d-fine 2010-10-05 defining d-fine - heidelberg university · 10/5/2010 · defining d-fine...
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defining d-fine
Our Company
� d-fine in a nutshell
Our People
� Our international team
� Publications and Conference Contributions
� The d-fine Career Model
Agenda
Slide # 2© 2010 d-fine All rights reserved.
� The d-fine Career Model
� Your Life at d-fine
Our Services
� Our Market Position
� Our Clients
� Our Services
� Our IT Expertise
Work Examples
defining d-fine
� With over 250 professionals and offices in Frankfurt, Munich,
London and Hong Kong, d-fine is a leading consulting firm for
demanding quantitative and technical consulting projects
� d-fine is built around
– Quantitative finance
– Risk management
– Accounting issues and reporting
d-fine in a nutshell
Slide # 4© 2010 d-fine All rights reserved.
– Accounting issues and reporting
– IT integration
� We help our clients with all trading, back office, loan
management, risk management and asset/liability projects
– From analysis and design to industry-strength solutions
– From mathematical modelling to business process implementations
– From retail and corporate loans to exotic credit and equity derivatives
– From internal market risk Models to IFRS
– From capital allocation to risk-adjusted portfolio management
– From internal rating systems to fully fledged Basel II(I) and Solvency II implementations
defining d-fine
� Successful in business since 1996
– Founded as a speciality consulting service of Arthur AndersenGermany
– Continuous and constant organic growth
– Hundreds of successful projects on all scales
– Long standing cooperation with universities and software providers
� d-fine as a separate legal entity
– Since July 2002 – d-fine GmbH, Frankfurt and Munich
– Since Nov 2004 – d-fine Ltd, London
– Since October 2007: d-fine (HK) Ltd, Hong Kong
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– Since October 2007: d-fine (HK) Ltd, Hong Kong
2000 2005 20101996
50
100
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nu
mb
er
of
co
nsu
ltan
ts
spin off from Arthur Andersen
office in London
office in Hong Kong
defining d-fine
Our international team
� Deep technical and mathematical skills- 60% physicists, 25% mathematicians, 15% Other (IT, MBA, Economics, ...)
- 75% PhD level degrees, 25% master level degrees- Typically in top percentile of their class at university
� Well balanced profiles- Analytical abilities- Technology expertise- Social and management skills
� Continuous and intensive training
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� Continuous and intensive training- MSc in Mathematical Finance @ University of Oxford- MSc in Quantitative Finance @ Frankfurt School of Finance & Management- MBA @ l'Ecole des Hautes Etudes Commerciales (HEC) de Lausanne- MBA @ Mannheim Business School- CFA (Chartered Financial Analyst)- Actuary- Corporate Finance with University of Warwick- State of the art know-how through internal research, cooperation with leading
universities, regular attendance at conferences and seminars
� Extensive finance industry and implementation know-how- Practical applicability of models irrespective of level of theoretical
sophistication- Wealth of experience gained through successful delivery of hundreds of
projects
- Our senior staff can look back on many years of hands-on client engagements
defining d-fine
Publications and Conference Contributions� Cooperation with leading universities and organisations
- UK: University of Oxford, Warwick University, …- Germany: FSFM and Universities in Frankfurt, Mannheim, Heidelberg, Darmstadt
- Switzerland: l'Ecole des Hautes Etudes Commerciales (HEC) de Lausanne - Providing regular training for Bank for International Settlements and BaFin
� Current research topics- Pricing credit derivatives via hazard rate models / distance-to-default models
- Interest rate models: Markov functional forms, Libor market models- Hybrid models: Credit Libor market models- Rating and LGD models: Validation and imputation techniques
- Asset management: Quantitative asset allocation techniques
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� Publications- Publications of books in the area of pricing, risk, asset allocation, among them
already the 4th edition of “Derivatives and Internal Models” by H-P Deutsch- Numerous articles in leading German and international journals, e.g., on credit
portfolio models, validation of rating models, option pricing, energy derivatives, IT integration of trading systems
- Comments on current events in the financial world: Financial Times, FAZ, etc.
