UARTET FS

ActivePivot
TM

CUSTOMER CASE STUDY

Vector Aggregation: Enabling
Interactive “Slice & Dice” of VaR
Quartet’s ActivePivot for Value at Risk
ActivePivot is able to aggregate the actual
vectors of risk and produce, on the fly, the “Quartet’s ActivePivot solution for VaR resolves many key issues we had as it allowed us to
VaR measures (closed form or statistic) properly handle, with large volumes, the non-linear nature of the VaR calculation while
needed – all within a split second. providing us a flexible and diverse portfolio view, with drill down, of our market risk data.”
Head of Market Risk IT, Large European Bank
1) ActivePivot is object-oriented and
can aggregate objects as well as
Current Situation
simple numbers whereas standard
Our client, a large European bank, has implemented a state-of-the-art Monte Carlo
OLAP solutions are built on databases
simulation application for Value at Risk (VaR). Their portfolio includes plain vanilla products
and therefore can aggregate
as well as options, credit derivatives, and hybrid structures. All calculations are deployed on
only simple numbers.
their grid computing architecture in order to complete the process during their overnight
batch schedule. All reports are prepared during this overnight process after the grid has
2) ActivePivot is able to compute,
updated a database with its results.
interactively, additional measures
based on the data aggregated in the
cube. For example, based on a vector Problems Faced
of risk, ActivePivot can easily compute Risk managers need to easily analyze the results, preferably within Excel, and to drill down
its variances, or its nth loss. So using into the risk from a business area level into individual desks or strategies. Since their current
the aggregated vectors of risk, solution was based on reports produced during the nightly end-of-day process, it did
ActivePivot can display VaR statistics not allow for real-time, interactive “slicing & dicing” of the data. Solving this requirement
for any level of aggregation in is complex because VaR measures are non-additive in nature and traditional business
the cube. intelligence solutions all assume that measures can be aggregated.

Risk managers can now not only look at
statistical measures such as nth loss, mean,
variance, etc., but they can also display
a graphical representation of the P&L
distribution - all accomplished within
Excel, a format familiar to users.
Another problem the Bank faced was that once the simulation is completed by their
grid, the results are stored in a data warehouse. Producing the VaR reports requires a
large allocation of time in the batch schedule because the data store is massive therefore
creating a bottleneck, resulting in time consuming reporting.
Finally, risk managers need the ability to simulate “what-if” changes to their portfolios such
as the addition of new trades or the removal of some sections (for example, a counterparty
default), capabilities not currently possible in real-time.

5th Loss VaR Desk

Product Desk A Desk B Total
LISTED -30% -12% -28%
Vector Drill In
OTC -15% -8% -7% 25
Total -23% -10% -12%
20
15
10 Screenshot of
5 ActivePivot’s
0 VaR results with
details of P&L
5%

5%

%
5%

%
-5

15

25

35

45
-2

-1

distribution
 UARTET FS
About Quartet FS
Quartet FS was founded in response
to a demand by industries with
complex business models and timely
decision-making requirements. To
date this has seen Quartet FS work
largely with the financial sector
but our technology crosses many
disciplines including risk management,
e-commerce, transportation,
telecommunication, logistics, and
of course financial markets, all of
which demand accurate and current
information to perform real-time
analysis and render timely decisions.
ActivePivot, our real-time, event
driven, object oriented business
intelligence (BI) component can be
easily and quickly integrated into
existing architecture to provide proven,
flexible, true real-time answers that are
adaptable to meet different business
requirements.
OLD
Continuous Vector Aggregation
NEW
London
43 Eagle street
London WC1R 4AT, UK
Tel: +44 20 7632 6910
Fax: +44 20 7831 7700
New York
11 Skyline Drive
Hawthorne, NY 10532 USA
Tel: +1 646 688 4442
Fax: +1 646 688 4451
Paris
130 rue de Rivoli
75001 Paris, France
Tel: +33 1 40 13 91 00
Email: info@quartetfs.com
Web: www.quartetfs.com
Incremental Update: Solution for Removing the Database
Bottleneck
“With their object oriented approach, we were able to immediately cost justify this innovative
solution as not only was our end-of-day reporting period shortened, but less hardware and
database support was required as well.” Head of Market Risk IT, Large European Bank
ActivePivot is designed to work incrementally. The in-memory “cube” is updated each time
a new object is inserted. The Bank’s grid is able to produce the risk vectors continuously
and, as they are produced, ActivePivot then detects these changes and updates its
cube. This process works in parallel with the grid calculation, so when the last vector
is computed, the cube is immediately ready for analysis by risk managers. The new
architecture results in a decrease in expenses at two levels:
1) Eliminates the need for an expensive database server, and
2) Decreases the time allocated for reporting in the nightly batch, allowing the Bank
to grow its trading volume without needing to increase the size of the grid farm.
Other OLAP tools try to address these issues by adding an additional layer on top of the
data warehouse which results in nothing more than additional processing time.
Aggregation
Static
Data
Reports
Warehouse
Time Lost
Time
Interactive
Reports
Drill Down
into Risk
Time Saved
Time
The Bank used ActivePivot in such a way as to maintain their proprietary Monte Carlo
calculation - an imperative from the start. With ActivePivot, all the simulations performed
by the calculation engine are fed into its server however it is the manner in which
ActivePivot aggregates and then stores this data that makes this solution truly unique.
How this data is now provided - through paper reports, web browsers, or even Excel - is
irrelevant as it can be delivered in any format. Both with Excel and web browsers, users
now have the added ability to drill down into each VaR number by changing search criteria
on-the-fly. The previous solution was very efficient at producing data, but ActivePivot
now allows users to transform their flat information into intelligent, actionable
information and enables users to understand and manage their risk more effectively.