Risk analysis with depth. Software, Services and. XVA Capital IM Limits Adjoint

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1 Risk analysis with depth CompatibL Risk Software, Services and Consultancy XVA Capital IM Limits Adjoint

2 The CompatibL development team has demonstrated extraordinary commitment, skill and flexibility, and it has been a pleasure for us to do the project and go live with this excellent XVA platform. About the company Maciej Winnicki, Head of the XVA project, European Investment Bank As well as delivering a robust and flexible XVA / Capital platform, CompatibL has provided excellent implementation and support. The CompatibL and RMB teams synchronise their daily work seamlessly and we are very pleased to have the CompatibL XVA platform as an integral part of the bank s Trading and Risk activities. Robert McIntyre, Head, XVA trading, Rand Merchant Bank The Compatibl Platform is very flexible and easily customizable to our needs. CompatibL has consistently provided us with excellent support and new quantitative solutions for our XVA challenges across pricing and risk management and we view our relationship with Compatibl as much more than just with a software and solutions provider. Alexey Trofimov, MD and Head of Risk Modelling, Sberbank of Russia CompatibL Technologies was founded in 2003 to offer risk technology solutions to banks and asset managers. Since then CompatibL has established itself as the leading provider of quantitative software and solutions for XVA, limits, and regulatory capital. CompatibL has over 200 experienced developers and financial engineers and boasts a client base of over 50 banks, central banks, supranationals and asset managers in the US, EMEA and Asia, including 4 out of 5 largest derivatives dealers. Over 70 major projects have been implemented across this client base. CompatibL is headquartered in the United States and United Kingdom. Why CompatibL? CompatibL offers turnkey solutions for XVA and regulatory capital as well as full support, implementation and customisation services by experienced XVA quants and development teams. In a similar vein, CompatibL s consultancy teams look beyond the delivery of the requisite report and bring practical enhancement to the clients operation, often incorporating the delivery of working code with source. CompatibL is at the forefront of many important industry innovations and trends around the trading and risk space, including adjoint algorithmic differentiation (AAD), a technique that has the potential of delivering massive performance gains for the calculation of sensitivities and capital measures, real world measure modelling for more accurate limits and capital, and the quantification of settlement risk as part of the overall counterparty credit risk. 13 years of experience in trading and risk management 52 clients banks, central banks, supranationals and asset managers in the US, EMEA and Asia 4 out of 5 largest derivatives dealers use CompatibL platform CompatibL products reach map #1 in CVA for Numerix CVA based on CompatibL XVA platform 76 major projects implemented 3

3 CompatibL Risk Software Application HIGHLIGHTS An advanced software platform for XVA, capital, initial margin and regulatory calculations, using a choice of CompatibL engine, in-house or external analytics Rich visualisation capabilities Regulatory and fair value measures classes including exotics. Governance reporting to verify calculation input including trade data, market data, front CompatibL s C++ library for AAD in quant finance. As part of the application interface, users can automate Specialised viewers for XVA, PFE, and trade pricing results All major regulatory calculations office MtM reconciliation, XVA any workflow step, including within Basel II and Basel III, SA- contributors. data loading, simulation, CCR, and FRTB. All major types of XVA including CVA/DVA/FVA, KVA, COLLVA. P&L predict and explain reports advanced predict Collateral modelling CSA modelling advanced pre- and post-processing, by creating scripts (e.g. batch, Python bindings) or accessing it via external API including C++, C#, Java, and Python. XVA metrics reporting to calculate PnL expectations based on T-1 scenario results using real time market data feed. Quantitative Features features to model the change of collateral through time, including dynamic initial margin. Classical or advanced (Andersen-Pykhtin-Sokol) model for the margin period of risk. Quantification of trade and Application architecture Management of complex trade, market and reference data. Flexible integration layer. Parallel computing: running On the fly calculation of XVA metrics such as CVA, DVA, FVA, KVA, and COLLVA Dynamic model calibration a flexible framework to tune calibration of IR/FX/Commodity/ Inflation/Equity/Credit models based on trade attributes. Real world (capital, limits) and risk neutral (XVA) modelling combined with the choice of full repricing or AMC valuation, for IR, FX, Commodity, Inflation, Credit, Equity and other asset margin flow settlement risk as part of the overall counterparty credit risk. Advanced Technology Platform Support for adjoint algorithmic differentiation (AAD) using TapeLib, user-defined calculations on a parallel cluster, cloud, or remote server. For desktop installation, utilise all cores of a local desktop. Learn more about CompatibL products and services by requesting a personal demo: [email protected] Advanced American Monte Carlo High performance analytics makes possible real time calculation of XVA and counterparty credit risk 4 5

4 Adjoint Algorithmic Differentiation Solving regulatory requirements From any report, the users have the ability to run AAD sensitivities on demand. Implementation is based on TapeLib, CompatibL s AAD library TapeLib supports scalar and vector AAD with tape compression, and includes a specialised API which permits effective recording of AAD tape in Monte Carlo and other calculations spanning multiple programming languages (C++, C#, and Java). Calculate AAD sensitivity by double-clicking on a calculated figure CompatibL Risk platform covers the current and upcoming XVA and regulatory calculation needs including FRTB and SA-CCR Basel III Basel III S-CVA report calculates CVA Charge, Default Charge and Total Charge projections with drill-down to counterparty and trade level AAD sensitivities to all appropriate risk factors are calculated from the recorded tape on demand Capital calculations CompatibL XVA supports SA-CCR method for calculating EAD. The user has the ability to drill down to Asset Class, Hedging Set and Trade Level FRTB Example of AAD sensitivity of CVA calculated on demand Basel FRTB Market Risk metrics, including 97.5% Expected Shortfall and MVaR, are available in the Market Risk report 6 7

