Banka CREDITAS a.s.
Českomoravská stavební spořitelna, a.s.
Českomoravská záruční a rozvojová banka, a.s.
Home Credit International a.s
Investiční kapitálová společnost KB, a.s.
PPF banka a.s.
Prima banka Slovensko, a.s.
RSJ Private Equity uzavřený investiční fond, a.s.
Slovenská záručná a rozvojová banka, a.s.
STEINER & MAKOVEC s.r.o.
ARM has delivered to KB Penzijní společnost, a.s. ("KB PS") the functionality of fund performance simulation in CADCalc® Market software, which is used, among other things, for risk management of pension funds.
The subject of the software extension was the simulation of future returns of the transformed fund based on the current portfolio status, user-specified planned trades, the fund's business plan and the expected outlook of market factors.
The parameters of the planned trades, the business plan (e.g. expected deposits and withdrawals of funds by clients) and the market factor scenarios can be entered into the software by the user in several variants (e.g. baseline and adverse scenario). The performance simulation takes into account the different accounting treatment of investment instruments depending on the chosen portfolio accounting type (HTCS, HTC, FVPL) to which the instrument belongs.
The output of the simulation is the expected return of the fund and its forecast cash flow for each defined scenario.
The new functionality allows to monitor fund performance and cash flow at the level of individual asset types or accounting types. Last but not least, a detailed view at the level of individual investment instruments is also available. The simulation also includes the calculation of fees and their impact on the overall performance of the fund. The final report includes a prediction of current account balances, which can be used in monitoring liquidity and deciding on volumes of future portfolio purchase.
ARM has expanded CADCalc® Market software with an investment limits module, which allows the user to define limits for a large number of monitored variables (e.g. credit exposure, nominal value, open FX position, total managed net asset value ...) using a uniform input scheme.
The user can define limit and warning values for the monitored quantities (in absolute value or in the form of a ratio to the balance sheet total, equity, etc.) and regularly evaluate them at a pre-selected level (e.g. at the level of the entire portfolio, individual issues or individual positions). Optionally, it is possible to apply additional criteria for each limit (e.g. apply a limit only to bonds, only to foreign currency positions, only to positions of a given counterparty, etc.) and further join these criteria arbitrarily, which allows creating a wide range of combinations according to the actual requirement of the user.
ARM also developed a module for KB PS for monitoring the risk profiles of participation funds.
Based on the historical volatility of the fund's performance, risk profile with a defined volatility limit value is assigned to each participation fund. For each fund, the software automatically monitors the volatility for the selected time period and informs the user if these limit values are exceeded.
"As part of the cooperation described above, ARM demonstrated relevant expertise and expected customer support," Director of Market Risk Management
ARM delivered and implemented CADCalc® Market software at KB Penzijní společnost, a.s. (KB PS).
KB PS uses CADCalc® Market software to monitor the impact of changes in market factors (especially interest rates and credit spreads) on the value of its portfolio using stress testing and Value at Risk. The software covers the range of investment instruments used by KB PS (bonds, term deposits, treasury bills, derivatives, stocks, etc.). The implementation also included the delivery of a report for checking the valuation of the portfolio calculated in software with an externally determined value.
According to the agreement with KB PS, ARM expanded the software with a Capital Requirement report, including a breakdown of individual assets according to risk weight and other requirements according to Decree 145/2014 Coll. of 16 July 2014, amending Decree No. 117/2012 Coll., on more detailed regulation of the activities of a pension company, a pension fund and a participation fund. With the report, it is also possible to clearly monitor the composition of the portfolio of the managed fund, the fund's deposits with banks and derivatives owned by the fund.
Part of the comprehensive delivery of CADCalc® Market software was the training of users in working with the software and a detailed explanation of individual calculations.
ARM created for Expobank CZ a.s. a tool for calculating risk-weighted assets (RWA) and economic capital within the ICAAP for credit risk. The tool unables calculating RWA of corporate clients.
