1. What are the main specific features of Risk Engine vs. Risk Framework?

Risk Engine:

  • high performance, enabling the work with large data bases
  • transaction support and reproduction of historical states
  • Rule Based Instrument (RBI) - a flexible tool to model structured and exotic instruments
  • language based, powerful compliance and alert modules
  • portfolio optimization, performance calculation, benchmark definition
  • beta and basis point hedge, key rate calculation
  • representation of derivative instruments: all usual futures and options
  • Service API

Risk Framework:

  • high flexibility, intended to support hybrid, non-financial and financial applications
  • rule based program and business logic, very fast development and modification
  • coverage of regulatory requirements and reporting
  • coverage of Basel II/III capital requirements
  • management information system for preparation of OLAP Cubes
  • includes a set of hybrid applications: Management of Real Estate Properties and Funds, Investment Consulting, Asset Based Funding Application

The application of Risk Engine, Risk Framework, or both, depends highly on customer requirements and tasks that have to be covered.

2. Is it possible to use different data base systems at the same time?

Risk Engine uses a single data base per instance user (company or department). A set of company users is defined in the company’s DB (instance user) and uses data from it alone. This is the usual scenario. In the case where a different set of users within the organization needs to access another DB, a separate instance of RE has to be started or a new instance user (department) has to be configured.
The instance user DB type may be different for the different users, for ex., one uses MySql, another DB2, etc.

3. Which WEB Browsers are supported in the WEB GUI?

All usual browsers are supported, incl. Internet Explorer 9+, Mozilla Firefox, Google Chrome, Sea Monkey, Opera, Safari for PCs, tablets and smart phones. The GUI uses HTML and JavaScript only, without any external dependencies.

4. What is the license policy for Risk Engine?

The usage of features and modules is enabled or restricted with separate licenses. In this way, customers pay only for modules they really need. The licenses can be configured to be either time restricted or not. It is possible to have test licenses, with free access to all interested modules, so the customer can have a closer look at the modules. The number of licenses restricts only how many users can login into the system at same time. It is possible, for example, to have 40 defined users, but only 20 of them can work at same time.

5. What is the Rule Based Instrument?

The Rule Based Instrument (RBI) is a tool that represents and calculates complex, structured, exotic and non-standard instruments that have a future path-dependent behavior. For example, in cases where future cash flows and pay offs depend on other future events. The evaluation of such instruments may require a Monte Carlo simulation of one or several factors at different future time points. The simulation structure is defined explicitly by periods and pricing formulas per factor, as well as by simulation markets.
Example: a 4-year loan can be paid back at the end of every year by max 50%. If in the first 2 years, the whole 100% are paid, then there is nothing to be paid back in year 3 and 4. If not, for example if 20% and 25% are paid, a lot of payback variations exit for year 3 and 4.

6. Why is it necessary to have Standard, Rule Based and Multi-Factor Instruments?
  • Standard Instruments - the contract conditions are simple, the instruments are known on the stock exchange, the direct implementation brings high performance.
  • Rule Based Instruments - s. FAQ 5, the instruments are defined by a simulation structure in the presence of exact contract conditions, given mostly in term sheets.
  • Multi-Factor Instruments - if term sheets don't exist and the contract conditions aren't known, then the evaluation can be based on existing historical price time series for the instrument. The approach is to map this historical price time series by best fit to well-known other time series (for ex. to FX-Rates, indexes, interest rates, price of other known instruments, etc.) using regression and construction of automatic pricing expressions for the unknown instrument. The pricing expression and the included known time series make the unknown instrument known and enable the performance of all analysis, including VaR.