Risk Management using VaR

An important American bank was facing critical issues with the regulatory body following an internal audit and needed to implement new risk management procedures and systems in a very short period of time.

ObjectLab took the challenge with a team from the Bank. Re-using some CORBA servers developed as part of a RMU system, it re-developed the system to use the VaR methodology.

After an initial implementation of the co-variance methodology, the Bank switched at very short notice to the historical methodology.

Again, the team used some advanced agile techniques (for the time) in order to respond. The new calculation algorithms were successfully added as well as some stress testing capability, in order, say to replay the Mexican Peso Crisis of 1996 or other scenarios given by the Bank of England or the Federal Reserve Bank in the USA.

Not only did the Bank passed any further audit by the BOE but the Bank also hailed the system as the reason why they did not lose any significant amount of money during the Russian Debt Default Crisis of 1998.

The system received feeds from branches across the world. The component-based architecture is component-based and allowed for re-use of entire modules. This system also provides the Stress Scenarios reports for the Bank of England and the Federal Reserve Bank in the USA.

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