The created tool also included a set of stress scenarios that might affect the amount of Expobank CZ's economic capital. The scenarios were based on various economic and structural changes and took into account both the development of the portfolio volume and the change in the risk parameters of individual sub-segments. Expobank received from ARM predefined stress values, which can be further expertly adjusted and thus used for stress testing in the future. ARM has included the so-called planning scenario among the stress scenarios, enabling to set all inputs into the RWA calculation, including regulatory parameters.
The outputs of the tool included, in addition to a detailed analysis of the current state of the portfolio and the impacts of stress scenarios, a sensitivity analysis of computational parameters, which allows analysing the impacts of changes in risk parameters on the size of RWA and economic capital.
"We were satisfied with the realisation of the contract indeed. ARM fully met our expectations. The project was well organized and our assignment was supplemented by functional and useful features of the tool, which is also user friendly and allows to set and analyse the impact of stress scenarios." Martin Kubíček, CRO
The software enables the Bank to analyze in detail the effects of stress scenarios. In the software the Bank assesses the impacts resulting from both its own and regulatory defined interest rate scenarios. The software allows to define both parallel (e.g. ± 1 bps, ±200 bps), and non-parallel shifts in the yield curves, making the Bank ready to respond more flexibly to market changes.
Using CADCalc® Market, the Bank also takes into account the behavioural characteristics of credit and deposit products. In this way, the Bank also uses the software to model the expected course of repayment of granted loans, which affects the size of net interest income. For this purpose, the Bank uses repayment calendars based on the behavioural rating - the software then takes into account prepayment, cash flow delay or default when calculating net interest income and when determining the economic value of individual positions based on the parameters entered.
In addition, the Bank uses CADCalc® Market software for FX risk management and liquidity management. The software allows the Bank to perform both of these calculations for current portfolio, thus enabling to actively manage the Bank's currency and liquidity position.
The comprehensive CADCalc® Market software delivery also included training of users in the field of software operation, algorithms and calculations, as well as in the interpretation of software outputs.
"We were very satisfied with the ARM´s work. All the functions included in the software are fully compliant with our requirements as well with the regulatory requirements for interest rate risk management of the banking book. We consider ARM´s know-how as a great advantage." Miroslav Morháč, Director of Risk Management Section.
ARM successfully delivered and implemented software CADCalc® Market at RSJ Private Equity uzavřený investiční fond, a.s. The fund uses the software for management of its investment portfolio. The software serves primarily as a tool for managing individual projects, monitoring their liquidity and the liquidity of the investment fund as a whole. Software also enables recording of provided loans or drawn loans by the fund, their gradual use and repayment, including consideration of any agreed changes of loan conditions over the life of the loan.
The Advanced Risk Management Company created and implemented for the TONA a.s. Company software enabling the following: import of accounting data, calculation of percentage overheads per direct wage unit for individual production dimensions (production dimension = product and its production operation), sums of expenses according to their specification, plan formulation, comparison of plans with reality, simulation of expense level based on anticipated volumes of production, comparison of simulation with reality.
The investment capital company KB, a.s. uses software for measuring risks of individual unit trusts which are administrated by KB. The software covers a wide range of investment instruments such as shares, bonds, time deposits, bills and derivates used by the company. This enabled analysis of the impact of considered investments on their risk profile. Software facilitates risk analysis for both internal and external purposes. For example: to clients and state regulators.
Českomoravská záruční a rozvojová banka, a.s. implemented CADCal®Credit software for the purpose of calculating the capital requirement by the standard approach according to Basel II. Apart from software implementation, the Advanced Risk Management Company also provided staff training.
Prima banka Slovensko, a.s. implemented our software CADCalc® Market, which the bank uses for the calculation of market risk through VaR method. The advantage of the software is from the point of view of the bank mainly the method of work with market factors (it is possible to use the rates MID, BID and OFFER), automated import, speed and simplicity of the calculations. The Bank considers the software as very flexible and suitable for use in a financial institution of its type.
The subject of our cooperation was to assess a software structure which the Českomoravská stavební spořitelna Company created for financial risk management purposes.
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