Accurate Risk Assessment Remains the Biggest Challenge for Sell-side, Buy-side

FINCAD Annual Survey shows more than half of buy-side and sell-side expect regulations to have moderate or major impact on their business.
July 21, 2011 - PRLog -- Vancouver, Dublin – July 21, 20111

FINCAD, the market leader for innovative derivatives solutions within the finance industry, released the results of its second annual survey to sell-side and buy-side professionals.  In the 2011 survey, 28% of sell-side and 30% of buy-side respondents reported that accurate risk assessment was their biggest challenge.  

In response to this being the major challenge, the respondents in both of these segments reported adjusting their risk management strategy.  Their adjustments included greater analysis and awareness of model risk and carrying out stress testing and scenario analysis.   The most important type of risk analysis was Monte Carlo VaR for both sell-side (31%) and buy-side (40%) survey participants.

“This survey corroborates what we have heard from our customers – risk management is a big priority, but also a big challenge in getting the numbers right,” said Bob Park, President and CEO, FINCAD. “Accurate risk assessment is such a critical component to their overall risk management strategy. Knowing your solution provides the right numbers is vital to an organization’s ability to manage their risk.  It has been a big driver in the creation of F3 and why we’ve seen so much interest in our technology.”

Another challenging area for both the sell-side and the buy-side was independent pricing and valuation.  28% of buy-side respondents said this was their biggest challenge. One in five sell-side respondents reported that independent pricing and regulatory compliance were also big challenges that they faced.  With all of the regulatory changes taking place, it was no surprise that both sell-side (63%) and buy-side (58%) respondents felt that there would be a moderate or major impact on their business.  

The majority of sell-side respondents (69%) reported using third-party analytics exclusively or in conjunction with their in-house systems.  When looking for a third-party analytics platform, transparency into the models and ease of use and implement topped the list for the sell-side, followed closely by adaptability to market conditions.  For the buy-side, transparency and ease of use and implementation were the most important features in an OTC valuation solution.  

FINCAD offers products that help sell-side and buy-side professionals meet their OTC valuation and risk management challenges.  F3 is the innovative technology from FINCAD that provides portfolio level risk analytics, including Credit Value Adjustment (CVA) and Monte Carlo VaR. F3's Universal Risk TechnologyTM provides first-order sensitivities on-demand, eliminating the need for resource intensive "bumping".  In addition to its comprehensive risk, F3 also provides an unprecedented level of flexibility which enables users to value virtually any trade or portfolio.

Download the summary reports:

2011 FINCAD Sell-side Survey:
2011FINCAD Buy-side Survey:

Founded in 1990, FINCAD provides advanced modelling solutions built on award-winning, patent pending technology. With more than 4,000 clients in over 80 countries around the world, FINCAD is the leading provider of financial analytics technology, enabling global market participants to make informed hedging and investment decisions. FINCAD provides software and services supporting the valuation, reporting and risk management of derivatives and fixed income portfolios to banks, corporate treasuries, hedge funds, asset management firms, audit firms, and governments. FINCAD Analytics can be accessed through Excel, MATLAB, as a Software-as-a-Service or embedded into an existing system through software development kits. Now, over 70 FINCAD Alliance Partners embed FINCAD Analytics within their solutions. FINCAD provides sales and client services from Dublin, Ireland, and Vancouver, Canada.

Media Contact:
Sarah Quon
Direct: +1.604.831.9599

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Founded in 1990, FINCAD provides software and services supporting the valuation and risk management of cross-asset class derivatives and fixed income securities to more than more than 4,000 organizations in over 80 countries.
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Tags:Derivatives, Financial Analytics, FINCAD, Derivatives Software, Risk Assessment, Buy-side, Sell-side
Industry:Finance, Technology, Business
Location:Surrey - British Columbia - Canada
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