Risk Modelling & Hedging Strategies:

The financial markets have undergone rapid changes in recent decades. Financial innovations make a range of risks tradable.  However, these risks can only be efficiently managed if the risk models and risk measurement systems used are reviewed and optimised on a regular basis. ACM Risk & Analytics offer support for clients with such complex issues in the market risk, credit risk, operational risk and liquidity risk environment.

A risk culture is a worthy investment for all business areas involved. It provides help in conscious risk-taking and exploiting opportunities. Our professionals combine financial risk management backgrounds with proven consulting and project management skills to assist financial institutions with:

• Risk measurement: is the fundamental basis of all risk management, ACM will help you to set up a top-quality risk measurement system by  providing the necessary data basis (instrument, trade and market data)  creating a measurement and risk methodology based on sound theory, and stable in practice  establishing structured and clearly defined technical and organisational processes.
• Risk control: setting limiting and monitoring risks according to risk-bearing capacity. To achieve this goal, we offer advisory assistance and solution in establishing a limit structure in line with the business portfolio and products portfolio structure, reviewing the limit system and stress tests with a view to regulatory requirements, determining escalation and control processes, establishing further control processes separately from actual risk measurement
• Modelling risk: The standard characteristic figure for quantifying market risk is Value-at-Risk (VaR). It is determined by stochastically modelling the daily return of the portfolio in question.  ACM solution offer advisory in defining risk factors (such as for interest curves, spreads, volatility surfaces, stocks, exchange rates, correlations and other valuation parameters), and defining risk position and develop market risk, credit and liquidity risk models to managing your risks and meet the regulatory requirements of pillars I and II of the Basel Accord.
• Stress testing and backtesting: Regulatory directives such as Basel II require rigorous and comprehensive stress testing and statistically validated via backtesting by financial institutions. Stress testing complements the Value-at-Risk (VaR) calculation by giving an estimate of the possible impact of extreme market movements not covered in the stochastic model. Through stress and backtesting, we can assist you in not only meeting regulatory requirements but also in improving your practical risk measurement.
• Capital requirement & internal ratings: Evaluate probability of default, loss given default, exposure at default, expected losses, and unexpected losses of bank loan portfolio to determine both regulatory capital and economic capital. We also help to develop internal ratings to help mitigate risk while maintaining a focus on business performance.

Applied Capital Market (ACM) is expert in financial risk modelling from market risk to liquidity risk, commodity risk and non-financial risks such as mortality, and persistence risks. ACM provides its clients with the most innovative and robust hedging solutions available today, based on their specific market, accounting, legal and regulatory needs.