Business Intelligence Internship – Summer 2016

As part of our continuing effort to foster excellence in our product offerings, we host a demanding, ongoing internship program for college students.  We’ve offered internships for more than a decade, but this season’s effort was different, as it focused on combining modern business intelligence tools with our own risk analytic platforms and APIs to develop financial dashboards and reporting tools for the investment community.

Financial Dashboards

Dashboards are becoming an industry must-have. Imagine’s customized dashboards provide clients with powerful financial analytics, business metrics, and current performance to measure and evaluate risk, all with a flat learning curve.  Dashboards seemed a natural focal point – and great opportunity – for our interns.

The interns received comprehensive training and mentoring at Imagine. Once their initial training ended, they began working side-by-side with both our Quantitative Analysts and Business Intelligence Analysts gaining insight and hands-on experience.

On the last day of their internship, they presented a company-wide demonstration of their dashboards. Each intern presented and demonstrated their contributions to the final project to us as if we were clients. They presented dashboards for the following investment strategy types:

  • Global Macro
  • Long Short Equity
  • Fixed Income
  • FX
  • Commodities

Slideshow of intern dashboards

Team Collaboration

Imagine works as a team, and we extended that core value to our interns. The end result was a group of interns who enjoyed both their interaction with each other and with others throughout the company.  The team experience offered them exposure to many different roles in the Business Intelligence process, which gave them a much more comprehensive understanding than they could have gained if on their own.

Here’s what the interns said they appreciated about our program:

  • Learning the basics in finance, JavaScript, and data visualization. They then took what they learned and developed dashboards they felt would provide value. Our Interns liked the level of freedom they had to define team roles, design visuals, and code dashboard behavior while still remaining a cohesive group.
  • Our Consulting Group guided the interns, providing them with the information they needed to understand the real world applications of the dashboards they created.
  • Our strategy experts provided them with the ability to better understand the rationale behind the projects they were working on.
  • The interns were mainly from technical or quantitative backgrounds that do not generally require presentation skills as part of their curricula. We wanted to give them the experience of giving a presentation to a company-wide group of professionals on a complex subject. In the end, they were proud to present tools that were actually meaningful, useful, and of tangible value.

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Schools and programs we’ve recruited from for our internships:

Our internship is offered all year, and if you’re interested in being considered for any of our sessions (Fall, Winter, Spring, Summer), email  Dwayne Fauvell.

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About the Author

Trever Evans has been with Imagine Software for eleven years and has been participating in scoping, development, and implementation of larger scale initiatives for Imagine. He holds an MS in Quantitative Financial Economics from Oklahoma State University. He is currently Director of Consulting for Imagine.

Contact Trever by email or phone: 646-827-4483.

Negative Interest Rates

Negative interest rates are a new and strange phenomenon. This concept causes a lot of head scratching, particularly regarding option valuation and VAR calculation, since the lognormal paradigm, applied for the last thirty years, breaks down.  In a lognormal world, the next period’s rate is calculated as this period’s rate multiplied by e (2.718…) raised to the sum of the drift (a certain number) plus the diffusion (volatility multiplied by a normal random number).

Lognormal Model: Rate Next Period = Rate Today * e Drift+Diffusion

No matter what the diffusion is, e is positive and therefore the rate next period cannot cross zero.  If this period’s rate is positive then the next period’s rate must be positive and vice-versa.

For example, consider the valuation of the right to lend to the US Government at 0% interest for the whole of 2018 (an interest rate floor).  Under a lognormal model, the loan rate cannot be negative and therefore the option has no value. If this were the case, you would always choose to let the option expire and lend to the US government at the prevailing rate rather than exercise the option. However, if you believe it is possible (no matter how unlikely) for rates to become negative then the option to lend the US Government at 0% is valuable, and your model must reflect this. Under the normal model, however, the next period’s rate is determined as this period’s rate plus a drift and diffusion coefficient.

Normal Model: Rate Next Period = Rate Today + Drift + Diffusion

This means that the rate can go negative and the above option would still have value.

