Success with Razor
Razor has helped transform the way Banks, Hedge Funds, Brokers, Central Clearing Counterparties and Stock Exchanges, in many countries, measure their risk and manage their capital. Globally, our announced Razor client list includes:
- ANZ Bank
- Australian Stock Exchange
- Federal Home Loan Bank of Pittsburgh
- International Derivatives Clearing Group
- LCH.Clearnet Group
- Man Group
- Royal Bank of Canada
- Treasury Corporation of Victoria
Read the following client success stories, or vist our case studies page to see how our clients are successfully using Razor to improve their business results.
Recent Client Success Stories
Integrated Credit Risk, Market Risk and Economic Capital
The latest 64-bit version of Razor is being used to cover the client's fully integrated and consolidated counterparty credit risk, economic capital and market risk management needs of its trading activities on a global basis across all asset classes. Razor is used by Traders, Risk Control and Risk Management. The client's mandate was to identify an optimal blend of functionality, performance, scalability and reliability.
Razor is fulfilling the client's current needs and will enable them to advance their agenda of extending their complex product range while providing accurate and globally accessible intra-day risk information to the client's network. Razor's open design will also allow the client to leverage the strengths of their significant in-house quantitative capability, as well as the analytical strengths of other third party products. This design level advantage, combined with the outstanding performance characteristics of Razor will yield substantial benefits to many levels of the client's risk management function.
Enterprise Credit Exposure and Risk Management
Razor provides global enterprise-wide credit exposure risk management. This enables the client to consolidate the management of credit limits and exposures across their global operations, and to fully implement the client's credit policy and remove a number of cumbersome workarounds, reducing operational cost and risk.
Razor provides a global consolidated One Customer View across both the banking and trading books. The client is using Razor across the treasury and commercial lending books to ensure exposures are managed within the limits mandated by credit policy.
The Razor client is deployed globally, enabling end users, such as dealers, to check limits and availability in real time, which enables the client to utilise available credit more profitably on a global basis while knowing credit policy is being followed.
This was a successful large complex implementation involving integration of Razor with over 10 main trading source systems, and also including reference data and market data interfaces, with high transaction volumes, and involving a global roll-out.
Maintaining AAA Rating
This client uses Razor to maintain AAA Rating as provided by ratings agencies Moody's and Standard & Poor's. This is achieved by monitoring specific areas of Credit, Market and Liquidity Risk.
The modelling of Credit Risk Losses involves transitioning along millions of paths and hundreds of time steps additionally simulating credit party rating migration, utilizing specialized active portfolio management and loss modelling.
Razor is also used for Liquidity and Funding Risk measures, Market Sensitivity Analysis and extensive Stress Testing. The objectives achieved include:
- Calculate the amount of capital required to maintain AAA rating from Moody's and S&P on the liabilities issued by the bank.
- Manage other exposures to comply with rating agency limits; i.e. IR and FX risk.
- Ensure that portfolio assets are invested in compliance with investment guidelines.
- Enable the bank to view risk concentrations to manage the portfolio and reduce the capital required to maintain the AAA rating.
- Allow the funding desk to view maturity profile of liabilities in order to better manage funding requirements.
- Allow real-time comparison of exposure to rating agency limits.
To satisfy these objectives, Razor provides the following types of exposure calculations:
- Potential losses - simulated portfolio losses using a forward looking Monte Carlo methodology with Credit Migration/Default of Obligors and Counterparties.
- Current exposures - comparisons of the current portfolio composition against the portfolio investment guidelines.
- Funding Exposures - monitoring the maturity profile of the portfolio's funding trades (liabilities).
- Interest Rate and FX Sensitivities.
Razor's reporting server framework is used for all Risk reporting requirements.
Central Counterparty Clearing
Razor is being used for integrated Clearing House Risk Management. Clearing Participant Risk management involves high volume of trades and positions, intraday risk management, capital stress testing, liquidity stress testing, multiple risk methodologies, e.g. different flavours of, SPAN, Historical Simulations and Expected Shortfall, Limit Management and Default Management. The main objective is to use Razor to meet the Clearing House's counterparty credit and liquidity risk management requirements as the central counterparty to all trades executed on the exchange.
As the CPSS-IOSCO Recommendations for Central Counterparties highlight, risk management expectations of clearing organisations are rising steeply, hence Razor is being used to enhance the risk management capabilities to maintain international regulatory best practice principles and methodology. These significant projects provide the Clearing House with an industry best-practice overnight and intra-day risk management solution, including extensive use of Razor's VaR and stress testing capabilities, setting a new benchmark for risk management by central counterparties. Razor provides the Clearing House with the scalability to meet their high and growing volumes and to cater for future product enhancements.
Razor is used for specialised Economic Capital Modelling by a leading global provider of alternative investment products and solutions, and a constituent of the FTSE 100 Index. Razor is used to measure and monitor the credit risk component of its Economic Capital.
This financial institution takes a rigorous approach to Economic Capital which is an essential component of its overall risk management framework. For credit risk this involves the regular monitoring of the Economic Capital that they hold to cover exposures to a wide range of counterparties. This approach provides security in all types of market conditions, including the recent volatility in the markets.
Razor has delivered a leading edge combination of thought leadership in managing Economic Capital and state-of-the-art technology. The business is constantly evolving, and the increasing complexity of the firm's trading and hedging activity required us to identify a solution that is inherently adaptable and extendible.
The Razor solution configured for the Group Risk Department models the credit component of Economic Capital and provides results in less than two hours for a process that had previously taken 24 hours. The solution fully utilises the distributed processing capabilities of Razor. For this implementation Razor was able to include both an internally developed, proprietary correlation model and a full simulation of trading book exposures to ultimately derive risk-based measures of Economic Capital.
Razor is being used for the quantitative and qualitative measurement and management of Market Risk including advanced 'best practice' requirements, including the simulation of the portfolios through time taking into account dynamic portfolio changes, comprehensive stress testing, back testing and scenario analysis. Additionally Razor fulfils internal risk audit control requirements and Razor has been through the 'internal model' approval process. Razor was deliberately selected as it provides the institution with a strategic platform for the future with the opportunity to expand functionality to include CVaR, Earnings at Risk (EAR), Risk Adjusted Performance Measures (RAPM) and Economic Capital, all within the same Razor framework.