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| Coming to the Crunch |
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| New York, Thursday, 06 November 2008 | ||
| Inside Reference Data | ||
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On 23 October former Federal Reserve chairman Alan Greenspan testified to the US House of Representatives Committee on oversight and government reform. When providing his views on the financial crisis, one of the aspects he mentioned was how risk management systems and the failure to price risky assets had impacted the crisis. "The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria," he said. The link between data management and risk management is getting stronger by the day. But in the risk management world, market and reference data can no longer be treated as separate units. Following the credit crunch, there has been a trend towards data management convergence. Enterprise data management vendor GoldenSource recently said it is working on capabilities in this space. London-based Gert Raeves, vice-president, business solutions at GoldenSource, says market and reference data have previously been seen as separate units, but the company is now being told that model is no longer good enough. "We need to build interfaces to request (data) from tick databases or times series databases and grab that data on a snapshot basis," he says, adding that 20-30% of potential customers wants this capability. Data convergence is also on the agenda for data management vendor Xenomorph. "The market now wants systems that go from front to middle to back office, cover all asset classes and all types of data - not just reference data alone," says London-based Brian Sentance, CEO of Xenomorph. When the data systems do not even speak to each other, it becomes a difficult task to identify exposure to trembling securities. This has become particularly prevalent in recent months. The collapses of several banks have led to firms scrambling for information - information that has been lost in the data. Sentance says one of the biggest problems with risk management projects is that risk management vendors assume the data is perfect. But they soon realize there is a need to spend a lot of time sorting out the data before they can sort out what the level of risk is. In fact, pricing and valuation is seen as one of the areas driving reference and market data convergence. Timely valuations are considered essential to reduce risk and increase transparency. The days when reference data was considered boring and static are now long gone. That is perhaps one of the few positive aspects of the credit crunch. The full article can be viewed on irdonline (subscription required)
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