One of the things I like about my role is that I get to map exciting innovations and technology approaches to the Risk and Compliance practices.
Be it VAR, Monte Carlo, Historical Simulation, Stress Testing, Back Testing, Actuarial modeling – All need huge computing power.
A key problem being that the throughput could vary depending on what level of portfolio we are subjecting to the stress test or scenarios being applied. This means that financial institutions need to invest in a high performance computing environment to meet peak volumes, and which potentially would remain idle in normal volumes, impacting ROI and cost decisions.
With the recent launch of Microsoft Windows Azure cloud offerings, there is a way out and one of the leading thought leaders in the Risk Measurement is already pioneering a new approach.
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Many in the Risk world are familiar with RiskMetrics, an independent Risk measurement specialist firm spun from JP Morgan’s 4.15 Risk reporting and methodology. Over the last 20 years, RiskMetrics has carved out a niche place for itself in the Risk Management services. One of its services being Monte Carlo based Risk Analytics to financial institutions to measure and model complex instruments. The processing involves daily models comprising 4 million securities spanning 750,000 market data time series. Its key challenge was to predictably manage large bursts of computing in short time for Monte Carlo simulations during peak loads, that could be as high as 10 times the normal capacity planned for.
RiskMetrics adopted a pay per use Windows Azure and Windows High Performance Computing environment to manage computing needs for its Risk analysis which was integrated with .NET 3.5.1 & Visual C++ 2008 development environments. This offering complements RiskMetrics On premises infrastructure with Windows Azure OS – Development, Service hosting & Service Mgmt environment. For peak loads, RiskMetrics taps additional Windows Azure resources. It’s a combination of processing complex calculations on Azure and integrating with local RiskMetrics analytics Architecture.
Congrats and kudos to the RiskMetrics team for yet another thought leadership initiative that will impact the Risk Management world in years to come.