Portfolio Management

Equinox 0.4 release focuses on green public procurement functionality

On Earth Day 2022 we are happy to release a significant update of Equinox, the open source platform supporting sustainable portfolio management

Reading Time: 1 min.
Equinox is an open source platform that supports holistic risk management and reporting in the context of Sustainable Portfolio Management. The platform integrates geospatial information with applicable regulatory and industry standards, for example the GHG Protocol (accounting for Project based, Corporate and City-Wide greenhouse gas emissions), the IPCC Emissions Factor database and further reference data, the PCAF attribution methodologies (and more) to provide a holistic view of the footprint of both individual projects and portfolios.
Input Output Models as Graph Networks

Input Output Models as Graph Networks

We discuss the relation of economic input-output models with graph theory and networks

Reading Time: 15 min.
Motivation Fig 1. An economic network as a graph. The economy is a complex tangle of various agents that interact via transactions (sales and purchases) and contracts (lending, investing). In recent times more and more techniques from graph theory and network science are brought to bear on economic analysis. On the other hand, ever since the seminal contributions of Leontief, Input-Output Models (IO) have been widely used to describe economic relationships between economic actors (e.
Integrating the IPCC Emissions Factors Database Into Equinox

Integrating the IPCC Emissions Factors Database Into Equinox

In the latest update of the Equinox Project we discuss the integration of reference data an in particular greenhouse gas emissions factors as catalogued in the IPCC Emissions Factors database (EFDB).

Reading Time: 2 min.
Equinox is an open source platform that supports the holistic risk management and reporting of major sustainable finance projects (the financing of projects with material physical footprint) such as project finance. Equinox aims to integrate in the database a number reference databases that facilitate tasks of sustainable portfolio management. In the current focus such reference material concerns the emissions factors for various processes and activities. In the latest (Solstice Day!) update of the Equinox Project we discuss the integration of reference data an in particular greenhouse gas emissions factors as catalogued in the IPCC Emissions Factors database (EFDB).
Open Risk White Paper: Sustainable Portfolio Management - Attribution and Allocation of Greenhouse Gas Emissions

Open Risk White Paper: Sustainable Portfolio Management - Attribution and Allocation of Greenhouse Gas Emissions

We develop an analytic framework that synthesizes current approaches to sustainable portfolio management in the context of addressing climate change. We discuss the different required information layers, approaches to emissions accounting, attribution and forward-looking limit frameworks implementing carbon budget constraints.

Reading Time: 3 min.
The frontpage graphic is adapted from Steffen et al. “Planetary Boundaries: Guiding human development on a changing planet". Science (2015). The Planetary Boundaries concept was proposed in 2009 by this group of Earth system and environmental scientists. The group suggested that finding a “safe operating space for humanity” is a precondition for sustainable development. The framework is based on scientific evidence that human actions since the Industrial Revolution have become the main driver of global environmental change.
Introduction to the EBA NPL Templates

Introduction to the EBA NPL Templates

Reading Time: 3 min.
Summary: The Open Risk Academy course NPL270672 is a CrashCourse introducing the EBA NPL Templates. Content: We start with the motivation for the templates and the domain of credit data (to which NPL data belongs). We discuss three core classes that capture the essence of lending operations from a lenders point of view (Counterparty, Loan, Collateral). Next we explore classes that capture events in the lending relationship lifecycle (which we term NPL Scenarios).
Equinox: a Platform for Sustainable Project Finance Risk Management

Equinox: a Platform for Sustainable Project Finance Risk Management

On Earth Day 2021 we are happy to launch Equinox, an open source platform supporting sustainable project finance

Reading Time: 5 min.
Equinox is an open source platform that supports holistic risk management and reporting of Sustainable Finance (Sustainable Portfolio Management). The platform integrates geospatial information with applicable regulatory and industry standards from EBA, PCAF and Equator Principles to provide a holistic view of the footprint of both individual projects and portfolios, in particular of project finance investments. Motivation Sustainability (understood in environmental, economic and social terms) is emerging as an undisputed constraint that will shape future human activity and more specifically how the financial system facilitates and empowers economic life.

