technology, March 18).

Infinity's risk management clients include: Bankgesellschaft Berlin, CPR Group, DG Bank, Santander Investment, Sanwa Financial Products, Schroders and Westdeutsche Landesbank.

Analytic objects

While Riskview Mapper covers the preprocessing needed before trade details are cached in a data warehouse, Riskview Objects deals with the analytics required once a risk database is fully populated.

As its name suggests, Riskview Objects is a library of C++ modules designed to complement Infinity's existing Fin++ object toolkit.

The Riskview Objects cover areas such as regulatory reporting, credit risk, historical simulation, value-at-risk and Monte Carlo simulation.

Infinity has built a couple of prototype risk analysis and reporting applications using its Riskview Objects library.

Vendor officials stress that these are simply examples of what can be done with the new toolkit, rather than being production-strength applications.

In tandem with the new announcements, Infinity has repackaged its old derivatives trading applications and will now market them as Infinity Derivatives.

Guldimann adds that enterprise-wide management of market risk requires accurate volatility/correlation data in order to generate VAR figures and other such risk measures.

To this end, Infinity has signed a partnership deal with Zurich-based Olsen, a financial data and analytics house. Olsen will provide volatility and correlation figures that can be entered into the Infinity Data Model.

Olsen's specialty lies in collating and processing intraday market data. It has recently launched a volatility/correlation data service on its World Wide Web site, designed to rival JP Morgan's Riskmetrics.

Infinity has also signed a similar partnership deal with New York-based IDC. IDC will provide static information on bond issues that can be imported into Infinity's risk platform.

Credit risk issues

For the future, Infinity is concentrating on extending Riskmetrics-style VAR calculations to cover credit risk management as well as market risk.

Guldimann says Riskview Objects already covers simple net present value estimations of credit risk. However, the vendor plans to unveil a new credit risk methodology later this year.

Though he declines to reveal details of this new methodology, Guldimann does say it will replace traditional Monte Carlo simulation-based analysis with a faster closed-form parametric risk algorithm.

Guldimann adds that the mathematical sophistication of credit risk management lags somewhat behind that of its market risk counterpart. Most institutions still rely on traditional asset/liability management techniques to gauge credit risk, he says.

However, triple-A rated specialist derivatives trading companies have developed far more complex methods of ensuring their high credit rating stays intact, he adds.

Guldimann says the next three to four years will see more and more institutions switching to the new credit management methods that have been pioneered by these triple-A institutions.

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