Project Examples – mex-consulting

Selected Project Examples

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Benchmark Analysis for Scoring Models Using Various AI Approaches

Client

Internal Study

Details:

In this project, customer data for the determination of scoring values were analyzed using both classical logistic regression and modern AI methods. In addition to traditional logit regression, scoring values were derived using neural networks, XGBoost, and random forest, and the results of the different models were compared. The calculations were implemented in Python. A key focus of this study was the use of AI in a way that would meet the standards of an internal bank validation process.

Tags:

#AI, #CreditScoring, #NeuralNetworks, #XGBoost, #RandomForest, #Python, #Validation, #CreditRisk

Validation of the Credit Spreads of a Credit Portfolio Model

Client:

Software Provider for Credit Portfolio Models

Details:

The credit portfolio model underlying the system is based, among other things, on J.P. Morgan’s CreditMetrics approach. The objective of the project was to validate losses in the lower rating classes. As a solution, a challenger model based on market data spreads was applied to determine risk premiums with regard to the risk coverage potential, including an analysis of the effects. In this context, a VBA-based credit spread tool for regression, interpolation, and extrapolation of quality-assured spread curves was enhanced and used. In addition, a model comparison was motivated and outlined between the Basel formula derived from the Vasicek approach (CRR, Art. 153) and the CreditMetrics approach.

Tags:

#CreditPortfolioModel, #CreditMetrics, #Vasicek, #CRR, #Validation, #CreditRisk

Design of an Ad Hoc Stress Test

Client:

International Large Bank

Details:

Konzeption und Umsetzung eines Ad-hoc Stresstests mit Hilfe von Regressionsansätzen sowie die Entwicklung eines passenden Prototyps in SAS zur regelmäßigen Ausführung von Ad-hoc Stresstests.

Data flow and process analyses
Historization of productive stress test parameters and results
Execution of panel regression approaches to approximate regulatory metrics (RWA, EL, etc.) under stress
Analyses for the modeling of ad hoc scenarios (regression analysis, sensitivity analysis) in SAS

Creation and configuration of a SAS prototype for the calculation of ad hoc stress test results

Tags:

#StressTest, #SAS, #RWA, #ExpectedLoss, #CreditRisk, #PanelRegression

Internal Audit Review of the Validation of a Scoring Model

Client:

Auto Bank

Details:

Support for Internal Audit in reviewing the annual quantitative validation of PD scoring models, taking into account the requirements under MaRisk. Review of the R code used for validation methods relating to representativeness, monotonicity, and discriminatory power. Gini coefficient, binomial tests, etc. Preparation of the audit report.

Tags:

#InternalAudit, #ScoringModel, #RCode, #Gini, #BinomialTest, #CreditRisk, #Monotonicity, #DiscriminatoryPower

QIS Analysis for the Introduction of a New Regulatory Definition of Default

Client:

International Large Bank

Details:

Execution of the supervisory Quantitative Impact Study (QIS) regarding the change in the regulatory definition of default and its impact on credit risk metrics (PD and RWA).

Creation of SQL queries for extracting and processing credit data from the bank’s internal risk data warehouse
Evaluation of the data in accordance with the various QIS requirements
Business-side coordination of the implementation
Analysis of the impact on different exposure classes
Completion of the QIS templates for reporting to the supervisory authority (COREP format)

Design and documentation of the implementation results

Tags:

#CreditRisk, #DefinitionOfDefault, #PD, #RWA, #COREP, #DataWarehouse, #StarSchema

Implementation of a VaR Framework in Front Arena

Client:

International Large Bank

Details:

Design and implementation of a risk management framework for the simulation of historical Value-at-Risk in Front Arena.

Configuration of risk factor time series and risk factor mapping
Generation of historical risk shift scenarios
Implementation of the AEL modules
Generation of risk positions
Identification of position-relevant risk factors
Generation of risk factor shifts and determination of P&L shifts
Aggregation of P&L shifts into Value-at-Risk
Creation and business validation of a market data interface to an Asset Control data system

Tags:

#MarketRisk, #ValueAtRisk, #HistoricalSimulation, #AssetControl, #FrontArena, #AEL, #ASQL, #Python

Integration of Base Correlations into Front Arena

Client:

German Promotional Bank

Details:

Introduction of base correlations for the valuation simulation of CDOs in a Front Arena risk framework.

