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engitech@oceanthemes.net

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Excellence in Market Risk Management & Regulatory Compliance

DarkTig’s Unmatched Expertise in Market Risk Management, Model Validation, and Global Regulatory Reporting across All Asset Classes.

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I. Market Risk Managament & Model Validation Expertise

DarkTig’s team has the the prowess of developing products in market risk management and model validation across a spectrum of asset classes. This entails:

01
Comprehensive Risk Assessment

A meticulous evaluation of market risks inherent in various asset classes, encompassing equities, fixed income, commodities, and derivatives. The team identified and quantified potential losses arising from market fluctuations, interest rate changes, credit spreads, and other risk factors.

02
Robust Model Validation

Rigorous validation of pricing and risk models employed for each asset class, ensuring their accuracy, reliability, and adherence to regulatory standards. This involved backtesting models against historical data, stress testing under extreme scenarios, and benchmarking against industry best practices.

03
Tailored Risk Mitigation Strategies

Development of bespoke risk mitigation strategies for each asset class, aligning with the client's risk appetite and investment objectives. These strategies encompassed diversification, hedging, and dynamic portfolio adjustments to safeguard against adverse market movements.

04
Regulatory Compliance

Ensuring full compliance with regulatory frameworks such as Basel III and Solvency II, ensuring the client's risk management practices met stringent industry standards.

05
Continuous Monitoring and Refinement

Establishment of a robust framework for ongoing monitoring of market risks and model performance. This facilitated the timely identification of emerging risks and enabled prompt adjustments to models and strategies to maintain their effectiveness.

By delivering comprehensive market risk management and model validation solutions, the team empowered the client to make informed investment decisions, optimize risk-adjusted returns, and maintain a resilient portfolio in the face of ever-changing market conditions. This expertise further solidified the team’s reputation as a trusted partner in navigating the complexities of financial risk management.

II. Independent Price Validation & MTM Expertise across Asset Classes

1. Independent Price Validation (IPV)

IPV is the process of verifying the accuracy and fairness of prices for financial instruments, especially those that are not actively traded or have complex structures. This ensures that the prices used for trading, risk management, and financial reporting are reliable and unbiased. Implementation for different asset classes:

01
Equities
Comparing prices from multiple sources, validating against similar or related instruments, using pricing models for illiquid stocks.
02
Fixed Income
Assessing bond valuations based on comparable bonds, yield curves, and credit spreads. Validating complex structured products using detailed cash flow modeling.
03
Commodities
Comparing prices from different exchanges and brokers, considering spot prices, futures curves, and storage costs.
04
Derivatives
Employing rigorous valuation models that account for underlying asset prices, interest rates, and correlations.

2. Term Sheet Generation

What it means: A term sheet outlines the key terms and conditions of a proposed financial transaction. It serves as a basis for negotiation and due diligence before a formal contract is drafted. Implementation for different asset classes:

01

Specifying details like the number of shares, price per share, settlement date, and any additional terms (e.g., lock-up periods).

01

Equities

Equities
02

Defining the bond's principal amount, coupon rate, maturity date, call/put options, and covenants.

02

Fixed Income

Fixed Income
03

Outlining the type of derivative (option, swap, futures), underlying asset, notional amount, strike price (if applicable), and expiry date.

03

Derivatives

Derivatives

3. Automated Mark-to-Market (MTM)

What it means: MTM is the process of valuing financial instruments at their current market prices. This is done regularly to reflect changes in market conditions and ensure accurate risk assessment. Implementation for different asset classes:

01
Equities
Valuing equity holdings at the latest closing prices from the relevant stock exchanges.
02
Fixed Income
Using current market yields and credit spreads to value bonds and other fixed-income instruments.
03
Commodities
Marking commodity positions to the latest spot or futures prices.
04
Derivatives
Employing valuation models to calculate the fair value of derivatives based on current market parameters.

4. Implementation of Latest Pricing & Volatility Models

What it means: Continuously updating and refining the models used for pricing and risk assessment to reflect the latest market developments and research. Implementation for different asset classes:

01

Incorporating new models for forecasting stock price movements, volatility, and correlations.

01

Equities

Equities
02

Updating yield curve models, credit risk models, and option-adjusted spread (OAS) calculations.

02

Fixed Income

Fixed Income
03

Implementing models that account for seasonality, supply-demand dynamics, and geopolitical risks.

03

Commodities

Commodities
04

Using state-of-the-art models for pricing options, swaps, and other complex derivatives.

04

Derivatives

Derivatives

III. Regulator Reporting Expertise across Global Markets and Asset Classes

The team has a deeep and comprehensive understanding and proficiency in regulatory reporting across diverse global markets and asset classes. This encompasses:

1. Multi-Jurisdictional Compliance

  • Navigating Complex Regulatory Landscapes
  • Addressing Regional Nuances

The team adeptly navigated the intricate regulatory frameworks of various countries, ensuring adherence to reporting requirements across multiple jurisdictions. This involved meticulous research, interpretation, and implementation of local regulations.

The team recognized and addressed the unique nuances of regulatory reporting in different regions, such as the European Union (EU), United States (US), Asia-Pacific (APAC), and others. This ensured compliance with specific regional directives and reporting standards.

2. Multi-Asset Class Reporting

01
Equities
Prepared and submitted accurate and timely reports for equity holdings, transactions, and positions, adhering to regulations like SEC Rule 13F in the US or EMIR in the EU.
02
Fixed Income
Generated comprehensive reports for bond holdings, including details on issuers, maturities, credit ratings, and trading activities, complying with regulations like TRACE in the US or MiFID II in the EU.
03
Commodities
Facilitated regulatory reporting for commodity positions and transactions, ensuring compliance with CFTC regulations in the US or ESMA regulations in the EU.
04
Derivatives
Submitted detailed reports on derivative holdings, including notional values, underlying assets, counterparties, and risk metrics, adhering to regulations like Dodd-Frank in the US or EMIR in the EU.

3. Regulatory Frameworks and Standards

Basel III
Ensured compliance with the Basel III framework for banking regulation, particularly in relation to capital adequacy and risk reporting.
Solvency II
Facilitated regulatory reporting for insurance companies in accordance with the Solvency II framework, focusing on capital requirements and risk assessment.
Dodd-Frank
Adhered to the Dodd-Frank Wall Street Reform and Consumer Protection Act in the US, specifically for reporting on derivatives and over-the-counter (OTC) transactions.
MiFID II
Ensured compliance with the Markets in Financial Instruments Directive II (MiFID II) in the EU, which covers reporting requirements for various financial instruments and trading activities.
EMIR
Facilitated reporting under the European Market Infrastructure Regulation (EMIR) for derivative transactions, aiming to enhance transparency and mitigate systemic risk.

By diligently handling regulatory reporting across a wide range of asset classes and global markets, the team enabled the client to meet their compliance obligations, avoid regulatory penalties, and maintain transparency with stakeholders. This expertise demonstrates a deep understanding of the evolving regulatory landscape and a commitment to upholding the highest standards of reporting accuracy and integrity.

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