� Talks and Conference Contributions- Science in Finance Workshop at Schlosshotel Kronberg- d-fine’s own “Risk Breakfast” sessions in the City of London- Mathematical Finance Workshop in Frankfurt
(co-organised by d-fine)
- International conferences on, e.g., commodity risk
management, credit trading, economical capital
- Asset management: Quantitative asset allocation techniques- Many more research papers in co-operation with the university of Oxford
For a more
comprehensiv
e list, see
our www
library
defining d-fine
The d-fine Career Model
Consultant
Senior
Manager,
Senior-Manager
Partner
• Project management
• Client Relationship Management
• Project
coordination
• Client
Relationship Management
• d-fineStrategy
• d-fine
Development
Clear Career Perspectives
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Student• Project work
at client site
• Responsibility for task or sub-project
• Training
on/off-the-job
management
at client site
• Coordination
of consultants
• Preparation andvalidation of official project documentation
coordination
• Project
responsibility
• Projectacquisition
Development
• d-fine Business Management
• Internship
2-3 Years 4-6 Years 10-12 Years
professional experience
We support your career with education, trainings, etc.
defining d-fine
Your Life at d-fine
Free Choice of Location• You may live wherever you like• We take care of your business travel
and accommodation
Attractive compensation• Competitive fixed salary plus bonus• Pension fund and insurance• 30 days annual leave (in Germany)• Company car programme
Absolutely unique further education • cooperation with Oxford-University, Frankfurt School of
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• cooperation with Oxford-University, Frankfurt School of Management & Finance, Warwick Business School, HEC Lausanne
• CFA, MBA and MSc possible• regular attendance at international seminars and
conferences• Soft-Skill and other In HouseTrainings
...last not least: interesting projects at top companies all over Europe
Great working atmosphere• dynamic and un-bureaucratic structure• work among „like-minded“ people
defining d-fine
Our Market Position
Bu
sin
ess K
no
w H
ow
Large
Strategy consulting
d-fine
Combines business know how and technical expertise of a large multi-disciplinary firm, but independent of any audit business
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IT consulting
Bu
sin
ess K
no
w H
ow
Technology Skills and Implementation Ability
Large professional
services firms
„Big Four“
defining d-fine
� Large, medium sized, and specialised banks� Insurances, asset managers, hedge funds� International industry corporations
Our clients
►
Our client list (abridged):
ampegaGerlingARAGBarclays Capital (UK)BayernLBBBVA (ES)
Hannover RückHBOS (UK)HSBC (UK)HSH NordbankHVB
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►
BBVA (ES)CommerzbankCOMINVESTCQS Management (UK)Daewoo Securities (ROK)DaimlerDBS (SG) DekaBankDeutsche Bank Deutsche BundesbankDG HypDeutsche PostbankDVB BankDZ Bank E.ONEurohypo
HVBKfWLandesbank Baden-WürttembergLandesbank BerlinMEAGNRW.BankRaiffeisen International (AT)RZB (AT)SchiffsbankSiemens Financial ServicesSparkasse KölnBonnStandard Bank (UK)ToyotaUnion InvestmentVW Financial Services (DE/UK)WestLB
defining d-fine
Our service focus (overview)
Models Processes Systems
Development and calibration of risk management models
� Market risk, credit risk
� Liquidity risk and FTP
� Consistent multi-standard
Design and implementation of processes
� Straight through processing
� Oversight and controls
Implementation of IFRS,
Integration of trading and risk management systems
� Business requirements
� System selection
� Design and parameterisation
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� Consistent multi-standardaccounting and economic P/L
� Economic capital & RAROC
Development of pricing models
� Structured & hybrid products
� Credit derivatives andsecuritisation transactions
Independent model validation
� IRB, VaR, PFE/EPE models
� System & pricing validation
� Benchmark C++ library
Implementation of IFRS,Basel II and Solvency II� Risk management process� Data management process� Reconciliation� Integration of finance & risk
Integrated reporting
Regulatory Compliance
� Cad 2 and 3 processes
� Counterparty credit riskprocesses (IMM)
� IFRS and multi-GAAP
� Design and parameterisation
� Workflow and processes
� Analytics
� Data feeds and reporting
� User acceptance testing
� Project management
Bespoke development
� C/C++, Java, VBA, XML etc.
