SYS-CON MEDIA Authors: ITinvolve Blog, Vormetric Blog, Jason Bloomberg, Liz McMillan, Pat Romanski

News Feed Item

Moody’s Analytics Adds Stress Testing and Interest Rate Risk Models to RiskFrontier™ Software

Moody’s Analytics, a leader in risk measurement and management, today announced the release of the RiskFrontier™ 4.0 software, the latest version of its award-winning portfolio management and economic capital solution for banks, insurance companies, asset management firms, and corporations. The software includes two significant modeling innovations: the GCorr Macro Model, an expanded correlation model which enables clients to perform portfolio level stress testing; and, the ability to model the behavior of an exposure’s future cash flow using both credit and interest rate risk.

The GCorr Macro model supports single-period, simulation-based stress testing and reverse stress testing, as well as multi-period stress testing, as required by the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR). The first approach utilizes simulation output from Moody’s Analytics RiskFrontier software, taking into account portfolio effects such as concentration, diversification and credit migration. This enables clients to apply stress scenarios to their entire portfolios, measuring resulting losses and the portfolio’s sensitivity to each scenario.

For example, using a 35 billion sample corporate portfolio and 2013 CCAR variables, a simulation-based stress test shows that 54% of the portfolio loss is due to CCAR variables, while the remaining 46% of portfolio loss is due to other factors, such as industry or regional effects.

“GCorr Macro allows clients to see the effect macroeconomic scenarios have on an entire portfolio that might span commercial and industrial, small-medium enterprises, commercial real estate and retail loans,” said Dr. Amnon Levy, Head of Portfolio Research at Moody’s Analytics. “Clients can use the model to determine which variables have the greatest impact on a portfolio, or to determine which sectors are the most sensitive to specific variables. It also allows users to leverage their existing infrastructure, so implementation is relatively straightforward.”

Moody’s Analytics also implemented a bottom-up approach in the RiskFrontier 4.0 software to evaluate the losses accounting for both credit and interest rate risk at the instrument level. While historically these two risks have been evaluated in isolation, Moody’s Analytics built a framework which allows clients to model their interactions in a consistent way. For example, during simulations, an option on a fixed rate callable bond is optimally exercised based on the interest rate environment and the credit quality of the issuer.

“Financial institutions have long been struggling to integrate credit and interest rate risk, often having no choice but to account for these risks in silos and then combine them using crude approaches,” said Chris Shayne, Head of Portfolio & Valuation Products, Moody’s Analytics. “Moody’s Analytics integrated credit and interest rate risk model is the first of its kind that natively integrates the two sources of risk, improving the accuracy of results.”

The RiskFrontier 4.0 software will help financial institutions to measure the impact of rising interest rates, which are broadly forecasted by economists to increase throughout 2014, putting negative pressure on fixed-rate bond portfolios. Users can also measure the effect of growing volatility on call options and forecast economic losses resulting from changes in credit quality.

Financial institutions globally use the RiskFrontier software for credit portfolio management, valuation, capital optimization, risk based pricing, performance management and stress testing. It provides a granular analysis of a portfolio’s risk drivers through advanced analytics and modeling methodologies.

For more information, please visit http://www.moodysanalytics.com/riskfrontier2014.

