case study - Valuations and risk monitoring

An Investment Bank Conforming to PRIIPS

A leading global investment bank offers wealth management solutions that became regulated under the Packaged Retail Investment and Insurance-Based Products (PRIIPS) regulation of the European Union.

This bank retained a "Big 4" accounting firm to calculate and produce the Key Information Documents (KIDs) required under PRIIPS. These documents include risk metrics that help investors to determine if the investment opportunity is appropriate for them.

The accounting firm had valuation and risk analytics software internally, but it needed an independent source of market data to power the software.

Cambridge provided the bank and accounting firm with yield curves, FX volatility surfaces, and more during a lengthy testing period. The bank's trading and quantitative analytics teams signed off on the quality of Cambridge data. The accounting firm signed off on the reliability of the service and operational support that Cambridge provided during the testing period.

Today, Cambridge provides daily data updates that are used to produce KIDs, which bring a greater level of transparency and more effective risk monitoring to investors across Europe.

case study - Cross-asset derivative valuations

A Fund Administrator Adapting to AIFMD

A fund administrator with significant operations in the UK and Europe made the strategic decision to develop internal derivative valuation capabilities. The admin made this decision for two reasons:

First, the cost of procuring multiple third-party sources of derivative valuations had become prohibitive. The admin and its clients agreed that the primary source of derivative valuations would remain a third-party service provider; however, the admin itself would calculate valuations to use as a verification within its daily quality control process. This approach would yield cost savings while maintaining rigorous quality controls.

Second, several third-party derivative valuation service providers considered by the admin were unwilling to be considered “External Valuers” under AIFMD, so their usefulness to the admin’s European operations became limited.

To execute its strategy, the admin needed to license a commercial analytics software package and procure market data. Cambridge satisfied this second requirement by providing the admin with yield curves, CDS spread curves, inflation curves and volatility surfaces on a daily basis, which the admin feeds into its analytics software in order to calculate cross-asset class derivative valuations. These valuations are then used to corroborate or dispute valuations from the admin’s primary valuations provider.

CASE STUDY - Market and counterparty credit risk 

A Risk Technology Firm Looking to the Future

A leading portfolio & risk management technology firm made the strategic decision to change its deployment model from an installed platform to a hosted, managed service. This approach would lead to a more efficient operating model that would also reduce the cost of market data procurement to the company's clients. In the old model, clients of the firm had to procure their own market data (often from more than one firm) and manage data connectivity and licenses. This increased operational risk and often led to redundant data licenses with multiple minimum fees.

Under the new model, the firm will offer its platform as a hosted service with Cambridge market data available "out of the box". This eases content management and reduces data costs to end clients. The risk tech company also greatly streamlined its sales process, because it is now able to demo a hosted platform with integrated market data, rather than giving potential clients sample installations that are cumbersome to trial. 

The risk management firm also receives CDS spread curves from Cambridge, which allow its clients to calculate counterparty credit risk and more sophisticated risk measures like credit valuation adjustment (CVA), in addition to its core market risk capabilities.