Familiarization with the bank’s proprietary risk environment
Integration of risk factors and their time series into Front Arena
Adaptation of the Python AEL scripts and ASQL code
Execution of developer tests

Tags:

#MarketRisk, #BaseCorrelation, #AssetControl, #FrontArena, #AEL, #ASQL, #Python

Testing FX Performance in Front Arena During a Release Change

Client:

German Regional Bank

Details:

Introduction of base correlations for the valuation simulation of CDOs in a Front Arena risk framework.

Familiarization with the bank’s proprietary risk environment
Integration of risk factors and their time series into Front Arena
Adaptation of the Python AEL scripts and ASQL code
Execution of developer tests

Tags:

#MarketRisk, #FX, #Performance, #FrontArena, #AEL, #ASQL, #Python

Integration of a Futures Trading Framework into Front Arena

Client:

German Mortgage Bank

Details:

Design, organization, execution, and testing of the business and technical integration of a futures trading platform into FRONT ARENA.

Automated integration of trading information from the SmartConnect trading platform (Lehman Brothers Inc.)
Design and implementation of a generic test concept
Automation of the creation and maintenance of futures trades

Tags:

#MarketRisk, #Futures, #TradingPlatform, #FrontArena, #AEL, #ASQL, #Python

Enhancement of a Front Arena System

Client:

German Mortgage Bank

Details:

Enhancements to the bank’s internal Front Arena system.

Migration of rating data
Valuation of cross-currency swaps
Integration of a market data database
Derivation of a master rating
Integration of the market data database

Tags:

#MarketRisk, #MarketData, #MasterRatings, #FrontArena, #CrossCurrencySwaps

Model Validation of IRRBB Methodologies in Treasury

Client:

International Bank

Details:

Methodological validation of the documentation series for the IRRBB models of the ALM/Treasury division.

Validation of interest rate risk methodologies
- NII simulation for non-maturing deposits, deposits, loans, mortgage loans, and the Treasury pool
- Capacity model for constructing replication portfolios
- IRRBB stress approaches
- Methods for hedging interest rate risks with swaps and prepayment risks with Bermudan swaps
Mathematical and statistical analyses of volume developments in R
- SARIMA processes, distribution tests, fat-tail analyses, regime and trend analyses, optimization of the asset-liability structure
Preparation of the validation reports

Formulation and coordination of findings

Tags:

#InterestRateRisk, #InterestRateRiskInTheBankingBook, #IRRBB, #Treasury, #ALM, #AssetLiabilityManagement, #BermudanSwaps, #NetInterestIncome, #NII, #ARIMA, #Validation

Preliminary Study and Implementation of IRRBB Regulatory Reporting

Client:

IT Center of a Banking Group

Details:

Business specification for the preparation of reporting metrics for banking book financial transactions for IRRBB reporting, for detailed submission in accordance with the BAIS reporting template.

In particular, the project included:

the attribution of financial transactions for classification into the reporting form cells with sufficient granularity,
the alignment of calculation processes and the identification of calculation gaps,
the compilation and preparation of results for transfer to the BAIS interface,
the specification for adapting the IDH data model and the description of the methodological value-added services.
Business specification for the preparation of reporting metrics for banking book financial transactions for IRRBB reporting, for detailed submission in accordance with the BAIS reporting template.
Business testing and processing of change requests.

Client:

Bank within the German Sparkassenverbund

Details:

Modeling of business risk based on the bank’s profit and loss time series.
Implementation of various trial calculations in R and Excel
Analysis of risk factors for conditional normal distribution and backtesting
ARMA modeling of volatility
Monte Carlo analyses and quantile line regression
Impact analysis on VaR risk metrics
Support for implementation by IT
Design of a stress test approach for business risk

Tags:

#BusinessRisk, #StressTest, #MonteCarlo, #Regression, #ARMA, #R

Preparation of a SREP Report

Client:

International Large Bank

Details:

Preparation of a comprehensive SREP report for the European supervisory authority (EBA) to present the bank-wide profile as well as the business and risk strategy and the overarching risk management process.

