Technology — once a major obstacle blocking risk management from reaching its full potential — has broken through. Where older systems traded speed for accuracy, new systems use techniques such as algorithmic differentiation and distributed computing to shatter speed barriers. Risk analytics no longer simply monitor performance but drive it, through intra-day metrics that cover everything from vanilla instruments to exotics.
Leading investors use these systems to analyze the full spectrum of investments — intra-day and on-demand. And when risk analytics are incorporated into regular trade-decision workflows, the rewards include better trading decisions and greater predictive confidence. This paper outlines the “Five Pillars” that define the core of today’s top risk systems. Though our analysis is rooted in what’s available now, “future-proof” architecture is key: the best systems are highly adaptive to change. Risk analytics continue to excel at compliance and down-side protection. The difference now is that leading investors have moved them close to the core of the investment process itself.
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