Marking Pi Day 2021 With a Raspberry Pi Docker Image for OpenNPL

We celebrate Pi Day 2021 releasing an ARM version of the openNPL platform that is suitable for the Raspberry Pi

Reading Time: 2 min.
Celebrating Pi Day 2021 Pi Day is celebrated every year on March 14th. The reason of course is that the day is denoted in some calendars as (3/14), which evokes of 3.14, the first three digits of “π”. A thin excuse maybe but sufficient for the true believers to join along! The occasion represents an annual opportunity for mathematics and science enthusiasts to recite the infinite charms of Pi, including its irrationality, to talk to friends and family about math and its uses, and, when everything else fails, simply eat pie.
Stress Testing of the Future - A view from 2031

Stress Testing of the Future - A view from 2031

What is the future of stress testing? We speculate on how stress testing might look like in 2031

Reading Time: 13 min.
What is the future of stress testing? To speculate on the future of Stress Testing we need first a basic definition what stress testing is. Broadly speaking, the goal of Stress Testing is to assess how a system would behave under adverse conditions that - while not the most likely outcome with the knowledge of today - are within the realm of the plausible. There are, broadly speaking, two types of stress testing: The Real stress testing version and Hypothetical stress testing version.
Monte Carlo Simulation of the US Electoral College

Monte Carlo Simulation of the US Electoral College

Using a simplified version of the rules of the US Electoral College system we illustrate how the use of Monte Carlo techniques allows exploring systems that show combinatorial explosion

Reading Time: 9 min.
The role of simulation in risk management and decision support A Simulation is a simplified imitation of a process or system that represents with some fidelity its operation over time. In the context of risk management and decision support simulation can be a very powerful tool as it allows us to assess potential outcomes in a systematic way and explore what-if questions in ways that might otherwise be not feasible. Simulation is used when the underlying model is too complex to yield explicit analytic models (An analytic model is one can be “solved” exactly or with standard numerical methods, for example resulting in a formula).
openNPL 0.2 REST API implementation

openNPL 0.2 REST API implementation

The 0.2 release of openNPL exposes a RESTful API that provides easy standardized online access to NPL credit portfolio data conforming to the EBA NPL templates

Reading Time: 4 min.
openNPL 0.2 release The open source openNPL platform supports the management of standardized credit portfolio data for non-performing loans. In this respect it implements the detailed European Banking Authority NPL loan templates. It aims to be at the same time easy to integrate in human workflows (using a familiar web interface) and integrate into automated (computer driven) workflows. The latest (0.2) release exposes a REST API that offers machine oriented access using, what is by now, the most established mechanism for achieving flexible online data transfers.
openNPL now Available in Dockerized Form

openNPL now Available in Dockerized Form

Open Source, cloud based management of Non-Performing Loan data following the European Banking Authority's templates with just a few keystrokes!

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openNPL now Available in Dockerized Form Following up on the first release of openNPL the platform is now available to install using Docker. Running openNPL via docker is the installation option that simplifies the manual process (but a working docker installation is required!). Docker Hub You can pull the latest openNPL image from Docker Hub (This method is recommended if you do not want to mess with the source distribution).
openNPL: Open Source NPL Platform - First Release

openNPL: Open Source NPL Platform - First Release

We introduce an open source platform that allows the easy management of non-performing loan data

Reading Time: 4 min.
Non-Performing Loans: The covid-19 crisis will certainly impact the concentration of Non-Performing Loans but given the special nature of this economic crisis compared (in particular) with the 2008 financial crisis it is unclear how precisely things will evolve. In a previous post and white paper (OpenRiskWP07_022616) we discussed the importance of advancing open and transparent methodologies for managing the risks associated with such credit portfolios. Effective management of NPL is also a top regulatory priority.
The limits and risks of risk limits

The limits and risks of risk limits

Reading Time: 2 min.
Limit frameworks are fundamental tools for risk management: A Limit Framework is a set of policies used by financial institutions (or other firms that actively assume quantifiable risks) to govern in a quantitative manner the maximum risk exposure permitted for an individual, trading desk, business line etc. Why do we need limit frameworks? A limit framework is expressing in concrete terms the Risk Appetite of an institution to assume certain risks.
Visualization of large scale economic data sets