Preparation of the sections ICAAP overview, risk inventory, risk measurement methods, and group-wide stress tests
Distinction between the bank’s understanding of going concern and gone concern approaches
Preparation of a detailed reconciliation from accounting equity to regulatory capital

Tags:

#SREP, #ICAAP

Further Development of Regulatory Stress Tests (Pillar 1)

Client:

German Banking Group

Details:

Group-wide materiality analysis to identify the drivers of RWA metrics in market risk
High-level design of stress approaches for RWA metrics
Outline of a target operating model consisting of modules and processes for an integrated stress testing framework covering relevant stress test types (i.e. Pillar 1 and 2, MaSan, EBA stress tests) as well as group-wide planning scenarios
Business support in designing the target operating model: elaboration of the business modules, processes, and cross-functional interfaces, taking into account the implementation plan in line with BCBS 239 requirements

Tags:

#StressTest, #Pillar1, #MarketRisk, #RWA

Further Development of Macroeconomic Stress Tests

Client:

German Banking Group

Details:

Management, organization, staffing, and coordination as the responsible manager of the business team.

Further development of Stress Testing

Preliminary study to stabilize an Excel prototype for representing group-wide, cross-risk stress tests (Pillar 2)
Preparation and coordination of the preliminary study to define the workflow, business modules, audit trail, user and status concept, and their mapping into a business data model
Design of a flexibly configurable calculation structure (recursive calls) for representing interdependent result metrics with interchangeable methodological building blocks
Design of a structured mapping logic to translate macro factors from stress scenarios into bank-specific risk factors
Representation of intra-year developments as required by MaSan
Parameterization and business support for the technical implementation
Business support for IT/development as well as system migration
Coordination of business testing using an MS Access prototype

Validation and enhancement of methodologies

Validation of the macroeconomic regression model
Support for the annual scenario selection process (scenario list, storylines, calibration of macroeconomic stress parameters, management of workshops, and coordination with the specialist departments of Group Risk, Front Office, and Macro Research)
Validation of the economic and consolidated metrics used to determine risk-bearing capacity at bank-wide level
Validation of volatility forecasts
Validation of the risk models for market risk, credit risk (CVaR, PD, migration, and LGD), business risk, and operational risk within the stress test

Documentation

Preparation of the business concept, including the business data model
Preparation of the methodological concept
Documentation of the recursive calculation modules used to derive result metrics by means of detailed flow charts

Tags:

#StressTest, #Pillar2, #MarketRisk, #CreditRisk, #ICAAP, #CreditVaR, #RatingMigration, #PD, #LGD, #BusinessDataModel

Validation of a Due Diligence Model for Real Estate Investments

Client:

Real Estate Asset Manager of an Insurance Group

Details:

Validation of a valuation tool for due diligence assessment of investment decisions in the real estate market for Real Estate Asset Management.

Tags:

#RealEstate, #Property, #AssetManagement, #DueDiligence, #Validation

Business Concept for Real Estate Asset and Property Management

Client:

Real Estate Asset Manager of an Insurance Group

Details:

Preparation of the business concept covering all processes and methodologies of the Real Estate Asset and Property Management department, taking into account MaRisk VA.

Conducting interviews on all business processes of the specialist department
Evaluation and optimization of the processes with due consideration of MaRisk VA (segregation of duties, outsourcing control, etc.)
Definition and description of areas of responsibility on the basis of the department’s processes
Development of methodological proposals for Real Estate Asset Management

Tags:

#RealEstate, #Property, #AssetManagement, #PropertyManagement, #MaRiskVA

Preparation and Support of a BaFin Certification

Client:

Real Estate Asset Manager of an Insurance Group

Details:

Support for the asset manager in obtaining BaFin certification in compliance with MaRisk (VA). All business concepts and processes of the company were restructured consistently and in line with regulatory requirements.

Sub-project management in the creation of business and technical concepts for risk and limit controlling, performance measurement, and reporting
Preparation and coordination of an overarching risk manual
Support for both strategic and operational restructuring of business processes, as well as for documenting the organizational and operational structure of the company
Identification of operational risks through the assessment of individual risks based on process descriptions (ICS sheets)
Review of the business concepts for Strategic Asset Allocation, Risk Management, Performance Measurement, Asset-Liability Management, and Alternative Investments

Tags:

#AssetManagement, #MaRiskVA, #RiskManual, #BaFinCertification

Validation of Real Estate Risk Metrics in MaRisk Reporting

Client:

German Asset Manager of a Banking Group

Details:

Coordination and preparation of a general validation concept at a large asset manager for the validation of risk metrics for MaRisk reporting to institutional clients, including the integration of real estate fund holdings.

