Natural Language Processing and Machine Learning Technology is Deployed to Address LIBOR Contract Renegotiation Challenges and Key Operational and Technology Requirements
Numerix, the leader in risk technology, has partnered with NextGen Strategic Advisors, an innovative Financial Institutions management consulting firm, to introduce Numerix Oneview for the LIBOR Transition, a new technology designed to address the most burdensome legal, operational, technological and risk challenges presented by the phase-out of LIBOR.
Leveraging Artificial Intelligence (AI) technology, Oneview for the LIBOR Transitionidentifies, revises and extracts specific legal and transaction terms in Loans, Structured Transactions, Floating Rate Notes, and Derivative contracts to:
- Support contract language renegotiations;
- Provide critical information to support operations and transaction management;
- Provide custom data feeds to update downstream processing and valuation systems;
- Provide risk management and scenario analyses.
“The alternative reference rate (ARR) debate today is centered around the timing of the transition, the specifics of the ARRs, term structures and basis spreads, and the lack of liquidity in new ARR products,” said Gary Mandelblatt, Managing Partner of NextGen Strategic Advisors. “However, the biggest and most expensive challenges of managing this transition include renegotiating millions of contracts that reference LIBOR, operationalizing the updated terms for legacy and renegotiated contracts, and managing the financial, credit and operational risks of the transition. By utilizing the AI technologies of machine learning and natural language processing, we have designed a capability that will help institutions radically address this transformational change efficiently and cost effectively.”
Adapt Quickly to Alternative Rate Developments
By digitizing contract information to automate the updating of systems with new rates and terms, Oneview for the LIBOR Transition can help legal and operations departments to significantly reduce the burden, resource demands, and time needed to drive their LIBOR transition projects. The contract information can also be fed into Numerix’s valuation models to calculate LIBOR exposures and risks under different scenarios utilizing a range of benchmark assumptions.
“Numerix has been on the forefront of helping market participants prepare for the LIBOR transition. Our cutting edge multi-curve framework is helping firms navigate the shift to alternative reference rates, and we were first to market with complete coverage for SOFR and SONIA curves,” said Steven R. O’Hanlon, Chief Executive Officer and President of Numerix. “Over the past twelve months, our clients have been leveraging our technology to assess the impact of the LIBOR transition, making the necessary adjustments within their pricing and risk systems to accommodate new curves. This revolutionary new solution addresses a unique and massive challenge and will help to streamline the legal and operational complexity of the LIBOR transition while mitigating P&L and risk exposures.”
Numerix Oneview for the LIBOR Transition provides legal departments with revised contracts utilizing the recommended language from jurisdictional working groups or firm-specific proprietary language. Critical information is extracted from the contracts and can be used to feed transaction processing systems to update the terms of the transactions. Oneview for the LIBOR Transition can also be used to perform detailed valuation, risk and scenario analyses to support the risk management of the transition.