- Solution Overview
- For Multi-Strategy Hedge Funds
- For CLO Investors
- For ABS/MBS Investors
- NxR² Technology Overview
NxR² Risk Management
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NxR² provides traders, portfolio and risk managers with superior risk, scenario and portfolio analytics for real-time pricing, hedging, and capital management of multi-asset portfolios. Leveraging Numerix’s advanced pricing models, NxR² provides all the information necessary to:
|•||_||Real-time Pricing, Hedging & Strategy Analysis for Portfolio Management|
|•||Drill Down, Roll Up, Slice & Dice Reporting|
|•||Flexible Calibration Capabilities|
|•||One of a Kind Scenario Studio|
|•||Easy Integration with Market Data Interfaces|
|•||Full Audit Capabilities|
|•||Open, Scalable Architecture Supports Fast Deployment|
NxR² is a real-time pricing, portfolio construction and risk management application designed to help active trading desks, structurers and risk managers to independently price and analyze the risk in complex portfolios. Leveraging Numerix’s advanced pricing models and the R² proprietary methodologies, the system allows users to create profiling strategies in real time, perform advanced analyses of their portfolios (such as roll down, carry and aging) and provide transparency and clarity around portfolio and position risks and the impact of market changes.
As a powerful portfolio management tool, NxR² supports all asset classes, including:
|•||_||Cash Fixed Income (Treasuries, Corporates, Munis, Callables, Loans, Convertibles)|
|•||Equities (Stocks, Preferred, ADRs)|
|•||Interest Rate, Foreign Exchange and Equity Derivatives|
|•||Credit Derivatives (CDS, LCDS, nth to default basket)|
|•||Structured Finance (ABS, MBS, RMBS, etc.)|
|•||Cash CDOs (CLOs, RMBS CDOs, multi-sector CDOs)|
|•||Synthetic CDOs (Synthetic CDO tranches, Bespoke CDOs|
NxR² provides users the ability to integrate multiple 3rd party and in-house data sources.
NxR² helps multi-strategy hedge funds mark portfolios, assess performance, and measure and control financial risk with the highest degree of accuracy. Credit is our area of specialization so we have developed a set of unique tools that help credit traders, portfolio managers and heads of trading units look at risk from their perspective. Some of the unique features of our product include:
Powerful ruled-based predictive scenarios . At the click of a button, PMs may create custom credit shocks where they control both the timing and the magnitude of changes in:
|•||High-grade or high-yield credit spreads|
|•||Industry and rating spreads|
|•||Obligor-specific credit spreads|
This enables them to simulate their credit portfolios across any number of dimensions. PMs may also create “conditional” scenarios where, for instance, a shock to the S&P 500 leads to movements in high-yield credit spreads, which further leads to movements in the cash-synthetic basis, and which ultimately leads to movements in instrument-level credit and liquidity spreads. Security-specific spread movements may “scaled” by instrument specific credit betas, thus providing PMs with the ability to control how shocks are transmitted through large and complex portfolios.
Strategy specific trading tools. NxR² provides access to strategy-specific “trading” reports designed to profile very specific investment strategies at the highest level of granularity. For instance PMs have access to trading tools that enable them to identify bonds that offer the best negative-basis profiles. Users may measure return-on-capital and return-on-investment across a series of market scenarios and default times while accounting for their own funding costs and hedging preferences.
Our agile development framework and dedicated financial engineering team enables us to incorporate an unlimited number of trading tools at an unprecedented speed. You may also leverage NxR² powerful analytics through embedded functions, APIs and web services so that you may perform additional analysis in Excel, proprietary databases or in your preferred business intelligence software tool.
