Paragon PRODUCT BRIEF - In a world of increasing regulatory controls, Advent Axys clients can accommodate their needs both in terms of Market Risk exposure monitoring as well as those of riskrelated Regulatory-required-Reporting, via our state-of-the-art Risk Management software, Paragon Risk. What makes Paragon unique? Seamless Integration with Advent`s Axys Robust software capable of performing either using the Free of License SQL Express or the Standard edition of Microsoft, when available. Delivering Risk Measurement and Management innovative functionality for the buy-side sector, well suited for Axys clients, such as Asset and Fund Managers, Private and Wealth Managers, Hedge Funds, as well as Family Offices and Private Advisors. Powerful Regulatory Reporting examples targeting risk-related compliance for Basel II, MiFID, UCITS, OPERA, Form PF, ΑΙFMD requirements. Maximum two weeks for Implementation and GO LIVE Advanced Risk Evaluation through Calculation Methodologies such as Monte Carlo Simulation, Parametric and Historical Simulation. Calculation of several VaR related measures such as: Marginal and Component VaR along with Tracking Error, Expected Shortfall, Diversification Benefit and Portfolio Distribution Moments. Credit Rating Risk incorporation in the calculation of all the above measures when needed. Multiple decision support tools like Stress Testing, Back Testing and What-if Scenarios. Risk Decomposition into all available Classifications (asset classes, sectors, risk countries, etc) as defined in your AXYS environment. Custom Volatilities-Correlation Price-Sets and predefined volatile period scenarios. On-Demand and Scheduled Risk Calculation and Report generation. High Security Standards, Single Sign-on, Auditing and multiple Authorization & Authentication levels. Copyright Klarity Risk Ltd 1
Key Features Paragon s prime functionality is the calculation of Value-at-Risk (VaR) through both market approaches Ex-Post and Ex-Ante. Ex-Post VaR is calculated through the Historical Simulation method which assumes that the distribution of future returns is identical to the distribution of past returns. On the other hand, according to the Ex-Ante approach, VaR is also calculated by assuming that asset returns are independent and follow a normal distribution. By calculating each asset's volatility and the inter-asset correlations the Risk Manager is able to calculate Value-at-Risk by either applying the Parametric method, which calculates VaR through fast analytical formulae, or the Monte-Carlo simulation method, which captures non-linear instrument risk as well as Credit Rating Risk. The latter takes into account the credit rating of the counterparty as well as historically observed credit rating migration likelihoods to estimate possible losses due to shifts in the credit quality of counterparties. The Monte-Carlo method is also used for the calculation of several VaR related measures. Marginal VaR and Component VaR can be used in order to identify the prime risk factors affecting the portfolio, while Expected Shortfall shows the expected portfolio loss if a bad scenario does indeed take place. Lastly, Relative VaR along with Tracking Error measure how closely the portfolio's risk relates to a given benchmark. Useful features like Back Testing, where the accuracy of the model is assessed, and the possibility of filling in missing data are also included. Copyright Klarity Risk Ltd 2
Additionally, Paragon includes Stress Testing, through which the user can simulate changes into certain risk factors and view the impact on the portfolio value. Moreover, features like What-if Scenarios, which show the Value-at-Risk change upon including certain positions in a given portfolio, and Diversification Benefit, which shows the risk gains due to investing to different assets, are very useful tools in terms of helping the Risk Manager minimize the portfolio's risk. Lastly, Variance Reduction Techniques have been applied to the Monte-Carlo framework which vastly reduced computational times while maintaining the calculations' precision at the same level. Instrument Coverage A wide range of security types are supported: Stocks, Forwards, Futures, Fixed and Floating Rate Bonds, Inflation Linked Bonds, Bond Futures, Floating Rate Agreements, Interest Rate Swaps, Foreign Exchange Swaps and European Options. The use of analytical pricing formulae, which are used for the valuation of the aforementioned derivative prices and sensitivities, as well as the mapping of interest rate products to deterministic future cash flows, which are then modeled using zerocoupon yield curves, render our model the perfect combination between accuracy and