Imagine Fair Valuation of the above T-Bill Floor under the normal and lognormal models.

tbill

A further point of interest is the volatility (the diffusion multiplier) between the two models is not equivalent. For example, suppose the rate in question is 1%, and we assume no drift, and an annualized volatility of 5% in a lognormal setting. This implies the two standard deviations range of rates with two standard deviations is approximately 0.91% and 1.1%.  However, in a normal model a volatility of 5% would imply this range to be approximately -9% to 11%. Clearly, it is very important to adjust the volatility between the two.

At Imagine, we let our users choose to value their options using a lognormal or normal model for both option valuation and VAR calculation. In addition, for our risk calculation, we handle the conversion and provide the lognormal equivalent volatility so the earlier-mentioned issues do not occur. Please contact Imagine if you would like to know more about how we can help.

Brexit: Imagine the Consequences

At Imagine, our job is to help clients better understand risk. We enable our clients to estimate risks to their positions and portfolios ahead of both known and unknown critical market events. For example, historical simulations formed from previous significant shocks (crash of 1987, September 11, etc.) allow for a visualization of the effects of sharp changes in market conditions that, by definition, are hard to predict. These simulations, however, are not just determined from past events.

This month, June 23rd to be precise, is set to deliver a potentially very large shock to financial systems in the UK, across Europe, and globally too. Both the buy and sell side point to sharp falls in risk asset valuations in the event of a Brexit. The probability of a Leave outcome changing sharply from one day to the next, means prices will also sharply change. Imagine’s real-time risk engine and customizable analytics allow shock inputs to be defined from either market data held in your system, or from data you can set manually and adjust “on the fly”.

Highlighted below are some typical market scenarios from both Leave and Remain outcomes, and how they can be used as inputs to help offer insights and estimate exposures:

Probability 0.6 0.4
Asset Class UK Remains UK Leaves
Sterling 5.00% -9.00%
UK Equities 4.00% -11.00%
European Equities 3.00% -6.00%
Global Equities 1.50% -3.00%
UK Bond Prices 1.50% -3.00%
European Bond Prices 0.30% -2.00%
US Bond Prices -0.50% 3.00%
Gold -2.00% 5.00%

You can enter the above hypothetical shocks into Imagine as the values to shift respective underlying asset prices. Imagine’s analytics applies historical statistical relationships between your positions and the shocked input instruments you define to generate the estimated effect on your holdings. Our Dashboards allow you to define an aggregation of shocked positions into a multitude of combinations to better describe, and uncover, pockets of risk nested within your portfolios. Once you identify the risk, you can drill in to see what parts of your strategies are most exposed with expectations of Brexit. And, crucially, this does not just apply to an event such as the UK’s referendum. Any event that your business or your investors require stress testing against can be calibrated for under your own assumptions, research, and analysis. Contact Imagine and we will create the stress test your business or investors need to help you evaluate your exposure.

Report Example

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Strategy View

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Portfolio View

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Example of Aggregation (Industry)

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(Currency)

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Disclaimer

The stresses described in this blog post illustrate one possible scenario and are intended to be used in general as guidance towards risk management of market events.

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About the Author
David White worked as an equity trader and portfolio manager in derivatives for more than five years before joining Imagine’s London office as a Consultant in 2015. David’s roles are to advise and offer consulting services for systematic applications of risk management and derivatives pricing. David leads and is the project manager for EMEA client implementations. David holds a bachelor’s degree from Bournemouth University. He can be reached by email and phone: +44 (0) 7440 0743.

An Industrial Strength Recon System

In the wake of the 2008 Financial Crisis, another layer of complexity in regulatory requirements has been added to the operational structure of investment management firms.  Market-shifting events like the Madoff Ponzi scheme and Lehman Brothers bankruptcy created a need for checks and balances to ensure reconciliations are done by an outside party to further protect investors. In the light of these developments, it has become increasingly important for managers to have access to trade and position level information at all times. Therefore, managers have been investing more time and effort into their operational processes and infrastructure around data and analytics as the demand for reporting and regulatory scrutiny has dramatically increased. In our view, a sound infrastructure armed with on-demand tools provides the best defense against regulatory breaches and operational failure.

