AUTOMATED RISK MONITORING METHOD AND SYSTEM

• US 20140279406A1
• Filed: 06/02/2014
• Published: 09/18/2014
• Est. Priority Date: 02/24/2005
• Status: Active Grant

• Current Assignee: Swiss Reinsurance Company
• Original Assignee: Swiss Reinsurance Company
• Inventors: MIDDELKAMP, Peter, WILHELMY, Lutz
• Granted Patent: US 10,460,384 B2
• Time in Patent Office: Days
• US Class Current: 705/38
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

The invention relates to an automated risk monitoring method and a corresponding risk monitoring system for automated risk monitoring, in the case of which control data for different companies are transferred to a monitoring unit and evaluated, a company specific asset distribution and a corresponding threshold value being determined, said threshold value corresponding to the expected value of the asset parameter for the occurrence of the insolvency of a company, recovery rate factors being determined by means of a standardization module of the monitoring unit, and wherein, using a MonteCarlo module of the monitoring unit (20), MonteCarlo asset parameters are generated for each company by means of which the companies with the lowest expected recovery rate factors are determined and dynamic adjustment of the portfolio accordingly made by means of the monitoring unit.

Claims

1. (canceled)

2. A monitoring device comprising:

processing circuitry configured to;

for each entity of a plurality of entities of a portfolio;

extract one or more asset parameters of the entity,

determine an asset distribution by stochastically evaluating the one or more asset parameters,

determine a recovery rate in an event the entity defaults based on the asset distribution, the recovery rate indicating an expected percentage share of a loan that will be recovered from the entity in an event of default on the loan by the entity, and

determine a threshold value based on the asset distribution, wherein default by the entity occurs when an asset parameter of the entity falls below the threshold value;

perform a MonteCarlo simulation to identify one or more entities in the portfolio that have recovery rates that are probabilistically expected; and

adjust the portfolio based on the recovery rates and the threshold values for the one or more entities identified in the MonteCarlo simulation.

3. The device according to claim 2, wherein the recovery rates for the entities of the portfolio are standardized distributions.

4. The device according to claim 2, wherein the processing circuitry is configured to adjust the portfolio by purchasing or selling securities of the one or more entities that are identified in the MonteCarlo simulation.

5. The device according to claim 2, wherein the processing circuitry is configured to identify and store, in a database, expected recovery rates that are determined to be smallest amongst the recovery rates that are probabilistically expected by the MonteCarlo simulation.

6. The device according to claim 5, wherein the processing circuitry is configured to output, via a network interface of the device, the smallest expected recovery rates to remote user devices.

7. The device according to claim 2, wherein the processing circuitry is configured to extract the one or more asset parameters of the entity by extracting the one or more asset parameters from control data used to assess a credit risk of the entity.

8. The device according to claim 7, wherein the control data includes one or more of a time since foundation of the entity, a number of employees of the entity, a balance sheet of the entity, cash flow of the entity, and credit liabilities of the entity.

9. The device according to claim 7, wherein the processing circuitry is configured to:

update the control data at regular intervals, and

repeat performance of the MonteCarlo simulation and adjustment of the portfolio based on the updated control data.

10. The device according to claim 2, wherein the processing circuitry is configured to adjust the portfolio based on the recovery rates and the threshold values for the one or more entities identified in the MonteCarlo simulation by outputting instruction signals to one or more receiving devices of a financial institution.

11. The device according to claim 2, wherein the threshold value corresponds to an expected value of the one or more asset parameters in the occurrence of insolvency of the entity.

12. The device according to claim 2, wherein the processing circuitry is configured to display the expected recovery rates for the entities represented in the portfolio.

13. A method, comprising:

for each entity of a plurality of entities of a portfolio;

extracting one or more asset parameters of the entity,

determining an asset distribution by stochastically evaluating the one or more asset parameters,

determining a recovery rate in an event the entity defaults based on the asset distribution, the recovery rate indicating an expected percentage share of a loan that will be recovered from the entity in an event of default on the loan by the entity, and

determining a threshold value based on the asset distribution, wherein default by the entity occurs when an asset parameter of the entity falls below the threshold value;

performing, by a computer, a MonteCarlo simulation to identify one or more entities in the portfolio that have recovery rates that are probabilistically expected; and

adjusting the portfolio based on the recovery rates and the threshold values for the one or more entities identified in the MonteCarlo simulation.

14. A non-transitory computer readable medium including executable instructions, which when executed by a processor, cause the processor to perform a method comprising:

for each entity of a plurality of entities of a portfolio;

extracting one or more asset parameters of the entity,

determining an asset distribution by stochastically evaluating the one or more asset parameters,

determining a recovery rate in an event the entity defaults based on the asset distribution, the recovery rate indicating an expected percentage share of a loan that will be recovered from the entity in an event of default on the loan by the entity, and

determining a threshold value based on the asset distribution, wherein default by the entity occurs when an asset parameter of the entity falls below the threshold value;

performing, by a computer, a MonteCarlo simulation to identify one or more entities in the portfolio that have recovery rates that are probabilistically expected; and

adjusting the portfolio based on the recovery rates and the threshold values for the one or more entities identified in the MonteCarlo simulation.