Algorithmics, the leading provider of risk solutions, will talk about how its clients are seeing a significant reduction in their capital requirements as a result of implementing a full simulation approach to measure their counterparty credit risk. Having a consolidated view of their counterparty exposures across all asset classes and lines of business, and thus leveraging the benefits of credit risk mitigation, enables Algorithmics’ clients to re-assess both credit limit utilization and the necessary capital allocation. Algorithmics states that one client in particular experienced reductions of 33% in the CVA charge and 61% in the potential future exposure (PFE) of its top five counterparties.
This is one of the points that Neil Dodgson, vp Business Development & Customer Solutions at Algorithmics, will make in a presentation at Ri$k Minds USA 2011 in Boston, entitled ‘Strategies For Building A System To Aggregate Risk Across The Enterprise’.
Neil Dodgson commented: “Our clients are reaping the rewards of having more precise methods of measuring counterparty credit risk in their trading operations. This precision comes from using simulated exposure methodology, instead of less precise mark-to-market approaches, or from using real-time incremental CVA for pre-deal pricing. Regardless of which method they use, our clients are seeing impressive reductions in the capital cost of their counterparty credit risk. Once they know their consolidated exposure to a given counterparty, they can utilize their credit limits more efficiently, in some cases adding on trades incrementally without adding risk on to the counterparty.”
Neil Dodgson will be speaking at the Main Conference: Innovations in Strategic & Practical Risk Management, as part of Stream C on Innovations in Risk Management Systems & Technology, at Ri$k Minds USA 2011 at 1200 EST, Wednesday June 15th.
