A New, Flexible Stress Test Product
The stress test app is built on Imagine’s Consulting Team’s modus operandi, “Tell us what your risk technology need is and we can tailor whatever Imagine has to offer for you.”
The idea of developing a separate product for stress testing came to life when we observed our clients and general end users of financial tech products. Both groups, when using historical stress testing for estimating how their portfolios would perform during documented periods of extreme market movements, had the same two major pain points: ease of use and transparency.
Ease of Use
Our studies showed us that end users were getting lost in complicated setups. They also wanted more control over the scenario designs and stress factors and models. We addressed this concern and created a comprehensive infrastructure on which the app runs and stresses the positions. With initial setup from Imagine Consulting team, users are able to alter the setups by modifying scenarios, risk factors, and fallback strategies depending on their asset types, investing styles, and risk management needs without having to write a single line of code. On top of this, if the user wants a completely different way of shocking positions or seeing the results – for example seeing the worst of or best of scenario for a period – this is also possible as the app is very flexible.
Users wanted two things; transparency in their results and the ability to visualize analysis with graphs, tables, and smart dashboards. These were vital for our clients, and our product makes it easy to drill-down into complex portfolio structures and multi-layered aggregations. We designed the app so users have the ability to see results in a factor-by-factor detailed data table and a fully configurable set of data visualizations that enables the user to identify trends and discover patterns. This way, what looks like a very straightforward historical stress test will help the decision makers see the “stories” hidden behind historical data available to everyone else.
About the Author
Murat Sen is a Consultant in Imagine’s New York office working on consulting engagements and client-facing product management projects. A native of Istanbul, Murat holds an MBA degree from Cornell University.
Murat can be contacted by email or phone: 646.827.4433
In times of stress in the markets, not only does volatility increase for individual assets, cross-asset correlations can increase dramatically as well. This results in a “double whammy” for a typical portfolio because the portfolio’s volatility increases due to both effects.
Those responsible for maintaining a margin system often feel that they are drowning in data management issues. In part two of this series we discuss ways to make margin calculations far more efficient and meet the firm’s need for answers in real-time.