Rates, Curves and Surfaces Need Cleaning Too, Says Xenomorph
February 24, 2011
Although financial firms are implementing data management projects to improve the quality and distribution of market and reference data, they are doing little to address another set of data: rates, curves and surfaces.
So says Xenomorph, a London-based analytics and data management software firm in a white paper issued Thursday.
In the wake of the economic crisis, financial firms are realizing the pitfalls of poor and inconsistent data resulting from too much data in too many business siloes and applications. However, they are still finding it difficult to implement centralized datasets to ensure correct valuations and risk metrics. The pressure on them to do so will only increase as regulators on both sides of the Atlantic demand more detailed information on just who traded what when to monitor systemic risk.
“Rates, curves and derived data management is too often a neglected function within financial institutions”, says Brian Sentance, chief executive of Xenomorph, which offers a software package called TimeScape to collect, validate and store rates, curves and surface data. “What is the point of having an excellent data management infrastructure for reference and market data if ultimately instrument valuations and risk reports are run off spreadsheets using ad-hoc sources of data?”
The principles of data quality, consistency and auditability found in traditional data management functions need to be applied to the management of model and derived data, according to Sentance. That is because a “disorganized hotchpotch of tactical spreadsheets, files and access databases provide the rates and curves data that downstream systems, processes and analysts require”. Those include trading and risk systems and pricing models for valuations.
“If financial institutions do not address this issue, how will they be able to deal with the ever-increasing requests from regulators, auditors and clients to explain how a value or risk report was arrived at?,” asks Sentance.
