In this TABB Forum video interview, Tony Webb, Director of Analytics at FINCAD discusses how the need for fast risk analytics to enhance trading performance is putting increasing pressure on existing risk systems.
The custom-built risk models that were developed for individual asset classes or specific instruments are unable to provide the flexibility and speed required by today’s portfolio managers, traders, quants, and risk managers. A more up-to-date approach uses a flexible hybrid modeling framework that takes into account the dynamics and correlations between multiple asset classes, thus allowing a firm to quickly build new models, value complex trades and portfolios, and test various assumptions about underlying risk factors. In addition, embedding algorithmic differentiation into the framework significantly improves performance and accuracy over traditional “bumping”. In this video interview, Tony Webb, Director of Analytics at FINCAD, and TABB Group analyst Shagun Bali discuss how hybrid modeling and algorithmic differentiation can speed risk modeling and valuation calculations, and cover some typical use cases, such as xVA.