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Top 10 Ways Beacon Enhances Trading and Risk Management

Beacon’s customizable suite of applications and modules cover the full trading lifecycle, from pre-trade analytics to portfolio and risk management, providing the tools traders and risk managers need to evaluate potential deals, manage risk across all asset classes, and optimize portfolios. Like all of Beacon Platform, clients have full transparency and license to the source code, enabling traders, quants, and developers to customize these tools to their own requirements. Research, evaluate, backtest, refine, trade, analyze, and report in a robust and secure production environment running on enterprise-scale cloud infrastructure.

10) Performs pre-trade analysis

Risk evaluation and portfolio management start before the trade. Beacon’s front-office modules, frameworks, and applications include pre-trade analysis tools that enable traders and portfolio managers to price trade ideas, construct sample portfolios, and run risk reports on the sample. Portfolios can include any type of instrument, such as bonds, futures, forwards, exchange-traded and over-the-counter derivatives, and any asset class, such as fixed income, commodities, rates, foreign exchange, equity, crypto, credit, and alternatives. Market data defaults to the current date, but available data from any historical date can be used. The platform calculates risk sensitivities for each instrument type and can also automatically add the necessary hedging instruments. Traders can view discount curves, volatility surfaces, and forward curves all on one screen, to quickly evaluate trade ideas and capture market opportunities.

9) Enables strategy backtesting

Beacon’s strategy backtesting simulates the performance of rules-based trading strategies, using either historical end-of-day or intraday market data. Strategies can be based on any instrument and asset class and can include complex hedging strategies. Trading rules are created with simplified Python script and helper functions and can be executed on the integrated elastic compute grid for quick results. Output from the test is displayed in a PnL report with a statistics table, can be plotted in Beacon Plot application, or transferred to a spreadsheet. Strategies can be named, modified, and saved in the Beacon database for reuse. Using Beacon’s integrated application development framework, clients can craft simple backtesting applications that enable traders and risk managers to modify the parameters and rerun the desired strategies.

8) Includes integrated Beacon Notebook

For more detailed research and modeling, Beacon includes a Notebook environment for researching signals, trying out different pricing models, evaluating new strategies, running risk analytics, accessing other third-party libraries, all with authorized access to production data. Traders and quants can safely experiment and refine their work in the Notebook, and when ready to move their proven ideas towards production, copy and paste code directly from the Notebook into Beacon’s integrated developer environment for review and quality assurance testing. Beacon Notebook provides the additional benefits of executing notebooks on a schedule, with version control at a notebook level, and proper access control.

7) Marks curves and volatility surfaces

Beacon’s data connectivity tools and plugins facilitate the connection to multiple trading platforms, such as FXall, MarketAxess, or Tradeweb. Market makers can work from a comprehensive view of a particular market, enabling them to quickly mark and manage spreads, and publish curves in real-time. Users can quickly fit and mark the shift, wings, and skew of a volatility surface by adjusting calibration parameters and store the results in the database. Developers can leverage Beacon’s user interface framework to build and deploy marking tools that further simplify this process, helping traders publish their curves or volatility surfaces even faster. 

6) Automates sales/trader workflows

To help connect fragmented workflows and automate manual processes, Beacon Platform includes a Workflow Management Module for tracking, orchestrating, and automating trade execution. For example, automating RFQ workflows between salespeople and traders and auto-quoting trades that meet certain criteria. Workflows can be configured to pass through multiple validation checks before execution, including checks on instrument types, notional amounts, risk sensitivities, counterparty risk, credit limits, and margin requirements. Traders can easily interact with other desks and operate their business and books on a larger scale by responding more efficiently to all pricing inquiries. Audit trails and logs keep track of intermediate steps in the workflow so that you can always redo the sequence of events that lead to the execution of a trade. We provide a more robust and well-defined communication flow than via chat, phone, or email, to respond to incoming pricing inquiries.

