New Market Risk Platform (ZKB)

An existing legacy market risk platform no longer met rising regulatory requirements – especially in the FRTB context – or growing performance and transparency demands. Long runtimes for Monte Carlo VaR calculations, limited scalability and increasing complexity for structured products led to operational bottlenecks. At the same time, migration had to take place without interrupting ongoing reporting – under strict requirements for data quality, model consistency and auditability.

At the heart of the business case was the optimisation of capital requirements. A clean, model-true and regulatorily correct implementation – especially in the FRTB context – enabled more precise risk measurement and thus potentially reduced capital backing, with a direct impact on our client's P&L. Faster, more stable calculations also improved steering capability in trading and enhanced limit and portfolio decisions. The investment thus paid off twice: through regulatory security and through more efficient capital use with a direct impact on profitability.

The transformation offered the chance to optimise Monte Carlo simulations, automate end-to-end data flows and establish flexible scenario logic for VaR, stress and FRTB. Challenges lay in migrating the legacy solution, the high computational load required, complex valuation models and comprehensive regression tests to ensure consistent results – all while operations continued.

Together with the client we implemented an integrated market risk platform based on the Front Arena Scenario API with consistent end-to-end coverage of VaR, stress, P&L and FRTB. A performant architecture, clean data models and comprehensive validation ensured regulatory robustness and stability. The result: a scalable, audit-proof platform with a measurable impact on capital requirements and efficiency.

We were responsible for architecture design, implementation, scenario design, performance tuning and regression and consistency testing. We also took on sub-project leadership in the stress-testing area and supported the go-live. Business risk expertise and technical excellence came from a single source.

If you want to modernise your market risk platform while optimising your capital requirements, talk to us. We combine regulatory understanding with precise system implementation.