Data management
� Data warehouse
� Data cleansing and quality
defining d-fine
Our Services
� Independent valuation of Financial Products– Validation of client’s pricing models
– Benchmarking vs d-fine’s bespoke ‘MoCo’ library
– Selection of pricing models, hedging calculations, portfolio viewpoint
– From simple instruments to complex OTC derivatives and structured Products
– Development of risk management methodologies
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– Development of risk management methodologies
– Containing interest rate risk, equity risk, FX risk, all other market risks, and credit risk
� IAS/IFRS implementation
– IAS 39 incl. hedge accounting tools
– Full fledge implementations
� CAD 2, Basel II(I), CRD (CAD 3) implementation– Internal models for market risk
– Internal ratings based models (IRB)
– Internal Capital Adequacy Assessment Process (ICAAP)
– FSA Prudential Sourcebook (PRU)
– Liquidity Standards (Basel III)
defining d-fine
Our Services (cont’d)
� Development of Rating Systems– Retail IRB, Foundation IRB, Advanced IRB
– PD, LGD, CCF, EAD calculation
– Corporate, Retail, Banks, non-banking Financial Institutions,Funds, Project Finance
� System specification, validation, selection, customisation and implementation– For trading front and back office
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– For trading front and back office
– For risk management and risk controlling (e.g. VaR)
– For treasury and ALM
� Development of optimisation techniques for– Asset and capital allocation (e.g. triple-alpha)
– Risk adjusted portfolio optimisation (RAROC)
– Asset liability management (ALM)
� In house training at any level from top management to technical experts– On quantitative finance or risk management techniques
– On specific IT systems
– On Basel II, CRD, CAD 3, IAS 39, ICAAP, PRU
defining d-fine
Our IT Expertise – Systems (abridged)
� Trading systems– Calypso, Front Arena, Kondor+, Murex
– Summit, Sophis Risque, Trema …
� ALM and Treasury systems– Almonde, Algorithmics ALM,
– Simcorp Dimension
– Fermat, RiskPro, Trema...
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– Fermat, RiskPro, Trema...
� Market and Reference Data systems– Asset Control, Xenomorph, ...
– Data Vendors
• ThomsonReuters, Bloomberg, Mark-it Partners, …
� Risk Management systems – Algorithmics Suite / RiskWatch
– FERMAT, Misys RiskVision
– Sungard Adaptiv, Credient, ...
– SAS Risk Dimensions, ...