Tags:

#AssetManagement, #MaRisk, #Validation, #RealEstate, #Property

Integrated Data Model for Reporting and Analytics

Client:

German Sparkassenverbund

Details:

Business support in the design of an integrated data model for a data warehouse (uRMS) to represent IDH reports and pivot analyses at overall bank level, taking into account stress and planning scenarios. The ETL process for populating the uRMS was based on data from the technical KDS database. Support for agile sprints related to the modeling of liquidity risk (LCR controller and SVP calculator). Adaptation of the data dictionary for the subject areas of bank-wide simulation, risk-bearing capacity, market risk, and liquidity risk.

Tags:

#LiquidityRisk, #DataWarehouse, #LCR, #SVP, #IDH, #Reporting

Development of a VBA-Based Fund Reporting Tool

Client:

German Asset Manager

Details:

Development of an Excel tool with a VBA calculation engine and database connection (MS SQL) for the automated creation of monthly fund reports for clients.

Consolidation of data in the central fund database
Integration and dynamic preparation of the relevant reporting components and charts in Excel
Coordination of reports via a VBA XML parser
Automated generation of fund reports and email distribution

Tags:

#AssetManagement, #MSSQL, #Excel, #VBA, #Reporting

Creation of an Automated Target/Actual Allocation Reconciliation

Client:

Asset Manager

Details:

Automation of the reconciliation between the current allocation weights of funds and the optimal target allocations.

Data flow analysis, design of a business data model for reconciling target/actual deviations
Design of generic key-value mappings from assets to asset categories
Initialization of the technical data model on an MS SQL Server database, as well as programming of the interfaces and database queries (VBA)
Programming and integration of an Excel front end to control the reconciliation processes
Documentation of the implementation

Tags:

#AssetManagement, #AssetAllocation, #MSSQL, #VBA, #Excel

Model Validation of a Robo-Advisor

Client:

International Large Bank

Details:

Validation of the methodological concepts for the introduction of a commercial robo-advisor for retail and wealth management clients.

Validation of the quantitative methods
Assessment of the analytical results from the backtests
Approval of finding closure requests

Tags:

#AssetManagement, #RoboAdvisor, #Validation

Further Development of a Market Data Database

Client:

German Banking Group

Details:

Further development of the bank’s proprietary market data database, an in-house solution based on KDB. The system included a requirements layer and a publication layer, delivering original and derived market data via a standardized interface to a network of receiving systems. The market data database system was continuously improved and adapted in regular development cycles.

Business sub-project management and hands-on responsibility as lead manager for the further development of the market data system:

Guidance and coordination of staff from market data risk controlling and IT
Business support for various enhancement topics, including:
Business analyses and interface specification
Bootstrapping of interest rate and spread curves
Validation of volatility surfaces and segment curves
Design of requirements management
Integration of an integration architecture
Design and implementation of a market data publication layer
Integration of inflation-linked bonds and the related derivatives
Design of an automated market data request report from Front Arena to the market data system
Design and coordination of the procedural and technical implementation of data quality management for the market data of the trading system
Definition of release packages, release and test planning, and execution of project controlling
Test coordination/planning and coordination with the owners of the receiving systems
Support and supervision for connecting internal group users to the market data system (via service level agreements)
Implementation of various prototypes (Access/VBA)
Design and coordination of a test strategy for coordinating releases and tests across the receiving systems

Tags:

#MarketData, #Access, #VBA

Development of a BCBS 239-Compliant Stress Testing Platform Including a BI Tool for Reporting Purposes

Client:

Large International German Bank

Details:

Scrum/SAFe project with approximately 20 participants (onsite and offshore)
Management of business requirements (product backlog) and release scope (in JIRA)
Design of the calculation logic for credit risk stress test results (ICAAP) based on a parameterized set of formulas (in SAS)
Concept and documentation of IT architecture, process flow, data architecture, and UI design for consolidating stress test results across all risk types:
- Group-Wide Stress Testing
- Capital Planning Stress Testing
- Multi-Year Stress Testing
- Local ICAAP
BCBS 239-compliant measurement points for the delivery chain
Status dashboard including escalation process for data delivery
Design of the data marts and creation of management dashboards in SAS Visual Analytics
Design of database structures in SAP PowerDesigner, derivation of DDLs and DMLs
Implementation of an authorization concept based on user roles
Support for the creation of test data, as well as test planning and execution

Tags:

#StressTest, #Scrum, #ICAAP, #BCBS239, #JIRA, #CreditRisk, #SAS

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