The Unseen Edge: Market Risk, Strategy, and Resilience

In today’s volatile global economy, market risk is more than a compliance burden—it is a central business driver. The ability to intelligently manage exposure to shifting interest rates, FX volatility, and credit spreads is the difference between achieving strategic growth and suffering unplanned losses.

Our focus is on delivering true financial resilience. We go beyond simple compliance with the new Basel framework (FRTB & CCR) to ensure your risk function powers your trading strategy.

1. Market Risk in a New Era: From Compliance to Confidence

Market risk is the potential for losses in your trading and investment portfolios. In the wake of the financial crisis, regulators introduced the Fundamental Review of the Trading Book (FRTB) to ensure banks hold sufficient, risk-sensitive capital.

FRTB’s Strategic Shift: The FRTB is not just a revision; it's a redefinition of the entire capital requirement process. It forces a cultural shift, demanding perfect data alignment between the front office and risk teams, and requiring a trading strategy robust enough to withstand deep stress scenarios.

A central element of FRTB is the strict, legally binding boundary between the Trading Book and the Banking Book. This prevents arbitrage and opportunistic asset movement that obscured true risk in the past. Your processes must demonstrate and justify the intent behind every classification.

2. FRTB: A Dual-Track Approach to Capital Efficiency

The new framework offers a choice, but each path demands absolute precision. Your desks can choose the Standardised Approach (SA) or the capital-efficient Internal Model Approach (IMA)—but with major strings attached.

This is not the simple checklist of the past. The new FRTB-SA is a sophisticated formula that is far more capital-intensive than its predecessor, comprising three key charges:

1. Sensitivities-Based Method (SbM): A granular breakdown of risk across asset classes (Interest Rate, Credit Spread, Equity, FX, Commodity) to capture how portfolio values react to small market moves (Δ, Γ, Vega).
2. Default Risk Charge (DRC): A specific measure for the potential for losses due to a sudden "jump-to-default" event.
3. Residual Risk Add-on (RRAO): A punitive charge for products with complex, non-linear risks (e.g., exotic options) that defy easy modelling.

To earn the right to use the IMA and save on capital, your trading desk must prove its risk management is flawless and fully integrated:

• Expected Shortfall (ES): The core metric changes from VaR (a point loss) to Expected Shortfall (ES), which measures the expected size of the losses once the threshold is breached. This requires a more conservative approach to tail risk.
• The Data Test: Modellability: To use the IMA, risk factors must be “Modellable,” meaning a verifiable history of real, binding price observations must exist. Any factor that fails is deemed a Non-Modellable Risk Factor (NMRF) and is subject to a heavy capital charge, forcing firms to re-evaluate their data strategy.
• Rigorous Validation: Every single day, each IMA trading desk must pass two non-negotiable tests: Back-testing (comparing model losses to actual P&L) and the Profit & Loss Attribution Test (PLAT) (proving your risk model P&L aligns with your Front Office P&L).

3. Counterparty Credit Risk: The Market’s Domino Effect

The risk that a counterparty defaults is a credit risk, but the sizeof your loss at the moment of default is a market risk—it depends entirely on how markets have moved since the trade.

The Standardised Approach for Counterparty Credit Risk (SA-CCR)replaces older, less risk-sensitive methods for calculating the Exposure-at-Default (EAD) of derivatives. SA-CCR provides a more accurate and nuanced view of your true potential exposure, factoring in collateral and netting agreements far more intelligently.

The Credit Valuation Adjustment (CVA) is the market price of counterparty credit risk. The new FRTB-CVA framework ensures you are holding capital against the market risk factors (like credit spreads and interest rates) that drive changes in that CVA, making your capital charge a better hedge against the true cost of doing business.

4. Partnering for Resilience: Our Solution Pillars

The regulatory demands of FRTB and SA-CCR cannot be met with old technology or siloed processes. We provide the integrated, next-generation tools required to transform risk into a source of competitive advantage.

Our Focus

Strategic Value

Unified Risk & Finance Data

Eliminate manual reconciliation. Achieve a single, gold-standard view of risk data that can pass the rigorous PLAT test and justify your IMA desk approvals.

High-Performance ES Engine

Calculate the complexity of Expected Shortfall and DRC in minutes, not hours. Gain true intraday visibility into capital usage and limits, allowing traders to act strategically.

Intelligent NMRF Management

Leverage advanced analytics to identify, track, and strategically manage (or minimize) the highly expensive Non-Modellable Risk Factors, directly improving your capital ratios.

Integrated Limit Monitoring

Move beyond simple static limits. Integrate market exposure, CCR exposure, and CVA risk into a single, dynamic framework that enforces your firm’s overall risk appetite in real time.