The new Imagine Reconciliation System is a web-based solution that is made to fit perfectly into any operational infrastructure and is capable of addressing the entire reconciliation life cycle. With automated matching and exception processing, our reconciliation product lowers operational risk while at the same time reducing operational costs. As we have observed with many managers in the industry, manual reconciliation can take several hours a day while creating a higher risk of potential of errors. Our reconciliation system infrastructure sits on a complex backbone directly hooked up to your Imagine account, where your positions reside. Our system is on-demand, reliable, and can process thousands of trades within a matter of seconds while offering a simple, intuitive end-user experience.

Imagine Does the Heavy Lifting

Imagine consultants offer a no-impact implementation with a product that is scalable for any size business. By managing approximately 80% of the workflow, this product will reduce your team’s efforts significantly.

reconart_workflow

Our reconciliation product provides canned dashboards that are tailored to delivering immediate views and easy drill-downs of your important data providing you with operationally critical analytics.

With a super low-impact implementation, an on-demand, web-based product with a robust reconciliation engine might be what you need to make your operational infrastructure stronger. Imagine can make this easier to achieve than you might think.

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About the Author
Murat Sen is a Consultant in Imagine’s New York office working on consulting engagements and client-facing product management projects. A native of Istanbul, Turkey, Murat holds an MBA from Cornell University.

Murat can be contacted by email or phone: 646.827.4433

A Client Pain Point, Adding Securities, Solved

Did you know the most common request our clients send to our Data Support team is to add securities to the shared (or global) security master?  A client’s typical workflow is:

• Attempt to book a position
• Discover a security is missing
• Send an email requesting the security be added
• Wait for response
• Re-book the position

So Heeran Patel, Ilker Ozturk, and Peter Loizou from our UK office recognized that this was a frustrating and time consuming process for our clients, and built a web service solution, the Security Uploader.  This web service puts the power back into the client’s hands—they’re able to create securities quickly and efficiently. And clients who have automated the booking of trades into Imagine can add this functionality directly into their process avoiding breaks and rejection management.

How Does this Web Service Work?

The client runs the Security Uploader web service with a file containing a list of identifiers (e.g., CUSIP ). The list of security identifiers is passed to the Security Uploader web service,  which leverages Imagine’s integration with market data vendors to query the corresponding security terms and conditions, and automatically loads it into Imagine’s global security master. Previously, each request could take an hour or more depending on the number of securities to be added. Now? This entire process is reduced to three to four minutes.

If the security cannot be added for any reason a case is automatically created and assigned to the Data Team. The Data Team investigates and reaches out to the client with a resolution or an explanation of the error.

I Want to Run This Web Service!

You can! The web service is currently available and accepts any combination of these identifier types: ISIN,CUSIP,SEDOL or RIC. Contact us to have it enabled for your use. Our consultants will provide you with a quick demonstration on how to run the web service.

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About the Author
Brendan Hayes has been with Imagine for more than seven years; first in Sales and now in Consulting. He has been involved with IFP since its initial phase. Brendan holds a bachelor’s degree in Computer Engineering from Rochester Institute of Technology.

Brendan can be contacted by email or phone: 212-317-7629

A Dashboard for any Imagine Implementation

A Q&A with Michael Moncada

Imagine’s I/O Services are an indispensable command line tool that invokes Imagine’s APIs for uploading, processing, and downloading data. This tool is a critical component of virtually every client’s use of Imagine, providing nearly one hundred different services. But have you heard about the SITKA I/O Services Dashboard? Mike Moncada, Senior Implementation Specialist for Imagine, says, “I would use this with any implementation.” We sat down with Mike to ask him a few questions about the dashboard.

