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Trading and Balance Sheet Risk

We help clients better manage market volatility, address liquidity risk, and improve trading and marketing operations.

Market-risk management has become a boardroom priority, not only for financial institutions—which must carefully consider market risk when managing their trading positions and funding their balance sheets—but also for corporations, which are exposed to commodity-price volatility and fluctuations in foreign-exchange rates. The recent economic downturn highlighted the degree to which company earnings are vulnerable to market volatility. Through superior management of market exposures, companies can create a competitive advantage and deliver significant shareholder value.

Our expertise in market and trading risk encompasses six distinct areas:

  • Asset liability management (ALM) and treasury management. We help financial institutions and corporations address complex questions about funding and optimizing balance sheets and about improving the effectiveness and efficiency of treasury operations. We serve clients using our industry-leading ALM and Treasury Survey and our advanced-analytics modeling capabilities (such as deposit modeling).
  • Counterparty-credit-risk management. We advise clients on assessing and managing counterparty-credit-risk exposures, including optimizing cost-benefit trade-offs and credit-value adjustments.
  • Trading operations. We help clients identify and capture growth opportunities in trading and marketing; we also help them optimize end-to-end trading operations including front office, risk management, and mid-office and back-office processing. Our proprietary tools and research include a trading benchmarking survey, a commodity-trading value-pool analysis, and our trading-strategy risk-return optimizer.
  • Risk mitigation and hedging. We support financial institutions and corporate clients in defining their risk appetite and hedging strategies.
  • Market risk and regulation. We assess the impact of regulatory changes on market-risk-management practices, and we support clients in building new tools and approaches as they adjust to new regulatory requirements.
  • Market-risk analytics. We help develop and improve models for measuring market-risk exposures, such as next-generation value at risk, integrated cash flow at risk, earnings at risk, stress testing, risk-book analysis, and hedge-effectiveness simulation models.

In each of these areas, we create proprietary tools, generate new insights, convene meetings with business leaders and industry experts, and conduct research and surveys to develop and publish seminal knowledge.

Impact story

Transforming a global bank’s approach to market risk

A global bank undertakes a 3-year effort to revamp its market-risk models and systems, yielding more accurate risk projections and better business decisions.