parsimony. Integration Paragon is fully integrated with the latest versions of the Advent Axys Platform. After an initial configuration process, during the first installation of the application, only the new or updated data will be imported during each new synchronization process verifying the integrity of the data. This process will be managed using an intermediate database, ensuring data integrity, either on demand or as a scheduled task while every step of the process is automatically being recorded into audit logs. Moreover, the platform utilizes single sign-on, integrated reporting as well as automated database integration. Last, all risk evaluation methodologies have been tailor made to the available Axys data, in order to achieve maximum integration. Copyright Klarity Risk Ltd 3
Single Sign-On Technology Paragon supports single sign on technology that allows you to have one unique username & password for all enterprise applications. Additionally, since the specific SSO works with the windows domain user credentials, you will only have to type the specific username & password only once to access all related applications, including Advent Axys. Paragon Auditing All system and user operations, from the stage of receiving the primary data through the subsystem Paragon Receptor, the stage of calculations through the subsystem Paragon Calculator and the stage of parameter changes through the subsystem Paragon Web Application (UI) are audited and stored in the Paragon Auditing Database. The option to retrieve audited information is available to the System Administrator. Additionally, the system incorporates the following additional components that make it stand out: Intelligent Package Manager, that supports installation/removal of software updates. License Manager that provides the ability to manage licenses, software, clients and connections between them. Layered Administrator s configuration. Three administration layers exist in the system according to the importance and relevance of the setting (Application, System and Global). Reporting A number of user reports are available in the system which can be customized and easily changed. These Reports range from the Histogram report, which enables the user to visualize the portfolio returns distribution, to the Risk Decomposition report, where the user is able to identify high Risk exposures to certain portfolio components. In addition to Paragon s standard reports, the application come along with a set of dashboard-like compound regulation sample reports (Basel, Opera, UCITS, Form PF, AIFMD). These are available using the advanced Paragon`s calculation engine and the MSSQL reporting functionality. Since the application`s core reporting engine is based on the Microsoft SSRS Reporting component of Microsoft SQL server, Paragon can accept and share to third party applications any custom SSRS report that uses its functions. Copyright Klarity Risk Ltd 4
Paragon Archiving An archiving system layer is responsible to extract database records and structure and store them to the archive database. The System Administrator must define the frequency of the archiving, the cut-off date, and the naming convention of the archive databases. Technology Paragon is a web-based application that it is developed using state-of-the-art Microsoft-based frameworks and applications. The technical requirements listed below depend on the client s access to SQL setup and it is meant as either/or only. Free SQL Express Setup Microsoft.Net framework 4.0 Microsoft Silverlight 4.0 MVC 3.0 Microsoft SQL Express Edition (2008 R2+) IIS 6.0+ SQL Standard or Enterprise Setup Microsoft.Net framework 4.0 Microsoft Silverlight 4.0 MVC 3.0 Microsoft SQL Standard Edition (2008 R2+) IIS 6.0+ For More Information Contact your KlarityRisk representative, at info@klarityrisk.com About Klarity Risk KlarityRisk provides software applications and services to measure Market Risk and minimize integration/operational risk while focusing on Advent Software clients. All KlarityRisk products are fully integrated to Advent Software Asset Management suite of applications. We aim to provide our clients with stable, technologically advanced solutions to accommodate on-time, accurate market risk measurement and reporting. 148 Leadenhall Str. London EC3V 4QT United Kingdom Telephone: +44 (0) 207 788 7986 / Email: info@klarityrisk.com Website: www.klarityrisk.com Copyright 2014 KlarityRisk S.A. All rights reserved. Information subject to change without notice. Paragon, the Paragon logo, are registered trademarks of KlarityRisk S.A. All other products or services herein are trademarks of their respective companies. Copyright Klarity Risk Ltd 5