RISK-MANAGEMENT TECHNOLOGY

The U.S. General Accounting Office to the Committee of Financial Services criticizes regulators and financial-services firms for falling short in disaster-recovery procedures; Kamakura releases a new version of its Kamakura Risk Manager application; Mark-It-Partners releases an integrated daily-pricing service for global credit derivatives and cash credit instruments.

A report by the U.S. General Accounting Office to the Committee of Financial Services at the U.S. House of Representatives has criticized regulators and financial-services firms for falling short in disaster-recovery procedures. In a review of 15 clearing and trading organizations, the GAO found that many still had limitations in preparedness that increased their irks of being disrupted. Of the 15, nine had not developed business-continuity procedures to ensure staff capable of conducting their critical operations would be available if an attack incapacitated personnel at the primary sites. In addition, the report criticized the Federal Reserve and the Securities and Exchange Commission for not developing strategies and practices for exchanges, key broker/dealers and banks to ensure trading can resume in a timely fashion in the case of future events. The GAO also says the industry and regulators need to work harder to improve BCP and contains recommendations to improve the SEC's oversight of information technology issues.

Kamakura has released a new version of its Kamakura Risk Manager application. The new KRM version 4.3 will allow defaults to be simulated on a multi-period basis for every counter party. In addition, the new version incorporated reduced form credit models for estimating default probabilities and the older Merton structural models of default, as well as a volatility smile capability for all fixed income, foreign exchange and equity options. KRM version 4.3 also includes a fully distributed Monte-Carlo simulation and has a multi-period framework to correct valuation and risk assessment of collateralized debt obligations or any other balance sheet.

Mark-It-Partners has released an integrated daily-pricing service for global credit derivatives and cash credit instruments. Credit data form 11 large global-credit trading institutions will be contributed on a daily basis for confidential redistribution of the data. The applications were developed using XML and Oracle technology and can be accessed via the Internet.