The Contemporary Industry Standard

Full portfolio pricing and contemporary credit/market risk analytics including efficient production of Value at Risk (VaR), Credit Valuation Adjustments (CVA) and Potential Future Exposure (PFE)

Discover the Quaternion Range of Products

 

Dynamic Initial Margin

Benefit from Open Source Risk’s open and transparent calculations to achieve regulatory sign off.

 

XVA (Family) Calculation

Sophisticated RFE models for all asset classes and a wide financial product range.

 

Backtesting Model Validation

Meet backtesting requirements while increasing the accuracy and robustness of IMM model frameworks.

 

IFRS 9 Structured Loan Pricing

Loan pricing library, based on the Open Source Risk, that satisfies IFRS 9 requirements.

 

Structured Bond Valuation

Compute sensitivities of structured securities much more frequently than a full Monte Carlo simulation would allow.

 

Dynamic Initial Margin

  • Calculate Credit Valuation Adjustment (CVA) and Capital Valuation Adjustment (KVA) reductions as well as MVA in a fast simulation that does not take more time than a standard CVA calculation by Monte Carlo simulation, thus saving time and IT costs
  • Optimize their MVA by comparing ‘what-if’ scenarios in order to reduce capital costs
  • Verify their own calculations in order to satisfy independent model validation requirements
  • Benefit from Open Source Risk’s open and transparent calculations to achieve regulatory sign off

XVA (Family) Calculation

Computation of the XVAs requires the ability to project credit losses (due to default), funding costs of posted and received collateral, capital costs and initial margin requirements at future points in time until the maturity of a given derivatives portfolio.

Built on Open Source Risk, Quaternion has developed ORE+ with its fast, sophisticated RFE models for all asset classes and a wide financial product range. It has been successfully used to validate RFE models as well as to calculate future exposure in commercial and investment banks.

Backtesting Model Validation

The Basel Committee stated that banks using Internal Model Method (IMM banks) to calculate regulatory capital are required to carry out on‐going validation of their counterparty credit risk (CCR) exposure models.

The key ingredients in CCR modelling are Loss Given Default (LGD), Probability of Default (PD) and Exposure At Default (EAD). For derivatives portfolios, EAD is the hardest to establish, because unlike for loans and bonds, it is not just determined by a notional amount.

Quaternion has developed a software module – an extension of ORE – for a number of leading global financial institutions, which ensures IMM banks can meet their backtesting requirements while increasing the accuracy and robustness of their IMM model frameworks.

 

IFRS 9 Structured Loan Pricing

Quaternion Risk Management has developed a loan pricing library, based on the Open Source Risk, that satisfies IFRS 9 requirements and uses well documented, transparent methods for the risk factor simulation.

Using the Quaternion loan pricing tool allows our clients to:

  • Value loans with many optional features;
  • Do risk analysis on such loans;
  • Validate their own pricing models, thus strengthening internal controls and negotiation positions.

 

 

Structured Bond Valuation

The accurate valuation of structured assets remains an issue that financial institutions and asset investors face. Collateralized Loan Obligations (CLOs) as well as cash flow Collateralized Debt Obligations (CDOs) have waterfall struc- tures that determine the priority in which tranche holders are paid interest, principal repayments and default priority. This feature makes them more complex to value than a synthetic CDO.

Using the Quaternion CLO pricing tool allows our clients to:

  • Reduce the time required to value a structured bond;
  • Compute sensitivities or other risk numbers for a portfolio of structured securities much more frequently than a full Monte Carlo simulation would allow;
  • Thus improve the risk management for their CLO portfolios.