BNP Paribas Securities Services has launched a service to help asset owners measure and monitor the counterparty and liquidity risk arising from their derivatives exposure and anticipate their long-term collateral requirements.

As regulations have generalized the use of collateral to mitigate counterparty risk and require market participants to meet collateral calls over the full lifetime of an over-the-counter (OTC) derivative, asset owners have been exposed to increased liquidity risk. This challenge has also been exacerbated by recent market volatility.

AIA, a long-term risk and analytics client of BNP Paribas Securities Services in Asia, is already using the service, which is based on big data analytics and powerful calculations engines. AIA is able to assess its collateral needs at any given time, take into account collateral constraints in its trading decisions, and reprice derivatives and collateral in more than 3,000 economic scenarios.

A powerful data visualisation layer enables AIA to drill into the data and proactively manage its derivatives books in different economic scenarios.

“For our asset owner clients, predicting their collateral needs, and optimising increasingly scarce collateral resources, have become vital to the success of their investment and risk management practices,” says Philippe Tassin, head of asset managers and asset owners, Asia-Pacific at BNP Paribas Securities Services. “They have to ensure they can satisfy every collateral call over the lifetime of each OTC derivative in their books.

“Our solution enables them to manage the huge amount of data and complex calculation and pricing models required to simulate a multitude of what-if scenarios across the lifetime of their derivatives portfolios. “