Visualization of large scale economic data sets

Reading Time: 3 min.
Visualization of large scale economic data sets: Economic data are increasingly being aggregated and disseminated by Statistics Agencies and Central Banks using modern API’s (application programming interfaces) which enable unprecedented accessibility to wider audiences. In turn the availability of relevant information enables more informed decision making by a variety of actors in both public and private sectors. An excellent example of such a modern facility is the European Central Bank’s Statistical Data Warehouse (SDW), an online economic data repository that provides features to access, find, compare, download and share the ECB’s published statistical information.
Machine learning approaches to synthetic credit data

Machine learning approaches to synthetic credit data

Reading Time: 9 min.
The challenge with historical credit data: Historical credit data are vital for a host of credit portfolio management activities: Starting with assessment of the performance of different types of credits and all the way to the construction of sophisticated credit risk models. Such is the importance of data inputs that for risk models impacting significant decision making / external reporting there are even prescribed minimum requirements for the type and quality of necessary historical credit data.
Release 0.4 of transitionMatrix adds Aalen-Johansen estimators and many usability enhancements

Release 0.4 of transitionMatrix adds Aalen-Johansen estimators and many usability enhancements

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Release of version 0.4 of the transitionMatrix package: Further building the open source OpenCPM toolkit this realease of transitionMatrix features: Feature: Added Aalen-Johansen Duration Estimator Documentation: Major overhaul of documentation, now targeting ReadTheDocs distribution Training: Streamlining of all examples Installation: Pypi and wheel installation options Datasets: Synthetic Datasets in long format Enjoy!
Comparing IFRS 9 and CECL provision volatility

Comparing IFRS 9 and CECL provision volatility

Reading Time: 8 min.
Is the IFRS 9 or CECL standard more volatile? Its all relative! Objective In this study we compare the volatility of reported profit-and-loss (PnL) for credit portfolios when those are measured (accounted for) following respectively the IFRS 9 and CECL accounting standards. The objective is to assess the impact of a key methodological difference between the two standards, the so-called Staging approach of IFRS 9. There are further explicit differences in the two standards.
Version 0.4 of the Concentration Library adds geographic / industrial concentration functionality

Version 0.4 of the Concentration Library adds geographic / industrial concentration functionality

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Release of version 0.4 of the Concentration Library adds Geographic / Industrial concentration indexes: Further building out the OpenCPM set of tools, we release version 0.4 of the Concentration Library, a python library for the computation of various concentration, diversification and inequality indices. The below list provides documentation URL’s for each one of the implemented classic indexes (the Hoover index is a new addition in this release Atkinson Index Hoover Index Concentration Ratio Berger-Parker Index Herfindahl-Hirschman Index Hannah-Kay Index Gini Index Theil Index Shannon Index Generalized Entropy Index Kolm Index An important new direction that appears first in this release is the introduction of indexes that measure geographical and industrial concentration.
Credit Portfolio PnL volatility under IFRS 9 and CECL

Credit Portfolio PnL volatility under IFRS 9 and CECL

Reading Time: 2 min.
Credit Portfolio PnL volatility under IFRS 9 and CECL: Objective We explore conceptually a selection of key structural drivers of profit-and-loss (PnL) volatility for credit portfolios when profitability is measured following the principles underpinning the new IFRS 9 / CECL standards Methodology We setup stylized calculations for a credit portfolio with the following main parameters and assumptions: A portfolio of 200 commercial loans of uniform size and credit quality Maturities extending from one to five annual periods A stylized transition matrix producing typical multiyear credit curves Correlation between assets typical for a single business sector and geography portfolio Focusing on PnL estimates one year forward, with PnL being impacted both by Realized Losses (defaults) and Provision variability (both positive and negative).
Version 0.2 of the Open Risk API incorporates the standardized EBA portfolio data templates

Version 0.2 of the Open Risk API incorporates the standardized EBA portfolio data templates

Reading Time: 2 min.
Extending the Open Risk API to include the EBA Portfolio Data Templates: The Open Risk API provides a mechanism to integrate arbitrary collections of risk data and risk modelling resources in the context of assessing and managing financial risk. It is based on two key technologies of the modern Web, RESTful architectures and Semantic Data. OpenNPL, the credit portfolio management platfrom we launched recently fully integrates the latest versions of the Open Risk API.