NxR2 enables CLO investors to perform detailed Net-Asset-Value (“NAV”) on portfolios of CLOs in order to help identify the bonds that offer the best risk-return profiles. NAV reports include a number of compelling analytics including:
|•||_||Debt Through Tranche (CDTT) – cumulative balance of the tranche and all tranches senior to it.|
|•||Debt Senior to Tranche (CDST) – cumulative balance of all the tranches senior to the selected tranche.|
|•||NAV Coverage – measure of how pool market value (Pool MV) can cover the tranche.|
|•||Subord MV – amount of subordination on market value basis.|
|•||Px Appreciation to Cover – amount of collateral pool price appreciation needed to cover the selected tranche.|
Furthermore, NAV reports include collateral-level statistics that enable you to judge the quality of the underlying pool. some ofthe important statistics include:
|•||_||% of 1st lien, 2nd lien, bonds, and sf assets, computed using market or par value.|
|•||% of defaulted and performing assets, computed using market or par value.|
|•||Price distribution of underlying assets.|
To produce accurate NAV statistics, we upload information from several complementary sources including:
|•||_||Intex (deal definition and waterfall structures)|
|•||LoanX (loan pricing information)|
|•||Bloomberg (bond pricing information)|
PMs control every steps of the NAV report generation process including:
|•||_||Priority of payments. PMs may overwrite the priority of payments across tranches.|
|•||ID Matching. ID matching is done through a sophisticated text recognition software that quickly matches Loanx’s loan facility to Intex’s issuer names.|
|•||Historical look-ups and proxies.|
NxR2 enables structured finance investors to direct their attention to value-added activities such as analyzing potential investment opportunities, identifying suitable hedging vehicles, and gaining a better understanding of market and credit risks embedded in their portfolios instead of spending time massaging input data. NxR2, through its embedded link to Intex, covers all structured finance assets including ABS, MBS, RMBS, CMBS, CLOs, and CDOs. NxR2 helps you:
- Run large simulations (HPI scenarios, monte-carlo scenarios) on large portfolios of structured finance assets by leveraging our distributed computing environment, which is deployed locally so that you may control every step in the simulation process.
- Produce detailed valuation and risk estimates by employing internal or third-party credit/prepayment models such as the ones developed by Loan Performance. To do so, we have developed open APIs to third-party models and an infrastructure to combine information from several complimentary data sources including Loan Performance, Intex, markIT, which allows you to achieve the highest level of precision. We also develop tools to facilitate data reconciliation across the different data sources. For instance, we have tools to map IDs between Intex, LP and LoanX.
- Performed advanced Monte-Carlo simulations by employing our proprietary ground-breaking Weighted-Monte Carlo valuation method, which ensures valuation consistency for SF products backed by heterogeneous pools. The method superimposes a single factor credit migration model to the collateral pool. Users may specify default, prepayment, severity and asset correlation assumptions at the loan, cluster or deal level. The distribution of the systematic factor can be derived from either a normal, a student-t, or a uniform distribution. Alternatively, a custom distribution may simply be uploaded by the user. Valuing SF products with a WMC method allows you to obtain an entire distribution of losses, cash flows and prices, rather than just single values. This produces several statistics of interest, such as the standard deviation of prices and the lowest or highest percentile of prices or cash flows. Having full loss distributions allows you to answer questions such as “What is the probability of this tranche being hit?” or “What are the expected losses on this tranche?”
- Produce advanced analytics at the portfolio level, including exposure metrics (net, gross, long and short market values), value metrics (MTM, clean value, dirty value), yield metrics (effective, to maturity, current), duration metrics (effective, Macauley, Macauley-Wiel, dollar), convexity metrics (effective, Macauley, Macauley-Wiel, dollar) and sensitivity metrics (IR01, CS01, Gamma, Delta, etc). All of these may be calculated at the instrument and/or portfolio level during simulation. Results can be re-aggregated in real-time under dynamic and custom keys using pivot-table technology.
Technical Architecture Summary
NxR² is based on a service-oriented architecture that is 100% Microsoft .NET (Version 3.5) compliant. The .NET Framework provides an abstraction layer on top of the Microsoft Windows family of operating systems that ensures maximum portability to future releases and versions. Moreover, we are able to take advantage of the wide variety of reusable and tested .NET technologies available, allowing us to concentrate on delivering outstanding business functionality to our customers.
All major components of the architecture are accessible through configurable web services. Interactions between web services are managed through IIS 7. The architecture allows for distributing of reports and analysis to users outside of the client network through an optional web service.
All data is stored in a single, shared database. Data persistence is provided by SQL Server, Microsoft’s industry leading relational database product. Pricing is accomplished through multi-threaded core pricers that can take advantage of multi-core and multi-socket machines.
We utilize WCF (Windows Communication Foundation) to enable secure, reliable distributed computing. Database- and computation-intensive tasks are offloaded to one of two dedicated servers, the Monte-Carlo Server for WMC analysis, or the Report Server for a variety of reports. The latter is available to users who prefer not to run reports on their desktop computer. `
The user interface is Windows forms-based, with recently developed components, such as the Scenarios Studio—as well as all future components—built in WPF (Windows Presentation Foundation), Microsoft’s next generation framework for building stunning high-fidelity user interfaces.