Just in Time rather than Just in Case

Real-time access to accurate, updated market information in a flexible framework is critical to dealers today. VARXPRESS focuses on speedy delivery of risk information to the dealers, who can then use it to proactively manage risks. The application allows flexible, user-definable report formats, real-time VaR calculations, ability to define and obtain the most critical and relevant pieces of risk information in time to take trading decisions, not at end of day or after the transaction . We call it delivering the right risk information Just in Time rather than Just in Case.

Our approach to risk management combines all the methodologies, technology and data required in one solution: risk managers at all levels of sophistication can receive precisely tailored, pre-defined, accurate and timely risk information on demand and in real-time or overnight and across the globe.

VARXPRESS has been architected as an n-tier application with a browser front-end, developed using server-side Java™ technologies. Its servelet-based business logic engine and XML interfaces allow it to interact in real-time with other key applications across the bank, like Treasury and Asset Liability Management (ALM) applications. These applications can, using XML interfaces, enter into request-response type interactions directly with the VARXPRESS middle layer.

• Intra Day Deals: The effect of the day's deals on the overall portfolio VaR. Sensitivity analysis to compute VaR for a set of cashflows can be done intraday.
• Incremental VaR Calculation: The application allows users to execute incremental VaR calculation intra-day in real time for pre-defined currency/product combinations, in addition to BOD VaR calculations.
• Pre-define VaR Calculations: Users can pre-define and store small chunks of VaR calculations as named 'requests', e.g., on specific Portfolio (BPS or Book-Portfolio-Strategy) levels. These may then be fired for quick intra-day checks which will be much faster than more complete VaR runs.
• Back Testing: A power feature, the Back Testing function allows users to apply calculated VaR for prior periods against actual MTM returns during the same periods. This helps in choice of methodology and combinations where applicable, as well as in providing adequate capital charge.
• User-Defined VaR Computations: Users can define VaR computation methods for a currency/product combination. For instance, FEDAI Method for USD/INR and RiskMetrics™ for Cross-Currency Pairs or Monte Carlo for one asset category, RiskMetrics™ for some others and Historical Simulation for still others. The definition of methods could be based on Back Testing. Multiple methods could be defined, stored and used for different purposes: regulatory, operational or MIS.
• What-if scenarios: The change in VaR due to a particular scenario-driven change in position can be studied.
• Others:
  • VaR computation at the individual cashflow/deal level.
  • Calculate and store Adjusted VaR based on a reconciliation of Volatility and Total VaR figures. This computation may be parameterized and user-defined.

• Risk trace-ability reports which sort VaR values in descending order of any of a set of defined parameters: this helps highlight high risk areas for mitigation steps
• Reports can be viewed for a specific portfolio/entire position list
• Comprehensive drill-down capability - Dealerwise, Cost Centrewise, BPS wise (Book-Portfolio-Strategy)
• Flexible reporting: Standard reports by Product/Currency/Vertex plus Auxiliary (user-defined) reports, e.g., by BPS, costcentre, dealer or security.
• Cross-tab reports - Product/Currency, Portfolio/vertex etc.
• Reporting down to each individual cashflow level.
• Graphical reports - Pie charts, Histograms etc.

• Delta-Normal (Variance-Covariance) methodology
• Using the RiskMetrics™ datasets, which need to be subscribed to separately; does not support non-linear instruments, viz., options
• Historical simulation
• Using past data to generate risk datasets including for non-linear instruments
• Monte Carlo methodology
• Using random sampling to generate datasets independent of historical data
• Custom methodology, with externally provided volatility data
• Such as those provided by the local Central Bank or FX Dealers' Association based on the local currencies

• FX Cash & Forward
• Money Market (short term bills and bonds)
• Fixed Income Securities
• Equities
• Derivatives: options and futures
• Forward Rate Agreements (FRAs)
• Interest Rate Swaps (IRSs)
• Currency Options
• Commodities

• XML based Request/Response messaging mechanism to make VaR Computation easily and interactively callable from external applications such as dealing room decision support applications or enterprise information applications
• Generalized EDI module to support export/import of data to VaR database from otherexternal databases of different formats: this module may be parametrically set up once and used at regular update intervals
• VARXPRESS is fully interfaced with the ITMS™ database system for optimal data interchange and real-time access. This is a 2-way real-time messaging interface based on XML and provides immediate information to the ITMS™ analytics and dealer support modules on incremental and what-if type positions, among others

• Browser-based system developed on the Java™ platform.
• UI front end based on Java Server Pages (JSP)
• Oracle™ based Database Server.