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.
TONA, a.s.
For the needs of PPF banka a.s., ARM has expanded the CADCalc® Market software with a module enabling automatic completion of the DISIFE23 regulatory report template for the Czech National Bank.
The report includes:
The overview of expected cash flows is automatically categorized into individual types of assets and liabilities. Interest payments and principal balances are classified into time buckets based on maturity and refixation dates. For the purposes of the supervisory outlier test, the software evaluates the impact of 6 prescribed stress scenarios of interest rate risk on the portfolio value. The module also automatically evaluates the materiality of the currencies in the portfolio.
"The cooperation with ARM has consistantly met our expectations. The automatic completion of the DISIFE23 regulatory report is another enhancement to the software that has significantly increased the efficiency of preparing this report." Tomáš Hykl, Director of Market Risk Management Department.
ARM cooperated with KB Penzijní společnost, a.s. (KB PS) on the implementation of the behavioural asset-liability model for the transformed fund in CADCalc® Market software.
KB PS uses the behavioural asset-liability model to project trends in inflows and outflows. The main purpose is to optimize investments over time with respect to the return and liquidity of the fund. The model also produces an estimate of the amount of funds that participants can invest in alternative investment assets with a higher rate of return than the current performance of the transformed fund. The opportunity to invest in alternative investment assets is indicated based on time series of market aggregates (2T REPO rates and prices of selected bonds) in the model. The sensitivity of participants to these alternative investment opportunities is taken into account in the design of the proposed maturity structure of the investments.
The output of the model serves as the basis for the design of the transformed fund's investment policy. At the same time, it can be used to simulate stress scenarios (increased volume of inflows and outflows, change in alternative investment opportunities, liquidity strengthening, etc.). Along with the model, ARM has provided clear user documentation with a detailed description of the individual calculations.
"The cooperation with ARM met our expectations. The delivered solution is robust and significantly helped to increase the efficiency of preparing the basis for investment decisions. It also helped to reduce the operational risk of the model compared to the previously used approach of manual data editing in a spreadsheet." Risk manager, KB Penzijní společnost, a.s.
In cooperation with Home Credit International a. s., the software CADCalc® Market has been extended with a wide range of new functionalities used by the treasury department and the finance, liquidity and risk management department. The development of new functionalities can be divided into the following categories:
Development of new financial instruments
The software was extended with a new financial tool Facility Agreement, which allows to enter a group of credit lines (tranches) with different parameters. Each tranche has a maximum drawdown volume, the credit line limit, the flag static/revolving etc. The tranche counterparty can be either a single entity or a group of syndicated lenders (both may change in time). The information about fees and collaterals can be set on the tranche level, drawing level or on the level of whole facility agreement. For instruments with collaterals, ARM developed the module for guarantee fee calculation. This module displays the total expenditures associated with the financial collaterals within a given time period.
ARM has also developed a Non-delivery Forward, which requires additional parameters to be recorded compared to a traditional FX forward (e.g. fixing date or settlement currency) and a Joint Financing Scheme (JFS), which allows the recording of a loan co-financed by another bank.
Extension of trade input masks and trade workflow
ARM implemented e-mail notifications for new trade entry, trade change and trade authorization. These notifications are also used to inform the user about all future cash flows and refixation dates occurring in the following days.
On trade input masks, it is now possible to link related trades. For example, it is possible to create a link between a particular hedged trade and the corresponding hedging derivative.
ARM implemented the possibility of using more holiday calendars for each trade. On the input mask of bonds and T-bills, it is now possible to record fees.
For all interest-bearing instruments, it is possible to hold information about individual floors and caps. Floors and caps ensure that all future payments of variable-interest instruments are in the interval pre-defined by the contractual floor / cap.
Intragroup trades
In the Trading module, ARM implemented the option to enter an intragroup trade. In this case, the software automatically creates a mirror position from the perspective of the counterparty.
New reports
In cooperation with HCI, ARM developed new report, displaying details of the funding structure of the company (Exposure Report). The report shows current outstanding amounts (split by counterparties and products) as well as other funding details (actual interest rate, collaterals etc.).
As a part of the implementation, new modules for export of liquidity report, outstanding report and market risk report were developed.
The software enables the evaluation of credit exposure of the given counterparty.
ARM developed the Net Interest Income module which enables the assumption of the static balance sheet (i.e. to refinance repayments of deals made within 1 or 3 years).
ARM implemented the possibility of excluding commercial margin, for example in the modules of Net Interest Income and Repricing Gap. During the calculation, the software assumes that all interests are calculated at a risk-free rate of a given instrument (instead of their actual interest rate which includes commercial margin).
"As part of regular support, ARM is able to respond quickly to user requests. At the same time, ARM continuously improves the user-friendliness of individual functionalities based on the feedback from the daily usage of the software in our company." Petr Dvořák, Risk Analyst, Market and Capital Risk Management
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.