case-study
TDC: Valuation and Risk of Complex Portfolios using FINCAD Analytics Suite from Numerix

HIGHLIGHTS 

Client: TDC 

TDC logo

Business Objectives

  • Improve day-to-day risk management
  • Generate market values of derivatives without needing to build new technology

Requirements

  • Powerful analytics offering flexibility to adapt to change
  • Broad asset coverage with flexibility to expand business in the future 

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“FINCAD contains all the calculations and formulas we need to effectively manage our derivatives portfolio."

Igor Baranovski, Risk Manager, TDC

 


Background

TDC is the leading Danish TelCo, providing communications solutions and Pay-TV to an extensive customer base. The company’s treasury operations oversees risk management of the corporate pension fund and asset allocation for investments. 

Challenge

TDC’s pension team recognized the need to add a sophisticated solution for modeling and performing risk calculations on its interest rate derivatives portfolio for risk management, accounting and trading.

TDC required a risk and analytics tool to support both pension participants and internal personnel, which would be flexible and capable of evolving with a shifting market environment. Furthermore, TDC needed a tool that offered broad asset coverage to enable them to expand business without considerable time investment. 

Solution

TDC chose FINCAD Analytics Suite from Numerix to support its risk management requirements. The solution is run in Microsoft Excel®. “We were happy that FINCAD could be deployed through an Excel interface, as this provided easy integration with our existing technology setup. The output from the solution feeds directly into our risk management system,” said Igor Baranovski, Risk Manager at TDC. 

The pension team uses an internally-developed risk model that leverages FINCAD analytics for calculating rates derivatives value and exposure. FINCAD  also facilitates asset liability management (ALM). Specifically, TDC has integrated FINCAD’s fixed income capabilities into its risk model, helping the company calculate discount factors and interest rate curves for ALM. Once the interest rate curves are built, TDC uses the results to stress test their portfolios.

Results

TDC has been pleased with the speed, accuracy and reliability of FINCAD Analytics Suite from Numerix. Results include: 

Comprehensive Coverage: “FINCAD contains all the calculations and formulas we need to effectively manage our derivatives portfolio. We use the solution straight out of the box and have been able to quickly obtain all the market values and risk statistics we need. FINCAD is comprehensive, but at the same time easy to use," said Baranovski. 

Continuous Improvement: TDC also values that FINCAD continually improves the sophistication and usability of the solution’s pricing coverage and underlying functions.

Curves and Discounting: FINCAD helps TDC calculate discount factors and rate curves for cash flow discounting and fund liability management, as well as stress testing underlying interest rates.

Compliance: As a corporate pension fund, TDC is not subject to the same regulatory standards as other financial firms are, such as Basel III or EMIR. However, TDC uses FINCAD for compliance with local requirements for stress testing exposure to interest rates.


“One area we really appreciate is the responsiveness of the FINCAD Client Services team. It’s great having access to knowledgeable and experienced support personnel that are always eager to help.”

Igor Baranovski, Risk Manager