Customer Profile:

Ping An Bank is one of the largest and most innovative commercial banks in China and is affiliated with Ping An Insurance Group. Ping An Bank offers a comprehensive range of financial products and services, including retail banking, corporate banking and wealth management, and plays a leading role in promoting the digital transformation and innovation of China’s financial services industry.

Project Background:

Ping An Bank is committed to strengthening risk management practices and developing a market risk measurement engine in order to better handle the complex financial products and derivatives it deals with on a daily basis. The goal of this project is to create the first self-developed market risk engine, which is capable of pricing and valuing various financial instruments, calculating sensitivity, and conducting stress tests and value at risk (VaR) calculations. This system needs to handle multiple asset classes, including foreign exchange, bonds, inter-bank lending, options, swaps and other derivatives.

In addition, the engine must also support multiple computing scenarios, simplify pricing and sensitivity analysis, and facilitate the management of complex investment portfolios across different customer types. This system is designed to utilize big data technology to enhance computing speed and accuracy, improve user experience, and reduce the development and implementation costs of Ping An Bank and other commercial banks that use this system.

Provided solutions:

Golden Idea Technology Company has collaborated with Ping An Bank to develop an advanced market risk measurement engine system, which is used to handle the pricing, valuation and risk measurement of various financial products (especially derivatives) to meet the needs of Ping An Bank and the entire banking industry.

The main features of this solution include:

Valuation and pricing capabilities: This system is capable of using advanced pricing models such as Black-Scholes (BS), cubic splines, and binary tree models to value and price various financial products, including foreign exchange, bonds, inter-bank loans, options, swaps, and other derivatives.

Sensitivity analysis: The system can perform sensitivity calculations to assess the value of financial products and how they respond to changes in potential risk factors such as interest rates, volatility, and other market variables.

Support for multiple financial products: The system supports multiple asset classes, including stock derivatives, fixed income products, commodities, metals, etc., achieving comprehensive market risk management.

Big data integration: This system utilizes a big data platform to enhance computing efficiency and achieve real-time processing of massive market data, thereby enabling faster and more accurate risk assessment and stress testing.

Stress testing and VAR calculation: This engine conducts stress testing and VaR calculation, enabling Ping An Bank to assess potential risks in various market scenarios and quantify potential losses under extreme conditions.

Flexible and reusable models: The system contains multiple models that can be flexibly applied to meet the needs of different types of customers, making it suitable for both large institutions and small commercial banks. These models can be reused throughout the industry, thereby reducing the costs of product development and implementation.

Optimized user experience: This system features a user-friendly interface and a simplified workflow design, ensuring that risk managers and other stakeholders can easily access and interpret the results of their risk assessments.

Result:

The market risk measurement engine has significantly enhanced Ping An Bank’s ability to manage and assess the market risks of various financial products. The main achievements include:

Enhancing computing efficiency: The integration of big data technology has significantly improved the system’s ability to handle massive amounts of data and perform complex calculations quickly and accurately, thereby greatly reducing the time required for pricing and risk analysis.

Enhancing risk management: The system’s ability to calculate sensitivity, conduct stress tests, and calculate VaR has improved Ping An Bank’s capacity to manage market risks, helping the bank proactively identify and mitigate potential risks.

Industry-wide reusability: The system’s flexible design and ability to handle multiple product types make it an attractive solution for other commercial banks, promoting product reusability and reducing development and implementation costs across the entire industry.

Cost reduction: By automating complex risk calculations and providing systems that can be flexibly applied to a variety of products, Ping An Bank has significantly reduced the related costs of market risk management. The scalability of this system ensures that it can continuously meet the constantly changing needs of banks without a large amount of additional investment.

Better user experience: The intuitive interface and simplified process make it easier for users of Ping An Bank and other financial institutions to conduct market risk assessments, thereby enhancing decision-making and operational efficiency.