Credit exposure and counterparty risk management
Managing counterparty credit risk is essential when dealing with OTC products across asset classes. The challenge for organisations willing to set up sound credit risk management practices is to be able to monitor real-time business requests while also addressing regulatory reporting.
Sophis provides a comprehensive solution to compute credit exposure with counterparties and manage collateral risk on all the derivatives covered in VALUE.
For all financial instruments (stock lending/borrowing, swaps, options), netting, guarantees, collateral and credit derivatives, Sophis' application provides a real-time mark-to-market valuation and allows users to easily define the current credit exposures on each trade, position and portfolio.
All credit risk data (e.g. rating, credit default probability, seniority, recovery rates, mitigation matrix) are maintained in Sophis' applications. Simulations and stress-test scenarios enable accurate potential or maximum exposure to be calculated. Collateral for all the assets underlying the transactions made between two parties is managed either by transaction or by position.
Key Benefits
- User-defined hierarchies of counterparties, issuers, guarantors or geographical and business sectors
- Full cross asset management of credit exposure
- Accurate and real-time management of all collateral positions and margin calls
- Capacity to produce and send notices and documents to counterparties asking for collaterals: call notices, collateral substitution notices
- Automatic generation of transactions to readjust exposure, using customisable margin call tickets, fully integrated into the transaction workflow
- Generation of documents, settlement and payments of both physical and cash margin calls
- Loss Given Default(LGD) by counterparty computation
- Potential Future Exposure (PFE) calculation
- Third party exposure reports can be generated with the application in line with standard regulation such as MiFID
Learn more about our asset class coverage
| "With Sophis, not only have we put in place a risk system that can be scaled to our future needs, but a portfolio management system that has given us an edge in handling complex instruments"
Stephen Grobman, Chief Risk Officer of Lombard Odier Asset Management |
