Société Générale corporate and investment banking: How we monitor market risk

Abstract

It is no secret that monitoring market risk can vary greatly between financial institutions. For Société Générale Corporate & Investment Banking (SG CIB), this process is centralised, with a team dedicated to certifying and analysing approximately 100 different measures every day, all of which are associated with the scope of market risk. The process involves all types of market risk across geographies — including rates, corporate stocks, inflation and credit — as well as all departments (desks) and all products (vanilla through to exotics). In order to manage their market risk, all financial institutions, including SG CIB, need to consider the impact of market volatility on their open risk positions, with scenarios defined for both positive and negative movements; however, many market risk methodologies hinge their calculated outcomes on extrapolations, which can be prone to errors and inaccuracies. This paper explores why the traditional approaches to monitoring market risk are not best practice in the long term, and the ways in which SG CIB is planning to use Quartet FS’s in-memory aggregation and analytical engine — ActivePivot — to turn huge volumes of market data into a meaningful understanding of risk exposures, using a dynamic scoring mechanism.