Dresdner Bank Successfully Manages Risk With a SAS® Risk Intelligence Architecture

When dealing in shares, bonds, foreign exchange, derivative financial instruments and other products that are traded on the international financial markets, success depends on having effective information on hand. To obtain neutral assessments and to monitor market, credit and operational risks, Dresdner Bank has relied in part on its Market Database (MDB), a comprehensive, central information system in which all relevant data on the market is collected, edited, stored and analyzed. Dresdner Bank has recently implemented a SAS risk intelligence architecture to gain important new risk management functionality.

Extending the Investment
About 400 employees at Dresdner Bank use the MDB. Their analyses and reports provide information for the bank's general management, risk managers, trading and internal control, accounts departments, as well as for statutory external reporting and as the basis for regulatory risk calculation and the required capital allocation.

The market data is obtained from external commercial sources such as Reuters, Bloomberg or Datastream. The data goes through complex quality assurance and calculation processes and the raw data is then compressed to yield reliable and useful reference data. In this manner, hundreds of thousands of time series from all international financial markets flow into the MDB. Focusing on around 10,000 risk factors, various proprietary estimation methods are used daily to determine millions of volatilities, correlations and other statistical parameters.

At the end of the year 2000, the decision was taken to technically extend and upgrade the SAS engine, and at the same time to make the whole system even more user friendly, flexible and fast. With strong support from SAS professional services this goal was realized within six months, and the practice-oriented coaching from the SAS consultants made conventional training measures almost unnecessary for the users. The updated system achieved the best level of acceptance right from the start.

Sophisticated Calculation and Analysis
Dresdner Bank now relies on a central calculation engine based on the SAS risk intelligence architecture. The specialists of the Statistical Analysis group use the solution to continuously scrutinize the market data and time series using complex mathematical descriptions and formulae. The new SAS risk data warehouse offers users an extensive system of modules which calculates the statistical data and coordinates the necessary processes for seeking out errors, weak points and potential for improvement.

The SAS risk intelligence architecture integrates the various market data delivery systems and permits the statistical analysis team to implement new methods efficiently. The incoming volumes of data which flow into the database each day go through the system's sophisticated quality control process, which identifies missing or faulty data and compensates for it. Finally, the solution supports various risk models (for example, variance/covariance or delta-gamma, historic or Monte Carlo simulation) and systems (including VaR engines, credit exposure simulation engines and reporting tools).

The following questions show the breadth of the statistical investigations: Have the external data been transferred fully with no errors? Are the results of the calculations realistic and can they be reconciled with historical evidence? Have the dynamics of the market been depicted consistently? Which time series are especially informative? How can the information content of the data be maximized?

The SAS risk data warehouse provides an extensive set of modules for statistical modeling, a selection of analysis tools, a flexible infrastructure for implementing estimation procedures and managing new and existing risk time series. This enables the solution to quickly update the risk processes to support the rapid product cycles which are fundamental to success in investment banking.

About Dresdner Bank
Dresdner Bank counts as one of Europe's leading international banks and offers a broad range of products for private and corporate customers. In July 2001, the group, operational in over 70 countries with around 1,100 branches and over 47,000 staff, became part of the Allianz group. Capital markets business in securities, foreign exchange and derivatives is one of Dresdner Bank's traditional business areas.

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