Say goodbye to spreadsheets
In the fixed income and derivatives markets, precision, scalability, and transparency are essential.
Spreadsheets have long been a staple for financial modelling, valuation, and risk analysis. But as financial products become more complex, their limitations are more apparent. Financial institutions are turning to specialised solutions that offer the robustness and control needed to manage advanced valuation and risk requirements.
Weaknesses of spreadsheets
- – Prone to human error
- – Lack of automated error-checking
- – Limited dependency checking
- – Lack of real-time calculations
- – Ill-suited for handling large datasets
- – Reliance on manual updates
- – Difficult to verify and validate models
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Limitations of spreadsheets
Cell-based calculations are prone to human error. Small mistakes in complex formulas can lead to significant valuation errors.
This was illustrated by JP Morgan’s “London Whale” trading loss, where a spreadsheet error contributed to over $6 billion in losses.
The lack of automated error-checking and limited dependency tracking make it challenging to ensure data accuracy and integrity across large models. And software like Excel is ill-suited for handling the large, dynamic datasets commonly used in today’s capital markets.
Built for single-user applications, spreadsheet software makes it difficult to centralise the real-time calculation and distribution of vast data sets across an institution. Its capacity limitations and reliance on manual updating hinder real-time data processing and analysis, critical in high-frequency trading and risk management contexts.
Regulatory Risk Management
As portfolios grow and regulatory frameworks, like FRTB, CVA/xVA, and IRRBB demand precise, traceable calculations, spreadsheet’s lack of functionality to deliver comprehensive audit trails and version control creates compliance risks. Spreadsheet-based models are difficult to verify and validate, especially in collaborative environments where multiple analysts contribute to model changes without clear documentation.
Use Purpose Built Solutions
Purpose-built platforms, such as the Algorithmica Risk Management System (ARMS), addresses these challenges directly. ARMS is built on flexible server architecture which handles large datasets and massive calculations in real time, rather than choking overworked desktop machines. The lightweight, yet functional, client app delivers an exceptional and lightning fast end-user experience. ARMS offers modular libraries, real-time risk analytics, and robust audit features, allowing for complex valuation and risk calculations that scale with growing portfolios and data volumes.
See you later spreadsheets
By integrating advanced analytics and seamless compliance tracking, ARMS enables financial institutions to streamline their valuation processes, reduce operational risk, and maintain compliance with evolving regulatory standards.
ARMS delivers a sophisticated alternative to the outdated limitations of cell-based software. And of course, Excel will likely never become extinct, so ARMS provides functionality to view calculated results in both Excel and Python.
Don’t get stuck in the past.
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