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The Risk Framework™

Risk Practice Consulting

Behavioral Modeling Research

Trading Analytics Research and the Market Service

Education and Client Conferences

The Analytical Framework

Trading Analytics Research

The Trading Analytics Research group is dedicated to the continuous enhancement and extension of the analytical methods our clients employ for pricing and trading financial instruments. The group focuses much of its time on integration issues to identify how clients can and should create pricing processes, combining the nuances of various disparate trading models with the overarching goal of obtaining consistent, precise results as quickly as possible.

The Market Service

Maintaining best practice risk management processes demands sound, timely advice and assistance. Not only are financial models constantly changing, but the market itself is always evolving. As the complexity of financial instruments and balance sheets grows, it becomes increasingly important to make prudent modeling decisions and understand how such decisions individually and collectively affect the bottom line.

Risk practitioners must first model mainstream financial instruments, to create a solid foundation, before they address more complex instruments and hedging activities. Accurate modeling of these simple instruments takes time as accepted market conventions and other parameters must be accounted for--time that could be better allocated to activities with a higher value-add.

To alleviate the demands of rote decisions and activities, QRM has introduced the Market Service. The Market Service provides advice backed by empirical research studies and daily performance tests, showing clients how modeling choices affect the bottom line, both historically and in today's changing market. Models and analyses are built using real financial data and streamed directly into each client's analytical framework. This procedure allows clients to run analysis more frequently and validate results in their own environment, while also reducing operational risk. In the end, QRM clients produce more accurate numbers faster and at a lower cost, always adding value to the bottom line.

Make Better Modeling Choices
The Market Service directs clients towards the best possible risk management practices. Recommendations are backed by empirical research studies and touch all areas of risk management, including forward curve and term structure modeling, prepayment modeling, and credit pricing.

Ongoing daily performance tests ensure that QRM's recommendations remain relevant as the market changes. Each day, for example, QRM tests the pricing and hedging performance of different term structure models and QRM's proprietary prepayment models.

Finally, the Market Service provides the parameters necessary to drive risk modeling, including tuning parameters for risk-neutral prepayment models; estimates for indeterminate instrument characteristics such as mortgage TBA maturities; and correlation matrices for multi-factor term structure models, Value-at-Risk analysis, and stochastic economic scenario generation.

Increase Confidence in Your Risk Practice
The Market Service increases clients' confidence in their modeling decisions. Multiple behavioral and market models are quickly and fluently applied within a client's risk practice, ensuring complicated models are configured correctly. Clients are notified when updates to QRM-maintained models are available, and all supporting documentation and research is delivered upon update notification.

Furthermore, QRM understands that all financial institutions conduct business in the same market, relying on the same market data and transacting in the same vanilla derivatives.The Market Service provides all yield curves, common benchmark rates and indices, and over-the-counter and exchange-traded product pricing and attributes, configured according to the accepted market conventions. Pricing information comes from credible sources, and QRM's Subject Matter Experts collect, scrub, analyze and supplement the information before delivery, ultimately saving clients time and reducing operational risk.

Increase the Scope and Frequency of Risk Analysis while Reducing Effort
Analytical tools can only be used if one has the data to feed them. The Market Service offers access to current and historical data across a wide array of market drivers, increasing the scope of analyses our clients are able to perform. The minimized maintenance requirements and the immediate analysis afforded by the near-real-time intraday pricing data increases the frequency of analysis.

This increased scope and frequency of analysis, however, does not lead to increased operational effort. Taking advantage of the Market Service is itself very simple.  All drivers of global market risk can be harnessed and configured quickly.  Intraday and historical end-of-day pricing information, properly modeled and formatted, is quickly inserted into the client’s risk practice via a direct link into the Analytical Framework.  Finally, model updates are automatically downloaded and applied, ensuring that the client’s risk processes always remain tuned and calibrated to the latest market conditions.

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