What is Algo Risk Service?
Algo Risk Service is a hosted, web-based offering that provides access to leading-edge risk and portfolio analytics. Aimed primarily at buy-side organizations such as hedge funds and asset managers, Algo Risk Service delivers state-of-the-art risk measurement and investment support tools, without the costs or challenges associated with in-house deployment. Users upload data into their own dedicated production environment and all subsequent processing is performed by Algorithmics. The focus for the user becomes managing their risk, while Algorithmics manages the data retrieval and analytic process.

How do I access Algo Risk Service?
Algo Risk Service is hosted by Algorithmics and delivered online as a managed service. Clients can securely access Algo Risk Service through a web-based, interactive risk reporting tool. No additional hardware is required.

Is a managed service the same as an ASP-based service?
There are a number of differences between managed services and Application Service Provider- (ASP) based offerings. Managed services are more configurable and customizable than ASP models, and in terms of risk oversight can provide additional flexibility for data, valuation, modeling, and portfolio construction tools.

The ASP model generally provides clients with internet-based access to a standard edition program with few options for customization. Unlike the ASP model, managed services provide access to an offering that is specifically configured to address each client's unique business requirements.

To properly implement Algo Risk Service, Algorithmics designates a project manger to each client, providing a single point of contact to understand and take care of a firm's unique needs during the implementation phase.

What benefits does Algo Risk Service offer?
Leveraging Research & Development, data processing techniques, software development, and scenario generation, Algo Risk Service is specifically configured to address each client's business requirements. This flexibility can provide specific benefits, including:

  • Customization- Algo Risk Service utilizes Algorithmics’ award winning and patented Mark-to-Future methodology. Based on client-directed settings, this process separates the valuation, simulation, and reporting of the assets into discrete steps, allowing each to be tailored to a firm’s view of risk, markets, and state of the risk factors.
  • Decision Support - Results of the scenario-based valuations are stored for every asset, for every time step, and for every scenario, giving rise to a three-dimensional results cube from which granular and consolidated analyses, simulations, and reports can be quickly viewed. This robust, flexible, and scalable system supports on the fly, ad-hoc decision tools including Hedge Ratios, What-if Analysis, Limits Management, and an Optimizer to move beyond simple risk measurement.
  • Reporting - Algo Risk Service reports enable users to access a wide variety of graphs and tables to make results clear and vivid. Algorithmics is able to store daily results and display historical reports, to monitor changes day-by-day as well as facilitate back testing and audit.
  • Integration of Market and Credit Risk - Algorithmics’ Mark-to-Future architecture extends to both market risks and counterparty exposures by conditionally simulating credit environments under each market risk scenario. Each correlated scenario represents an economic state of the world which, when combined with the underlying issuer or counterparty's credit characteristics and the price of each underlying asset, determines a loss condition. Single scenario sets can be used for both market and credit risk questions.

Will our data / position / strategies be secure?
Yes. Each Algo Risk Service client is assigned its own production environment in a secured data center. As a result, no functionality or information is shared between clients, to safeguard the privacy of your data and documentation.

Can Algo Risk Service accommodate the real-time addition of new instruments?
Yes. New instruments can be created on the fly by combining existing instruments into a proxy, thereby replicating the financial profile of the initial instrument.

Does Algo Risk Service help address compliance requirements?
Yes. Algo Risk Service has the capacity to provide compliance support for the following:

  • Basel III
  • Solvency II
  • UCITS IV

Algorithmics provides additional solutions to help address other regulations and factors, including internal and corporate compliance.

Does Algorithmics subcontract support of Algo Risk Service?
No. Algo Risk Service is fully managed and operated by Algorithmics engineers, who are familiar with all aspects of the service and the financial services industry. No subcontractors are used.

Who implements Algo Risk Service?
A standard Algo Risk Service implementation team is comprised of experts in three roles:

  • Financial engineers who design, in concert with the client, the functional aspects of the solution including quantitative analysis, financial modeling, scenario generation, portfolio modeling, stress test design, specification, testing, and validation.
  • Integration engineers who oversee the technological operation of the solution including input data, logistics, output delivery, report generation, capacity planning and performance tuning.
  • Project managers who oversee the implementation, from initial project planning to production sign off.

