Global Energy Trader
We believe that accuracy and speed should go hand in hand. So do our clients. That’s why one of the world’s largest energy companies turned to QuIC to deliver the solutions they needed on time and on budget.
The client: This leading energy company operates in over 100 countries, with major businesses in transportation fuel, power, petrochemical products and a variety of retail services. With energy trading in power, oil and natural gas and emissions representing a significant portion of their profits, they needed a solution that was fast and accurate.
The challenge: With a reputation that speaks for itself, the client came directly to QuIC. Fortunately, they knew exactly what they wanted: a market risk solution that could effectively calculate the inherent risk on in-house positions, stock holdings and sales as well as traded risk management needs for physical and paper options.
“They chose QuIC for this project because we have an established track record,” said Cairns. “When a major global enterprise like this becomes a repeat customer, it is proof of the value of our solutions. They know us, they trust our people to understand the full complexity of their risk management needs, and they have confidence in our commitment.”
This client engages in transactions of a 25-year duration or longer, which means they had very specific requirements. In the early years, these trades feature risk exposure in markets with liquidity, where risk can be hedged and incorporated into standard market risk (MVaR) systems. Beyond the liquidity limit, however, there are no market prices, and the standard assumptions that underpin MVaR approaches break down.
To calculate the risk on these transactions, the client had an existing solution, but it was hardly an effective one. It essentially consisted of a series of spreadsheets requiring manual input.
“Their previous system was cumbersome, which comes as no surprise considering that for 25+ year commercial contracts, market risk calculation requires simulated risk profiles generated from 20 years of spot prices, with 5,000 simulations producing 5,000 potential paths. The positions then need to be valued and discounted to compute the 5,000 net present values,” said Nigel Cairns, President and CEO of QuIC. “Their manual system was slow and error-prone. Making modifications to risk factors or complex payoff structures was tedious and difficult.”
The Solution: QuIC was engaged to provide a “turnkey” risk management solution that would provide traders with the ability to run this type of calculation in real time. Our experts analysed the client’s existing methodology and workflow and configured QuIC’s Market Risk Solution to address the previous system’s structural weaknesses and speed issues. Their technology and business teams then validated the QuIC design and development proceeded.
With the support of our scalable, modular financial analytics technology, complex risk and simulation models were developed. The solution included QuIC Analyzer™ which creates 3-D graphics for visual analysis. The core of the solution was the QuIC Engine™, an exceptionally fast vector-based calculation and simulation platform that provides a shared calculation fabric that can be utilised throughout the organisation.
As is often the case, our services did not stop at implementation. QuIC experts continued to work alongside the client to train them in the use of the software.
The result: Delivered within four months, both on time and on budget, the project met every objective.
- Market risk now is analysed with far greater accuracy, ease of use and flexibility
- An interactive, flexible solution delivers results in a fraction of the time
- Increased speed permits complex calculations to be run several times daily, improving the validation of results
- The system’s speed allows for far more accurate hedging and business risk decisions to be taken
- The accuracy and frequency of NPV calculations have increased board-level confidence in monthly reports
QuIC’s Market Risk Solution
QuIC’s Market Risk Solution provides the fastest calculations and the most adaptable tools for accurate, real-time measurement of enterprise market risk. The calculation power of the QuIC Engine enables traders to run market VaR and credit PFE calculations on huge portfolios of complex instruments and receive results in a fraction of the time.