October 15, 2015
Thomson Reuters Risk Management Solution for Pricing Structured Products and for Mitigating Portfolio Risk Selected by Fubon Financial Holdings
Hong Kong & Taipei - Thomson Reuters announced that its solution for pricing complex structured products and for managing risk in exotic portfolios has been selected by Fubon Financial Holdings Company (FHC), one of the largest financial holding companies in Taiwan.
Fubon had deployed its market risk management system in 2007, and continuously integrated its risk management framework across multiple systems to provide an efficient risk management process, using such functions as the Straight Through Processing (STP) mechanism including Extract, Transform & Load (ETL) of position and market data, scenario generation, calculation, simulation and integrated report of the large portfolio products.
Fubon’s market risk management architecture, containing several pricing systems with steady performance, could handle most complex instruments rapidly. Fubon was the first financial institution in Taiwan to evaluate market risk across each subsidiary at the aggregate level through various Value at Risk (VaR) models and Stress Test scenarios. Fubon’s managers could also gain deeper insight into their sophisticated structured instruments at granular levels.
To maintain its market-leading position, Fubon has constantly strengthened pricing models and risk architecture for business and risk management needs. In 2014, Fubon was seeking a cutting-edge, comprehensive risk management solution, incorporating data management and advanced pricing models of complex structured products to support operations across its entire business. Thomson Reuters derivatives pricing analytics capability was short-listed to strengthen Fubon’s latest risk management solution.
"Fubon Financial Holdings is committed to maintaining our leading position in Taiwan, where we have been the most profitable financial holding company for six consecutive years, as well as in the rest of the Asian market,” said Patrick Chang, the chief risk officer of Fubon. ”We focus on building a first-class risk management solution that supports our entire network of commercial banks, brokerage and insurance firms. Thomson Reuters derivatives pricing analytics provides us with a solution that meets our transparency requirements and delivers best-in-class product and service performance, while bringing true partnership and collaboration.”
“We are delighted to partner with Fubon,” said Jayme Fagas, global head of Valuations & Transparency for Thomson Reuters Pricing and Reference Services. “Fubon’s selection of Thomson Reuters is a true testament to the high-quality pricing solution we provide. Not only do we understand the regulatory needs and challenges impacting the industry today, we also work hand-in-hand with our clients to provide direct access to the core calculations including cashflow descriptions, market data inputs, numerical methods and model assumptions. Our breadth and depth of expertise in this space positions us well to meet all facets of any client’s evaluated pricing requirements.”
Stringent regulatory policies are heightening the pressure on firms to meet highly detailed and timely risk management reporting requirements, so transparency is essential. Thomson Reuters allows for simple integration of the analytics library with an existing in-house infrastructure and uses a multi-process architecture to enable high performance computational ability and transparent pricing.
In choosing a technology to support Fubon’s structured products business, it was critical that the selected vendor offered a solution to overcome the pricing and risk evaluation challenges of low interest rates and volatility jumps that exotic products encounter in most financial markets. Comprehensive modeling coverage with great flexibility to incorporate new exotics instruments were also a key criteria in Fubon’s vendor selection. Thomson Reuters was able to meet these needs with its Price-it OTC derivatives pricing analytics solution, which was named “Technology Innovation Provider of the Year in 2014 in Asia” by Structured Products Magazine, proving its leading capability across all asset class pricing and analytics to meet the high standard requirements of financial institutions.
Fubon also benefited from Price-it Excel, the Excel version of the pricing library, which enables the user to export data to an Excel spreadsheet for auditing all steps of the valuation across model parameter, calibrated data, detailed cash flow and simulated values; creating a smoother model validation process. Lastly, Fubon’s confidence in Thomson Reuters ability to deliver best practice was a key consideration in their selection.
Thomson Reuters Pricing & Reference Service is a global solution that covers over 2.5 million fixed income securities, derivatives and loans, priced daily, including: collateralized loan obligations (CLOs), collateralized debt obligations (CDOs), asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), credit default swaps (CDS), Corporates, US Municipals, structured products and more. Prices are delivered throughout the day or at market closing times around the world depending on the asset class, with supporting commentary to provide insight on the day's events.
About Thomson Reuters
Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world's most trusted news organization. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges (symbol: TRI). For more information, go to www.thomsonreuters.com.
About Fubon Financial Holdings
Fubon Financial Holdings (FHC) is one of the largest financial holding companies in Taiwan, with total assets of US$179.61 billion as of June 2015. Its major subsidiaries include Fubon Life, Taipei Fubon Bank, Fubon Bank (Hong Kong), Fubon Bank (China), Fubon Insurance and Fubon Securities. Fubon was recognized as the “Best Risk Management House,” awarded by TABF (Taiwan Academy of Banking and Finance) in 2012. For more information, go to https://www.fubon.com/eng/index.htm.