Ongoing Model Performance Monitoring of pricing models across various asset classes for a large US Bank
Client : Large US Bank
Sucess Dialog
This is added to your favourites.
Warning Dialog
This is already added to your favourites.
sorry something went wrong.
Objective
To provide a top-tier US bank with ongoing performance monitoring of 50+ pricing models across Rates, Equity, Forex, Commodity, Credit and CVA asset classes.
CRISIL's Solution
Using process standardization and automation techniques, developed an efficient and cost-effective solution to monitor models on a quarterly basis
Market data used is no older than the quarter prior to the assessment
Tests during monitoring include:
Convergence and Stability Tests (NPV and Greeks)
Consistency Tests (parity relationships, model limits, accuracy tests)
Stress Tests (large volatilities, negative rates)
PnL Attribution (30 business reports and regression tests)
Most tests have well-defined numerical outputs that are compared against predefined thresholds (Green/Yellow/Red)
Monitoring process includes documentation/reporting of the results
FX: Cross-Currency Swap Model
FX Spot Rate Sensitivity
DV01
Consistency with Single-Currency Swap
Credit & SP: CDS Pricer
Monotonicity of the Price on the Hazard Curve
30 days PnL (R2)
Spread01
Process Automation
For equity and FX models, developed common python frameworks that allow running/monitoring in a standardised manner
Documentation performed directly from scripting
Infrastructure allows one analyst to monitor 14 models (tests + documentation) in less than 10 working days
Similar infrastructure being developed for other desks
Client Impact
Solution provides effective model monitoring across asset classes, faster and at lower cost
Test results presented in well-defined presentation with comparison to pre-defined thresholds using color coding, allowing for easy analysis and enhanced decision making
Request for services
Questions
Looking for high-end research and risk services? Reach out to us at: