Numerix: The Leading Provider of Cross-Asset Pricing and Risk Analytics

Numerix is the market’s leading independent analytics institution providing cross-asset pricing and risk solutions for structuring, pre-trade price discovery, trade capture, valuation and portfolio management of derivatives and structured products.

Through Numerix’s continued investment in innovative technologies, unrivaled analytic capabilities, and a customer-centric solution selling approach, the company has been firmly planted as the most prolific and dominant leader in both risk and pricing. To date, the company has been recognized with over 100 international awards, including being named one of the fastest growing companies in North America.

Steven O’Hanlon, a Dedicated Visionary of Numerix

As the leader of Numerix Steven O’Hanlon inspires bold change and flawless execution. Since first joining the company in 2002, and under his leadership as President & COO starting in 2004, he has driven the transformation of Numerix from a broadly-focused company with many disparate products and five locations, to a global analytics software company operating from a single platform with a presence in 26 countries.

In his early years with the company Mr. O’Hanlon aggressively pursued the derivatives pricing business. By 2008, witnessing firsthand the impact of the financial crisis, under Mr. O’Hanlon’s leadership, Numerix made a key decision to re-evaluate its core analytics solution and pivot the organization into the rapidly changing market of derivatives risk management. Through his ability to focus, adapt and execute – Mr. O’Hanlon was named CEO of Numerix in January 2013. His personal achievements include being named one of New York Smart CEO’s Future 50 rising stars, as well as being ranked annually on Institutional Investor’s “Tech 50” and “Trading Technology 40” Lists.

Prior to joining Numerix, Mr. O’Hanlon actively negotiated the sale of several companies for nearly $500M. A seasoned veteran, he has 25+ years of experience building emerging market start–up software companies and has contributed to three successful IPO’s..

Numerix Services & Solutions

As a global leader of financial software and services for the derivatives, OTC and Structured Products markets, the Numerix mission is to provide world-class analytics solutions that solve Wall Street’s most complex challenges in terms of the pricing, valuation and risk management of derivatives. Numerix analytics solutions enable global financial institutions and insurance institutions to understand performance, analyze and anticipate future derivatives risks with unparalleled speed and accuracy. Insurance solutions are also available through the Numerix Leading Hedge Product suite, which provides the tools to manage and hedge complex life and annuity products and investment portfolios.

Numerix CrossAsset and Server

As a flexible and transparent framework, Numerix CrossAsset is consumable through a wide range of options, including through Microsoft® Excel as an add-in, or integrated into proprietary or third-party systems via the Numerix Cross-Asset Integration Layer and SDK in C#, C++, or Java.

The analytic server enables the rapid deployment of pricing and risk analytics – including credit risk, market risk calculations as well as testing results (stress testing, back testing), limit monitoring, scenario generation and comprehensive reporting. The server leverages a distributed grid architecture, in-memory database, OLAP aggregation, limits and analysis engine. Clients can leverage a dashboard UI framework to manage core services. Numerix also offers Cross-Asset XL and other content tools for pricing.

Numerix solutions for insurance are built on the most comprehensive model library in the industry and flexible analytics architecture of Numerix CrossAsset thus enabling maximum scalability, flexibility and transparency.

With a common set analytics across business units from both an asset and liabilities perspective Numerix Leading Hedge solutions help life and annuity businesses manage profitability, capital, risk, and regulatory compliance. Numerix is fully transparent, audit and control friendly. Numerix ESG is also built on this consistent framework – enabling flexible custom indices and consistency for scenarios being generated and leveraged in downstream systems.

All the unique services & solutions provided by Numerix comprise its key differentiators, a few are mentioned below-

  • Advanced analytics for structuring and managing all derivatives and structured products.
  • Industry’s most extensive and sophisticated collection library of cross-asset models and methods.
  • Numerix unique hybrid model framework enables the production of consistent scenarios among multiple risk factors, which is critical to producing robust CVA calculations.
  • The American Monte Carlo: This highly efficient model uses the same set of paths for both market scenarios and prices, eliminating the need for a ‘Monte Carlo-on-Monte Carlo’ computation, making intraday CVA computations possible.
  • Object-oriented architecture, flexible payoff scripting language and broad asset-class coverage.
  • Extensive implementation experience and partnerships with global trading system and risk vendors.

Trends within Pricing & Risk Analytics

Regulation – With a range of Basel III bank capital regulations still under consideration the standardized approach to counterparty credit risk is set to come into effect from January 2017. While the CVA risk framework is undergoing a proposed revamp, BCBS aims to finalize the FRTB policy framework by end of 2015, and the ISDA Standardized Model for Initial Margin has banks around the world questions what their SIMM approach with be.

Risk Technology Infrastructure – For a long time the formula for risk technology infrastructure has been an amalgamation of latency systems stretched far beyond their limits. Often siloed and entrenched in duplicate processes these risk systems can be expensive to maintain in terms of human, compute and data costs. Risk managers know well that to uproot entire legacy systems in one fell swoop is often unrealistic. The Risk 2.0 approach leverages a “Planned” Risk Infrastructure approach. This means they’ll be tackling one system at a time to address the needs of the present and reverse the shortfalls of the past.

Real-Time Pre Trade Analysis – With evolving regulations considered key drivers behind the new era of real-time risk management, a strong trade profitability framework that brings the XVAs into trading decisions is now crucial. Many firms are transacting derivative trades without understanding the full profitability picture. Going forward, understanding and managing trade profitability with a complete understanding of the costs associated with the trade lifecycle will be a core requirement.

Data Management – As institutions move towards adopting more unified analytic approaches for enterprise level risk management this in turn has created massive amounts of data. In today’s market actionable intelligence is needed in real-time – as such risk silos, data processes, and analytics must be thought of in a holistic manner as opposed to separate entities. Through the instant analysis, aggregation and visualization of large volumes of complex and dynamic data decision makers can compare results over various time periods, make what-if inquires and achieve a timely, more accurate view of risk enterprise-wide. Through this process calculations are consistent and meaningful for business decisions, not just for regulatory compliance.

Global Market Influence – In 2015 there were incredible volatility swings in the equity market, huge dives in the commodity sector, and sustained low and even negative rates with no sign of change ahead. Risk managers need to be more prepared across the enterprise for the next impacts of a global marketplace – from dynamic stress testing capabilities to thorough and timely model validation techniques.

Numerix’s Global Presence

A key strength of Numerix is its ability to integrate into the industry’s largest trading systems as a best of breed pricing and risk component.

Numerix CrossAsset provides pricing and risk calculation services in a client-server networked environment, primarily for front and middle office usage, with the ability to scale out computational resources for large trade populations and significant risk evaluation capabilities.

It is designed to integrate with front-end trade lifecycle management tools. Integrations generally use the separate lifecycle tools to control the overall trade state and configuration, and send trade state data to CrossAsset Server for valuation and analysis.

Numerix has over 90 partner alliances, including system providers, enabling technology providers, market data/valuation services providers and consulting/integration partners.. On occasion Numerix engages partners for deployment of some augmenting technology as best of breed. Those technologies are generally in the area of data management and cleansing; cloud applications; and GUI or workflow construction.

Plans for coming years

Over that past year, Numerix has continued streamline its analytics offering. Today, the Numerix CrossAsset Server enables Numerix analytics to be scaled – from stand-alone desktop installations to enterprise-wide deployments.

Going forward they’ll continue to focus on solution selling and remaining customer-centric. Numerix is now moving from a stage of organic growth to one that would be acquisitive.

Their growth strategy also requires them to anticipate market needs and trends. Below are the top three areas they’ve identified. These areas will continue to be top of mind as they continue to develop their pricing and risk solutions.

Real-time risk: They see the market adopting a more integrated and holistic approach for managing risk, assessing trade profitability and allocating capital for their businesses. This combines real-time performance and a robust IT infrastructure for risk and pre-trade pricing.

Agile Analytics: While real-time and predictive analytics are well defined, agile means consistent, flexible, scalable and responsive.

Cloud: They will continue to see cloud technology for risk management being leveraged to dramatically reduce calculation times and provide faster results to facilitate faster decision-making.