5 Consultancy and Services Quantitative consultancy CompatibL s quantitative research team led by Alexander Sokol has a track record of constructing valuation and risk models used by over 350 banks and asset managers in 25 countries Risk and Trading system project implementation services Model IMPLEMENTATION AAD Project Delivery TapeScript Expertise Recently completed projects Electronic trading platform CompatibL s custom software Validation of multi-asset portfolio CompatibL developed specialised TapeScript is an open source development practice is trusted CompatibL provided integration simulation models, derivatives methodology for retrofitting AAD library for adjoint algorithmic by the largest international banks, and implementation services for pricing and risk models for to existing in-house analytics differentiation (AAD) developed including several major dealers, multiple in-house systems and standardised and exotic libraries, and has extensive and maintained by CompatibL. to provide implementation leading vendor solutions as well instruments. project delivery experience It can be downloaded from services for mission critical as bespoke project work that Model validation of working with clients to implement AAD within their github.com/compatibl and used free of charge in academic projects. included the following: Enterprise CVA Methodology review for capital trading and risk applications. or commercial applications, Our developers, quants, and implementations at multiple and XVA simulation, and the design CompatibL s methodology has with or without CompatibL s business analysts are an integral leading banks. of reference implementations. Performance optimisation Performance optimisation of inhouse software and analytics. Implementation of AAD for been proven by conversion of the open source QuantLib library to support AAD, and has been presented in multiple training courses, workshops,and webinars. The pioneering approach services. TapeLib TapeLib is a commercial library and AAD application part of our implementation team, and are well acquainted with the latest quantitative research, development technologies, and implementation practices to provide seamless, one-stop delivery of both the analytics and Real time PFE based pretrade limit monitor. Regulatory capital solutions for several European and US banks. Enterprise infrastructure for batch and intraday transfer Front-office pricing and PnL estimation tool used by corporate bond traders, heads of desks, and senior managers from various credit product groups of a major international bank in-house analytics using of using vector AAD (tape suite, delivered to as part of engineering aspects of the overall of trade data from multiple CompatibL s TapeScript and compression) solves the main CompatibL s implementation solution. trading systems into the TapeLib products. performance limitation of services, which extends enterprise risk platform. QuantLib consultancy Quantitative analytics library implementations using QuantLib, and implementation of AAD in QuantLib using QuantLibAdjoint, a CompatibL open source project. AAD excessive tape size. The use of vector AAD with tape compression reduces or eliminates the need to make extensive changes to in-house analytics that would otherwise be required with the traditional scalar AAD methodology. TapeScript with finance-specific functionality. CompatibL s experts will work with your management to identify and understand your business objectives and develop strategies for achieving them in a timely and successful manner. Collateral optimisation solution. Electronic trading platform for a major asset manager. Front-office pricing and PnL estimation tool. CompatibL is a Murex Business Partner with over 8 years of experience in Murex systems integration and a track record of successful Murex project delivery 8 9

6 Research and thought leadership LIBRARIES AND TOOLS FOR QUANTITATIVE FINANCE Long-Term Portfolio Simulation For XVA, Limits, Liquidity and Regulatory Capital TapeScript TapeScript is an open source TapeScript supports vector AAD (tape compression), an approach pioneered by CompatibL in which Tapescript features Scalar AAD library for adjoint algorithmic each slot of the calculation record Vector AAD (tape By Alexander Sokol differentiation (AAD) developed and maintained by CompatibL. (AAD tape) can store not only a single double number, but also an compression) APIs for C++, C#, and Java It can be downloaded from entire array of values. Vector AAD Complex numbers Published in September 2014, the book provides a github.com/compatibl and used can lead to performance gain of Works with Boost and comprehensive step-by-step guide to every aspect of free of charge in academic or several orders of magnitude due QuantLib constructing and using long-term portfolio simulation commercial applications. to the reduction of tape size. Multithreading support models. A comprehensive description of advanced techniques for model construction and calibration also includes examples for different asset classes. TapeLib TapeLib features TapeLib is a commercial library Document database Tape cutting and splicing extending TapeScript with preserving AAD data Parallel tape execution Leading Publications features specific to quantitative finance and large scale AAD programming. Tape database Finance-specific atomics including adjointable AMC Specialised gate checking API Excel addin, desktop client, and web client with AAD Rethinking Margin Period of Risk Leif B. G. Andersen, Michael Pykhtin, and Retrofitting AAD to Your Existing C++ Library: A Case Study with TapeScript User defined atomics capability Alexander Sokol, 2016 Alexander Sokol, 2015 SSRN Global Derivatives Conference, Amsterdam, 2015 Modelling the Short Rate: The Real and Risk-Neutral Worlds Exposure under Systemic Impact Michael Pykhtin and Alexander Sokol, 2013 ModVal.org is an online resource calculation results for derivatives ModVal.org includes source code John C. Hull, Alexander Sokol, and Alan White, 2014 Risk Magazine 26(9), pp provided free of charge for regulatory and internal model valuation, XVA, funding, collateral and margin period of risk, used to generate calculation results. SSRN validation. liquidity, PFE-based limits, and Risk Magazine, October 2014 The repository contains validated regulatory capital

7 Risk analysis with depth United States United Kingdom Poland CompatibL Technologies LLC 100 Overlook Center Second Floor Princeton, NJ Tel: +1 (609) CompatibL Technologies Lt First Floor 100 Pall Mall London, SW1Y 5NQ Tel: +44 (20) CompatibL Sp. z o.o. Prosta 51, 1/27 Warsaw, Tel: +48 (22) For more information or a product demonstration, contact [email protected] Copyright 2016 CompatibL Technologies LLC