Hey Mike, what is the SITKA I/O Services Dashboard and why would you use it so broadly?

It is a one-stop command center for running, monitoring, and reviewing results of I/O Services jobs. It is powerful, lets you come away from viewing the long and somewhat tedious batch files, and gives you a tool for setting up jobs and monitoring them. A partner of Imagine, Sindex Financial Systems, wrote this dashboard management program for our I/O Services.

Wait, what’s the problem with batch files?

Some people (like me) like using commands like this:

“%absPath%..\..\..\Bin\IOServiceClient.exe” -f %inpFile% -o %outFile% -ios %service% -log %logFile% -d

But I understand there are people who don’t care for that, and this tool lets them avoid that entirely. Here’s a screenshot of what they would get instead:

SITKA IO Service Dashboard

Click Image to Enlarge

What else does the Dashboard offer other than an escape from batch commands?

Lots of things. For example, it:

  • helps you set up new jobs, with search-as-you-type, to find the right I/O service,
  • gives you sample templates to help get the input files right with clickable links to online support for detailed help,
  • allows you to watch the progress that jobs are making, each input that’s successfully processed, or each item that’s rejected,
  • shows you the history of each job complete with when it ran, the input, output, and log files for that job,
  • and lets you re-run jobs by copying their setup with a single click.

If Imagine clients want to learn more about the SITKA I/O Services Dashboard, they can email info@sindexsystems.com or fill out this form to be contacted by Sindex.

We Have a Stress Test App–Check It Out

The Stress Test App is the latest addition to the current collection of customizable apps available in the Imagine Marketplace. Similar to the other simulation tools in Imagine, the Stress Test App uses archived data to stress current portfolios and generate robust historical simulations that estimate how a portfolio would perform under documented periods of extreme risk volatility.

The Stress Test App provides value-added features on top of regular historical stress testing abilities: advanced control over your inputs coupled with the ability to analyze your output in great detail. The App:

  • creates output that clearly explains the variables used to calculate the theoretical values
  • offers greater user-control over the logic and defaults to generate simulations

Additionally, a companion dashboard provides at-a-glance simple views that clearly identifies a portfolio’s strengths and vulnerabilities under a pre-defined stress scenarios.

Imagine & Excel™ : Enhanced Power Without the Learning Curve

Should you use the IFP Excel Add-In?

You already know Imagine Software is the award-winning and leading provider of real-time portfolio management and risk and regulatory solutions for financial firms worldwide. And on nearly every desktop is the powerful Microsoft Excel—arguably the optimum application for data analysis with an unmatched ability to visually organize data in charts or graphs and easily view trends and patterns.
Now you can combine two powerhouses – Imagine and Excel – and the resulting possibilities are nearly endless.

  • Do you want to streamline your business processes and perform the same functions as I/O Services but with a simplified process and in one file?
  • Do you want to leverage your Excel expertise and easily import real time Imagine data, access data/price feeds, calculate Greeks and run risk/stress analysis?

What exactly does the Excel Add-in do?
The options range from simple standalone functions you can type into a cell – like a standard formula – to custom spreadsheets and apps developed for you by the Imagine consulting team that rely on IFP Apps, enabling you to easily:

  • download position or pricing information from Imagine
  • manipulate and/or graph derived data within a few moments
  • incorporate proprietary data and update Imagine with the click of a button

The IFP Excel Add-in is fast, powerful, and configurable. Use your current apps, apps available on the marketplace, or contact us to create a custom app or spreadsheet specific to your workflow process and needs. Watch our demo to get an idea of what’s possible with the Excel Add-in.

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About the Author

Brian DeLuca provides quantitative support, implementation of new clients, and has built numerous applications in JavaScript using Imagine’s IFP engine. Involved since the initial phases of IFP, Brian spearheaded training internally and externally for the Imagine Financial Platform. Brian also assisted in the development of the IFP Excel Add-In.

Brian holds a Masters in Quantitative Finance from Rutgers University. Brian can be contacted by email or phone: 646-827-4418