Market Risk Analytics

Market Risk Analytics for Capital Markets or trading departments have held the spotlight as prepayment sensitive instruments have proliferated over the past decade.  Product expansion into specialties such as IOs, POs, Inverse Floaters, Options and Futures and other Derivatives have driven the need to quantify these complex risks.  Significant recent advancements have been made allowing accurate measurement of risk exposures to these sensitive instruments.

Montana Analytics has been intimately involved in developing applied solutions to quickly assess and monitor Market Risk.  We have proven experience providing analytical solutions to trading desks as well as executive management.

The Market Risk Analytics solution includes the following components that provide rapid, accurate analysis to trading managers and executives:

• Interest Rate Modeling and Analysis
  • Quantifies future rate paths and volatilities
  • Allows prepayment analytics relative to rate changes
    
    
• Position Level Prepayment Sensitivity Analysis
  • Quantifies cash flow and NPV for pricing
    
    
• DV01 sensitivity analytics
  • Measures rate and spread exposures
    
    
• Option Adjusted Spread (OAS) analytics
  • Captures non-linear dynamic sensitivities
    
    
• Holistic market risk modeling framework includes:
  • Interest Rate modeling for future paths
  • Prepayment events and timing
  • Cash flow and NPV engine
  • Pricing solutions based on market curves
  • Probability based outcome
    
    
• Aggregation to Portfolio Level Analysis
  • Manage Portfolio Interest Rate Risk exposures
  • Manage Portfolio Spread Risk exposures
  • Hedging analysis and management
  • Value Risk versus Return