RiskFrontier is the portfolio management and economic capital solution trusted by
leading financial institutions. It is a scalable platform that identifies a portfolio's risks and
opportunities allowing for improved strategic decision making and performance.
The Challenge: Managing a Complex Portfolio with a Competitive Edge
In today’s competitive market, financial institutions face the increasing challenge of managing risks in
complex portfolios—which often include exposures from a variety of asset classes, a number of industries
and across borders. In addition, portfolio managers face unprecedented pressure from regulators, investors
and executives to articulate credit risk strategies and portfolio management techniques. To achieve
compliance and stay ahead of their competitions, financial institutions need a reliable solution that combines
sophisticated analytics with robust technology to help them gain the most insight into the drivers of risks
and identify strategies to achieve the best possible return on their investment.
The Solution: Portfolio Management and Improved Decision Making while Achieving Transparency
Understand Your Portfolio
RiskFrontier enables you to perform rigorous analysis of credit risk and economic capital, which is critical to Basel II and Solvency II
compliance. It also identifies risk concentrations by industry, geography or asset type, computes expected and unexpected loss, and calculates
distributions of portfolio values, losses and capital.
Make Better Strategic Decisions
RiskFrontier helps you understand which incremental steps to take to improve portfolio performance. It identifies a portfolio’s top and poor
performers, as well as those exposures that are mispriced (those not earning enough spread given the risk they contribute to your portfolio).
RiskFrontier also allows you to determine optimal buy/sell quantities, perform risk-return analysis for hedging strategies and quantify required
return on new investment opportunities to optimize a portfolio’s risk-return performance. With an aggregated and granular view of your portfolio,
you will be positioned to make informed decisions about the strategic direction of your portfolio.
Achieve Transparency
RiskFrontier offers the ability to perform what-if analysis and stress testing using different model assumptions to determine losses and assess capital adequacy under changing economic conditions. This, coupled with RiskFrontier’s intuitive interface and robust reports, makes it easy to articulate the sensitivity of economic capital calculations, as well as portfolio management strategies to a variety of stakeholders.
The Difference: A Comprehensive Correlation Model, Incremental Deal Analysis, Open Model Framework
A Comprehensive Correlation Model
RiskFrontier is built on GCorr (Global Correlation Model), a multiple factor correlation model that infers the correlation of risks between a variety of asset types (corporate, CRE and retail) and their related factors (industry, geography, property type and retail product type). GCorr is calibrated from a reliable and global empirical dataset of publicly traded corporations, retail credits and commercial real estate loans that span several business cycles. This model is updated regularly to capture current dynamics. GCorr is also fully transparent: Moody’s Analytics publishes research on updates or changes to the model and underlying data.
Incremental Deal Analysis Using DealAnalyzer
DealAnalyzer uses RiskFrontier’s powerful analytics to quantify the impact a deal has on a portfolio’s performance. It applies a consistent model framework to portfolio management and deal origination by providing incremental capital figures for new or prospective buy/sell decisions. It introduces real-time, active portfolio management to the origination process and allows you to quickly assess deals in the context of your overall portfolio holdings.
Transparent and Flexible Framework
RiskFrontier has a robust and transparent data management technology, which allows clients to easily import, store, and extract input as well as output data. Furthermore, with an open model framework, clients have the ability to use their own models (PD, LGD, credit migration, and correlation assumptions) or use the established models that have been empirically derived from Moody’s KMV research. This transparent and flexible framework makes RiskFrontier easier, faster and less costly to implement.
The Toolbox: Key Features
Breadth of Coverage
Risk Frontier covers loans, bonds, CDOs, credit default swaps, basket default swaps, retail credit lines, retail loans, equities and exposure profiles across asset classes (corporate, retail and CRE). RiskFrontier can also model the effects of embedded options, including loan prepayment options and bond call/put options.
Default Risk and Recovery Correlations
RiskFrontier models the relationship between default risk and recovery. Clients who choose to use this feature benefit from an empirically derived model which uses default and recovery data from over 17,000 firms across the globe. Clients have the option to examine the effect of this correlation on portfolio risk and capital.
Scenario Analysis/Stress Testing
RiskFrontier quantifies the sensitivity of your portfolio to stress or alternative scenarios. Easily test your portfolio by changing a variety of factors including PD, LGD and modeling assumptions. RiskFrontier then reports results side-by-side. Users can also move specific exposures in and out of the portfolio—calculating the marginal impact of new instruments.
Technology
RiskFrontier is a cutting-edge, server-based application. Its grid-computing architecture allows massive simulations in a distributed environment. It scales easily to fit the needs of large and complex portfolios and offers an easy-to-use, web-based console for easy monitoring. Control features include permissioning, different work groups and user types (with public/private settings).
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