The changing landscape in the over-the-counter (OTC) derivatives market with respect to valuation, capital requirements, and counterparty and liquidity management poses significant challenges to many financial services institutions.
Addressing these areas is particularly challenging given the interconnected nature of these issues and the requirements for additional operational data not traditionally captured as part of valuation and risk management processes. Furthermore, in many cases there will be a need for significant infrastructure enhancements to support both the flow of information across the organization and the requirement to perform complex analyses on a frequent and timely basis.
An integrated response is critical to successfully address the competing challenges arising from the new regulatory, risk management, and market forces. Leading institutions have launched a number of initiatives to address risks relating to OTC derivatives, including: