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Intraday Risk: Leveraging Cloud-Based High-Performance Computing for Financial Modelling

As the finance industry trading volumes increase, end-of-day or even hourly modeling of position risks and portfolio exposures are not enough. Higher uncertainty and market volatility have been driving demands to significantly increase the performance interval of our risk analytics to minutes or even seconds. Beacon’s modular architecture and infrastructure-as-code foundation make it easy to swap in different data feeds and distribute the risk calculations over a horizontally scalable number of compute engines.

Leveraging the high-performance computing capabilities of our cloud-native infrastructure, Beacon’s new risk reporting framework utilizes real-time streaming market data, high-volume trade capture, and atomized calculations using prices and positions to deliver incremental updates as they happen and a full risk revaluation every few seconds.

Real-time streaming market data

The first requirement for intraday reporting of portfolio risk is a continuous stream of market data. Our current market data interface writes to a cloud database platform (MongoDB), but for real-time streaming, we are using the higher-throughput and scalable capabilities of Kafka®, Apache’s data-event streaming platform. Instead of continuously checking a database to see if anything has changed, Kafka uses a publish-subscribe system that processes data streams and gives us durable and reliable access to the latest numbers. One of the big benefits of Beacon’s modular and service-agnostic architecture is that we can easily swap in this new data to the existing market data feed, and all of the models and applications behind it continue to operate as normal. And market data integrations for a variety of sources are available as plug-ins from the Beacon App Store.

Market Data in the Beacon App Store: Browsing the Market Data section of the App Store shows a range of vendor plugins and utilities which let you facilitate data ingestion into Beacon using our Market Data Framework. You’ll see plugins for major market data vendors – just bring your credentials and use them to fetch the data you need via easily configurable Wizards which create and schedule the desired extract, transform, and load jobs for you.

High-volume trade capture

A similar requirement is the ability to capture trade data from the relevant exchanges or upstream order management systems and calculate the current positions of the desired book or portfolio. Beacon’s High Volume Trade Capture Wizard provides support and guidance on how clients can set this up in their Beacon environment. The Wizard leverages our Trade Ingestion Framework to capture trades from standardized formats or customized to meet a client’s specific needs. A booker function orchestrates the process of receiving the data, transforming it into the appropriate format, sending notifications, and managing errors. It subscribes to the relevant data feed for high-volume event-driven updates.

Trade Ingestion in the Beacon App Store: This video shows our Trade Ingestion Framework available from the App Store. It includes a Trade Ingestion Dashboard which allows you to design, test, and view trade schemas, view ingested trades, and fix import data issues. It can also be integrated with our FIX STP connector.

Distributed risk calculations

Finally, the core of Beacon’s intraday risk reporting is the distributed calculation of risk scenarios. As positions and prices change, relevant values are continuously recalculated and updated. For consistency, a timer kicks off a full re-evaluation of the desired book or portfolio every five seconds, using the same market and volume data for the snapshot. Because each scenario is an independent calculation, Beacon’s cloud compute manager can partition the workloads across as many compute pools as necessary to get the desired response time. Instead of processing them in an old-school fashion one at a time, clients can spread the workloads across 10s, 100s, or 1000s of machines. 

Risk Blotter Application: This app shows the intraday risk output in near-real-time. It is fully configurable in terms of full portfolio revaluation speeds (managed by our scalable backend high-performance compute infrastructure) and also supports pivoting, filtering, custom display columns, and trade drilldown. Beacon’s composable dashboards enable you to build and design other embeddable components, for example real-time charting and analytics.

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Beacon’s intraday risk capabilities are a natural extension of a platform that was designed to enable quants and traders to move at the speed of markets. In today’s environment, traders and risk managers must evaluate a far broader set of potential scenarios and portfolio risk must be aggregated across multiple markets and multi-asset portfolios. This requires a modular and flexible platform that can ingest and aggregate large volumes of streaming data, run event-driven risk calculations on scalable cloud computing infrastructure, and deliver customizable views of risk that are updated as the underlying variables change. Together, these tools increase confidence that risk calculations are consistent and relevant.

To learn more about Beacon’s intraday risk approach contact us to request a demo.