The calculation of risk adjusted factors (e.g., CVA, FVA, KVA, VaR) is often undertaken independently by different groups within a financial organizations and their results combined into reports. Such an approach for deriving risk adjustments fails to take into account all available information, does not allow for effective capital allocation and lacks an understanding as to the sources of capital utilization. A holistic approach is required to effectively address capital allocation and other risk provision processes.
The centralized portfolio pricing and risk analysis framework employed by Analytic Space provides a readily sharable and consistent set of in-depth valuation and risk analysis tools that facilitates effective communication and idea flows between front office and capital allocation groups. Such an improved communication flow can help identify and quantify hidden risks and provide for an effective and quantifiable capital allocation management framework.
- The ability to identify and quantify hidden risks
- An effective and quantifiable capital allocation management framework
- A holistic view of capital allocation over a product’s lifecycle