defining d-fine
Our IT Expertise – Tools (abridged)
� C(++) – various system APIs & pricing libraries– Risk++ (Algorithmics)
– Formula Engine/C-API (Asset Control)
– Xenomorph Analytics Modules
– d-fine’s bespoke ‘MoCo’ library
� Java – platform independent software clients– Various GUIs for Asset Control
� Data base / scripting / macro languages
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� Data base / scripting / macro languages– Various SQL dialects
– Python (Front Arena AEL)
– PERL (data pre-processing for e.g. Algo, AC)
– SAS, S-PLUS (e.g., development of Rating and LGD Models)
– UNIX shell scripts (process scheduling)
� Middleware / EAI– XML data modelling
– IBM MQSeries
– Vitria BusinessWare
– Reuters Tibco
– webMethods
defining d-fine
Examples of our Work: Credit Rating Systems
0%
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100%
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−ΦΦ=
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Y=defaults
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all defaulted
metric = scoremetric = score
Cumulative
Distributions Fit:
Power Curve, Lorenz Curve, Receiver
Operations Characteristic
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0% 20% 40% 60% 80% 100%M
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metric = scoremetric = score
( )( )Mxxx
yPDMPD
=∂
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0%
2%
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6%
0 20 40 60 80 100Score M
PD
(M)
rating class
( )
PD
dxxy
G−
−⋅
=∫
1
12
1
0
Discriminary Power,
Gini Coefficient,
Accuracy Ratio
Default Probabilty
Default
Probabilty
defining d-fine
Examples of our Work: Market Risk Quantification
STOXX 50
1%
2%
3%
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5%
6%
7%
Dail
y R
etu
rns
4000
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-7%
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-1%
0%
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000
04.0
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Dail
y R
etu
rns
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Returns
Value at Risk
Expected Shortfall
Volatility
Price
defining d-fine
Examples of our Work: Market Risk Quantification
� Calculation of ex-ante Value-at-Risk, Profit & Loss and Expected Shortfall
0,14
0,16
0,18
0,2 0expected return
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-5
-4,7
-4,4
-4,1
-3,8
-3,5
-3,2
-2,9
-2,6
-2,3 -2
-1,7
-1,4
-1,1
-0,8
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-0,2
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S1
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pro
bab
ilit
y
P&L [%]
conditional average =
expected shortfallexpected shortfall
defining d-fine
95
100
105
95% quantile (symmetric)
Examples of our Work: Monte Carlo Simulation
� Modelling the P&L distribution with Monte-Carlo simulations of correlated market parameters with stochastic volatility (e.g. GARCH-Models)
( ) dtXtdttSd )()(ln σµ +=
Drift (stochastic) Volatility Random Number
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65
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0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250
time [days]
sto
ck p
rice
[€]
95% quantile (symmetric)
( ) dtXtdttSd )()(ln σµ +=
outliers
defining d-fine
24%
26%
28%
30%
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34%
36%
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40%
Examples of our Work: Models for Commodity Prices
0.12
0.14
Annualized Volatility versus time horizons
Relaxation Force Effect: Deviation from pure Diffusion
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20%
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24%
0 50 100 150 200
-14%
-11%
-9%
-6%
-4%
-1%
1%
4%
6%
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19%
S1
S5S9
S13S17
S21S25
0
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0.06
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0.1
0%
2%
4%
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16%
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0 10 20 30 40 50
time horizon [d]
Sta
nd
ard
Devia
tio
n
Standard Deviation of Relative Price Change
Fre
qu
en
cy
Price Diffusion:Uncertainty increases with
time horizon
defining d-fine
� State of the Art numerical methods like, e.g., Matrix Diagonalization, Copulas, Finite-Differences, Elements etc.
Examples of our Work: Pricing Exotic Derivatives
Slide # 25© 2010 d-fine All rights reserved.
� for instance credit derivatives like CDO2
� for instance wheather derivatives using ARFIMA-FIGARCH Models:
[ ] [ ] 22 )1)(()(1)(1 i
d
ii BBBhB εψεβωβ −−−+=−
defining d-fine
� A process model for a Fonds manager and implementation of the business processes
� Data Management
Examples of our Work: Work Flows and Process Definitions
Slide # 26© 2010 d-fine All rights reserved.
defining d-fine
Your Contact
Wolfgang PleyerPartner
d-fine
FrankfurtMünchenLondon
Slide # 272010 d-fine All rights reserved
Partner
+49 69 – 90737-303
e-Mail: wolfgang.pleyer@d-fine.de
London Hong KongZürich
Zentrale
d-fine GmbHOpernplatz 260313 Frankfurt am MainDeutschland
T. +49 69-90737-0F: +49 69-90737-200
www.d-fine.de
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