In June, RiskBox, a new London-based company, promises to make things a lot simpler. The company is based on the premise that traditional futures and options risk management is an unnecessarily complex and unwieldy process, particularly for smaller institutional and retail investors. RiskBox says it has created an all-in-one solution delivered in a single web-based application—and at a fraction of the cost of the comparable systems available today.
Abder El Adraoui, former head of organization at BNP Paribas in London and current CEO of RiskBox, formed the company in 1998 with the goal of bringing institutional-quality risk management to the Internet arena. Initially, the firm will focus on the global exchange-traded derivatives markets, with over-the-counter equity and fixed-income derivatives coverage in the future.
The RiskBox solution is geared toward four types of customers. At the most basic level, retail investors can access the RiskBox.com web site for streaming real-time data feeds on equities, futures, options and foreign exchange rates from exchanges around the world. Trading tools include options pricing, a yield curve stripper, and implied volatility surfaces, which are calculated by looking at elements such as risk family, asset class, tick size, intraday and historical charts, and futures chains. The instrument analysis section provides prices for all options with the same underlying instrument by type, strike and maturities. (Alternatively, users can drill down into the option chain to access detailed information on a specific product.) RiskBox.com also offers a portfolio management function; customized reports for each asset class, currency, counterparty, exchange or maturity; and educational services covering derivatives concepts, strategies and trading techniques.
The system's more sophisticated functionality is geared toward three other groups of customers: sell-side brokers (including futures commission merchants), risk managers, buy-side professionals such as commodity trading advisers, mutual fund and hedge fund managers. RiskBox is currently developing an electronic trading interface allowing derivatives exchange members to execute trades at screen-based exchanges. It expects to provide electronic trading access to Liffe and Eurex in June.
In addition to the on-line trading tools available on RiskBox.com, the system will offer brokers and banks an electronic trade-execution system, which they'll be able to brand and offer their clients. A real-time portfolio and cash management facility, meanwhile, will provide multi-exchange currency and asset profit/loss analysis, risk sensitivity analysis and global currency consolidation, enabling users to display aggregated sensitivities for underlying instruments, gather multicurrency portfolios into one global currency and use test portfolios to conduct simulated strategies. And advanced risk management functionality will include option sensitivities analysis, value-at-risk, back testing and covariance matrix analysis.
Such complex offerings can't be delivered on a plug-and-play basis over the Internet. Because different institutional clients have different trading and risk management needs and disparate legacy systems, RiskBox integrates its high-end solution on a client-specific basis. But it's not the typical systems-integration nightmare, promises El Adraoui. "Our solution is purely web-based, and there's no software for clients to download.”
RiskBox hasn't divulged pricing details, but it claims the product will be "quite competitive.” The market, says El Adraoui, is ready for RiskBox. "Right now, people need an exchange connection and real-time prices, and they pay for expensive risk management and then integrate it into their existing systems. Our system integrates everything from real-time prices into real-time risk management, so customers can run risk sensitivities and VAR in real time.”