5) Consolidates views of portfolio and risk

One of Beacon’s key differentiators is the ability to build a consolidated portfolio view and manage risks across all asset classes. Our platform brings together trading information, portfolio positions, reference data, market data, data science tools, and risk analytics into a single source of truth. Data connectors can ingest data from multiple sources, including portfolio databases and order management systems, and plugins are available for direct connection to exchanges for historic or real-time data. The transparent source code license and collection of application interfaces integrate Beacon’s models with your proprietary and third-party libraries for consistent and reproducible results. New instruments and products can be added via our customizable Financial Object Hierarchy and packaged, priced, and traded. To further help traders and risk managers, Beacon’s Composable Dashboard makes it easy to create custom, consolidated views of risk, made up of widgets that display a mix of real-time market data, intraday risk at the deal or portfolio level, reports such as PnL and stress-tests, and plots of a desired data set, all in one screen.

4) Encourages customization and extension

Beacon Platform is a unique combination of prebuilt tools for trading and risk management combined with a transparent source code license. Clients are enabled and encouraged to extend the library of financial instruments, build new curves, extend pricing models and risk analytics, and add proprietary versions, all within their own private and segregated domain. The integrated research notebook and development environment accelerate the path from idea to production. Quants and developers can make new models available to traders and risk managers through our integrated software development workflow. Risk reports can be tailored to align with internal and regulatory reporting requirements, such as FRTB, Solvency2, or SEC Rule 18f-4. Reports can be scheduled with the integrated job scheduler or run on demand to get intraday risk data for stress testing, PnL, and VaR during periods of market stress.

3) Supercharges spreadsheets

Spreadsheets are often used to mark curves and volatility surfaces, price instruments, and run risk analytics. However, scale and performance constraints limit their risk analysis capabilities – It is challenging to run backtesting, stress-testing scenarios, or historical VaR reports in spreadsheets. There is also a growing frequency of errors in complex spreadsheet calculations, causing billions of dollars in fines and losses. To overcome these limitations, Beacon tools can read and convert spreadsheets into cloud objects while maintaining their structure and functionality. This enables traders to use existing spreadsheet logic within the platform, without needing to recreate formulas. Uploaded spreadsheets can use live production data, improving consistency and reproducibility, and use the cloud compute grid to run compute-intensive calculations and get insights faster. Customers such as PIMCO are using these frameworks to enable more exhaustive analyses and greater insights into potential risks and returns.

2) Maintains audit trail

Within Beacon, a booked trade is a collection of immutable events, such as opening, coupon payment, amending, or expiring. Each of these events has its own time-travel or “bi-temporal” feature, with as-of and entry timestamps. All versions of the trade are stored and remain accessible, allowing for time travel and consistent reproduction of analyses as of any time. Time-series data in Beacon also supports this bi-temporal feature, enabling risk managers to quickly assess and compare the risk and PnL impact of a portfolio before and after a data correction, such as a historical curve remark or trade amendment. The integrated version control system stores auditable details and version timestamps, including code author and reviewers. Together, these tools enable enterprise-class code and data governance, so that you can always reproduce previous calculations and determine who changed what, when.

1) Improves risk management and visibility

Finally, these benefits work together to integrate and centralize data, models, and processes, enhancing portfolio management and improving the evaluation and visibility of risks across all asset classes. Beacon’s risk framework can be run end-of-day or intraday at different levels of books within the portfolio hierarchy, or on pre-trades, using the elastic compute infrastructure to produce timely and relevant results. Large scenarios or complex models can leverage the cloud’s on-demand nature for ad-hoc or what-if reports, especially valuable during times of high volatility, market stress, or unexpected events. Beacon’s centralized platform for pricing and risk applications empowers traders to manage risk and PnL at the book or desk level. Risk managers use the same analysis as traders, providing uniform and consistent assessments across multiple desks and businesses. The platform can also simulate portfolio risk, allowing users to anticipate if a particular risk limit is close to being breached. Calculating end-of-day risk reports on large books, selecting the speed of results, and actively working towards more frequent and granular intraday analyses are just some of the ways that we are helping traders and risk professionals better understand and manage their portfolio risks and more confidently navigate market volatility.