Collateral Valuation
at an Investment Bank

Overview

An investment bank is operating a derivatives trading business in the local South-American markets. The so-called credit support annexes that govern the collateral that can be exchanged have an impact on the valuation of the derivatives. It was unclear to the client how accurate their existing methodology was.

Our Solution

Using Chiron App via SaaS, the client performs a daily independent valuation of the derivatives portfolios. Highlights include:

  • Daily comparison reports between official PnL and the PnL computed via Chiron App, leading to more profitable trading.
  • Automated warnings are generated in Chiron App when the portfolio valuation changes unexpectedly, leading to better operational resilience.
  • Using ML techniques for the prediction of the evolution of the PnL correction.

Benefits of Chiron App

  • Time Saving

The time spent on the repetitive tasks has been reduced by a factor of 10. Therefore they now have time to perform more in-depth analyses, deep dive into the data and validate other types of models.

  • Audit Trail

Through versioning and keeping the linkage between Model Risk Management objects in Chiron App, the internal validation unit can easily go back in time, reproduce results, and respond to questions from regulators.

  • Collaboration

Chiron App facilitates collaboration within the validation team and allows controlling access rights for other members within the organization.

  • Better Testing

Because of the shorter validation cycle, additional time can be allocated to more in-depth quantitative analyses and a more thorough investigation can be performed in case of identified model issues. With Chiron App, the bank can now source data independently (from the first line) and have control over the full cycle.

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