What is Algorithmics' approach for a successful implementation from a technical perspective?
All systems, applications, and hardware used to calculate results have been selected and tested for the specific purpose of providing a managed service. These optimized components, which are integrated, and maintained by Algorithmics' engineers, are brought online through the use of a proven implementation methodology, which reduces technical implementation time and risk.

On the data acquisition side, Algorithmics draws on extensive experience with market data providers such as Bloomberg and Reuters.

What is Algorithmics' approach for a successful implementation from a non-technical perspective?
There are two key factors minimizing functional implementation risk, which includes areas such as business process changes and user acceptance.

  • Experience - Leveraging nearly 20 years of experience working with the full spectrum of financial services firms, Algorithmics has established a proven methodology for technical delivery and product implementation. Through the use of a thorough discovery, we address client-specific functional requirements with proven financial engineering specifications that are standardized, yet customizable. This process is led by our financial engineering team and supported by a large research and development organization.
  • Implementation Methodology - Algorithmics has developed an implementation methodology incorporating a series of milestones and approvals allowing both clients and Algorithmics to avoid implementation problems and providing the means to handle them when they do occur.

How is Algo Risk Service supported?
A dedicated Algo Risk Service production team of financial engineers and integration engineers, based out of Toronto, Canada and London, UK, provides technical and functional support. Team members have expertise in Algo Risk Service in addition to finance, mathematics, business, and information technology. The team can call on additional technical and business insight from the line of business and Research & Development as required. Support levels are based on the terms of the Service Level Agreement, and include telephone and email support during business hours and access to the algoassist.com client portal.

How does Algorithmics meet support requirements?
Meeting or exceeding industry standards, Algorithmics' service level agreements set out detailed performance metrics, including rapid response times.

The team utilizes a transparent Service Request System (SRS) as the logging, alerting, and tracking mechanism for all customer-related issues. SRS captures and tracks relevant information related to submitted issues, including symptoms and resolutions

Using SRS, clients can, in real time:

  • create and update service requests (SR), including information requests, defect reports, and enhancement requests
  • receive email notifications for specific status changes to their submitted tickets
  • search SR submitted by their organization, based on a number of filter criteria to view real-time snapshots of SR conditions
  • view their Organization profiles, including Algorithmics SLA commitments

Does Algorithmics provide any type of product training?
Yes. Each client has access to a variety of options for training and user documentation.

The client's interface to Algo Risk Service is a reporting / graphic user interface, which is equipped with online self-help. User training is also provided by our dedicated training organization, Algo Academy.

Does Algo Risk Service offer separate environments for development user acceptance testing and production?
Yes. Algo Risk Service provides separate environments for testing, and production. Production data feeds are sent to the test environment as needed.

What steps can I take prior to commencing the project for a smooth implementation?
Algorithmics’ engineers can guide clients through all phases of project implementation. If you are interested in taking steps prior to initiating the project, we would recommend the following be considered:

  • Build your team - Identify personnel who will be responsible for key areas such as: data interface; data sourcing; financial modeling; risk management; reporting, and the creation of data feeds. This team should, ideally, be committed to taking part in at least the discovery, scope definition approval, testing, and validation stages of the project.
  • Gather documentation - Information about how risk is to be measured and managed will be an integral part of the discovery process. Relevant documentation may include:
    • Instrument type and volumes
    • Sources for market, instrument and portfolio data
    • Portfolio construction
    • Risk measures (historical, Monte Carlo, and/or parametric VaR, for example) and any specific requirements for financial modeling
    • Scenario generation
    • Report content, frequency, and timing
  • Data sourcing - Identify data requirements and engage third-party data vendors to procure the appropriate data licenses as soon as possible. Determine the required position holdings and portfolio data to feed Algo Risk Service.