UnRisk Software Solutions for the Financial Industries
Financial institutions (banks, asset management firms, insurance companies) must valuate their assets and liabilities to analyse their financial risk on a regular (often: daily) basis. MathConsult have been developing their UnRisk® product family to achieve these tasks.
Valuation
Depending on the specific details of financial instruments, valuation (meaning the calculation of a fair value) may be fairly easy, e.g., by looking up exchange traded equity prices or by discounting the cashflows of a fixed rate bond. Over the counter (OTC) instruments, on the other hand, are often quite complex and require the solution of a stochastic or a partial differential equation, equipped with appropriate terminal, interface and boundary conditions.
MathConsult has been working on a wide variety of valuation problems since 1997. The UnRisk ENGINE, which was (in its first version) released in 2002, covers now a wide range of financial instruments from various asset classes, and allows to apply different financial models for the valuation tasks needed.
![](https://www.mathconsult.co.at/wp-content/uploads/2018/09/call20option.png)
Workflow in valuation and risk analysis
The typical workflow for the valuation of a structured financial instrument is the following:
- Choose a model for the stochastic movement of the underlying. In the case of fixed income instruments, an interest rate model (e.g., Black76, Bachelier, Hull-White, Black-Karasinski, Libor market model) is chosen.
- Calibrate the parameters of the model by robust parameter identification techniques using market data of liquidly traded basic instruments.
- Apply the appropriate forward valuation routines for the structured instrument. In UnRisk, Green’s functions, finite element techniques, (Quasi)Monte Carlo simulation, and Fourier techniques are implemented.
![](https://www.mathconsult.co.at/wp-content/uploads/2018/09/floater20valuation.png)