Aozora Bank

Implementation of a Market Risk Management System for Aozora Bank

Market risk management system implemented for Aozora Bank can deal with a broad range of risk measurement methods including various advanced techniques. Simplex's unique diversified calculation platform can manage the cross sectional risk of roughly 100 products in trading and banking operations at a faster rate and with more precision than in the past.

Aozora Bank

Background

The management of market risk by financial institutions requires a sophisticated method for measuring risk, considering recent high market volatility and tail risk management of financial crisis and other events. Although the probability is low, there is still the risk of a significant loss if the market volatility is realized. Therefore, to manage risk across a broad range of products, and in correspondence to the aforementioned trends, Aozora Bank, with initiatives for enhancing its' risk management system already in place, decided to replace its' existing system.

Results

Ability to Deal with a Broad Range of Risk Measurement Methods including Advanced Techniques

Risk management at financial institutions generally utilizes "Value-at-Risk" (VaR), which measures market risk by applying statistical methods. In relation to the measurement of VaR, this project employs not only the historical method, which includes the full valuation method, but also the variance-covariance and Monte-Carlo simulation methods for future requirement. Furthermore, to handle cases that cannot be captured by VaR, stress tests (including simulation analysis) are also performed to conduct high sensitivity analysis and calculate profit and loss.

Ability to Deliver High Calculation Performance and Real Time Monitoring through Simplex's Unique Diversified Calculation Platform

The market is becoming increasingly complex, so an effective system must have the capacity to perform enormous amounts of complex calculations and quickly capture all of the various risks. In this project, Simplex's own diversified calculation platform utilizing hundreds of central processing units (CPUs) enables users to assess risks real time. The architecture adopted can contribute to constraints in additional investment while future increase in the number of positions can be addressed by scaling out of the hardware.

Deal with Approximately 100 Products in Trading and Banking Operations as well as the Basel Regulatory Framework

The implementation of this Market Risk management system has allowed for Aozora Bank to manage the risk of roughly 100 products from a broad cross-section of trading and banking operations at a faster pace and with more precision than in the past. Furthermore, not only does the system measure VaR, but is also being used to experimentally measure shortfalls that could arise under the Basel new capital adequacy regulations, which are being applied in phases from 2013 onwards.

Relevant Products

Real Time Multi Asset Capital Market Solution

Capital market solution that covers a variety of market trading operations ranging from trading to risk management. SimplexPRISM supports over 200 types of products as well as advanced risk management functions such as PFE/CVA. The solution enhances the overall success of a client's business due to its ability to deal with multiple entity situations for global deployment.

Client Details

Name Aozora Bank, Ltd.
Address 3-1, Kudan-minami 1-chome, Chiyoda-ku, Tokyo
URL http://www.aozorabank.co.jp/
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    03-3539-7370
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