Credit Risk System

Sinara worked at an international investment bank over a 5-year period to enhance and support an in-house credit risk system.

An international investment bank had developed a system to measure the credit risk resulting from its varied portfolio.

Sinara’s initial task was to undertake a study of the options for improving and extending the existing system.  The remit included an examination of existing and new business requirements; a detailed review of the design, effectiveness and efficiency of the existing system; and proposals for the way forward.

The Treasury Risk Management system calculates counterparty credit risk based on current trade and market data.  Its main mode of operation is as a batch, run overnight in normal operation, calculating exposure profiles from the relevant end of day transactions and market data.

The resulting profiles are automatically loaded into a second system where they are used in conjunction with credit limits to assess ongoing and future counterparty credit risk. The method of exposure calculation is a Monte Carlo simulation.

Over a period of time, Sinara improved the stability of the system and adapted it to reflect changing control measures and modelling of financial instruments.

The system consists of:

• a calculation engine written in multiplatform C++
• a grid of servers capable of delivering up-to-date results overnight
• a web front-end to manage and view results (JSP, Ajax, JBoss, Spring, Oracle)