About Moody’s Analytics

Moody’s Analytics helps capital markets and risk management professionals worldwide respond to an evolving marketplace with confidence. The company offers unique tools and best practices for measuring and managing risk through expertise and experience in credit analysis, economic research and financial risk management. By providing leading-edge software, advisory services and research, including proprietary analyses from Moody’s Investors Service, Moody’s Analytics integrates and customizes its offerings to address specific business challenges. Moody's Analytics is a subsidiary of Moody's Corporation (NYSE:MCO), which reported revenue of $2.7 billion in 2012, employs approximately 8,300 people worldwide and has a presence in 31 countries. Further information is available at www.moodysanalytics.com.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect at GE, and Ibrahim Gokcen, who leads GE's advanced IoT analytics, focused on the Internet of Things / Industrial Internet and how to make it operational for business end-users. Learn about the challenges posed by machine and sensor data and how to marry it with enterprise data. They also discussed the tips and tricks to provide the Industrial Internet as an end-user consumable service using Big Data Analytics and Industrial C...
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
Log data provides the most granular view into what is happening across your systems, applications, and end users. Logs can show you where the issues are in real-time, and provide a historical trending view over time. Logs give you the whole picture. Logentries, a log management and analytics service built for the cloud, has announced a new integration with Slack, the team communication platform, to enable real-time system and application monitoring. Users of both services can now receive real-...
The 4th International DevOps Summit, co-located with16th International Cloud Expo – being held June 9-11, 2015, at the Javits Center in New York City, NY – announces that its Call for Papers is now open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's large...
At 15th Cloud Expo, Shrikant Pattathil, Executive Vice President at Harbinger Systems, demos a video delivery platform that helps you do interactive videos. He discusses how Harbinger is accomplishing it in the cloud world, the problems they faced and the choices they made to get around these problems.
“Will Jaya is a direct source for server integration and storage solutions. If you are looking for any specific configurations for a project we can help you configure based on your needs and requirements," explained Netty Goya, CEO of Will Jaya, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
“DevOps is really about the business. The business is under pressure today, competitively in the marketplace to respond to the expectations of the customer. The business is driving IT and the problem is that IT isn't responding fast enough," explained Mark Levy, Senior Product Marketing Manager at Serena Software, in this SYS-CON.tv interview at DevOps Summit, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
“The year of the cloud – we have no idea when it's really happening but we think it's happening now. For those technology providers like Zentera that are helping enterprises move to the cloud - it's been fun to watch," noted Mike Loftus, VP Product Management and Marketing at Zentera Systems, in this SYS-CON.tv interview at Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
IoT is still a vague buzzword for many people. In his session at @ThingsExpo, Mike Kavis, Vice President & Principal Cloud Architect at Cloud Technology Partners, discussed the business value of IoT that goes far beyond the general public's perception that IoT is all about wearables and home consumer services. He also discussed how IoT is perceived by investors and how venture capitalist access this space. Other topics discussed were barriers to success, what is new, what is old, and what th...
Dale Kim is the Director of Industry Solutions at MapR. His background includes a variety of technical and management roles at information technology companies. While his experience includes work with relational databases, much of his career pertains to non-relational data in the areas of search, content management, and NoSQL, and includes senior roles in technical marketing, sales engineering, and support engineering. Dale holds an MBA from Santa Clara University, and a BA in Computer Science f...
The Internet of Things (IoT) is rapidly in the process of breaking from its heretofore relatively obscure enterprise applications (such as plant floor control and supply chain management) and going mainstream into the consumer space. More and more creative folks are interconnecting everyday products such as household items, mobile devices, appliances and cars, and unleashing new and imaginative scenarios. We are seeing a lot of excitement around applications in home automation, personal fitness,...
Entuity®, a provider of enterprise-class network management solutions, today announced that it solidifies its position as a market leader through global enterprise customer acquisitions and a refined channel strategy. In 2014, Entuity increased new license revenues in EMEA by over 75 percent, and LATAM by over 125 percent as customers embraced Entuity for its highly automated solution and unified architecture. Entuity’s refined channel strategy focuses on even deeper strategic alignment with ke...
Almost everyone sees the potential of Internet of Things but how can businesses truly unlock that potential. The key will be in the ability to discover business insight in the midst of an ocean of Big Data generated from billions of embedded devices via Systems of Discover. Businesses will also need to ensure that they can sustain that insight by leveraging the cloud for global reach, scale and elasticity.
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Cloud Technology Partners on Wednesday announced it has been recognized by the Modern Infrastructure Impact Awards as one of the Best Amazon Web Services (AWS) Consulting Partners. Selected by the editors of TechTarget's SearchDataCenter.com, and by votes from customers and strategic channel partners, the companies acknowledged by the Modern Infrastructure Impact Awards represent the top providers of cloud consulting services for AWS including application migration, application development, inf...