Cognity directly addresses the shortcomings of legacy risk management software systems that continually fail to estimate the actual risk present in portfolios during times of market crisis and far too frequently in today’s market reality.
Lacking any major advances by commercial risk analytics vendors for more than 15 years, many buyside portfolio and risk managers became skeptical of the value. For many, risk management devolved into a process of producing standard reports for executive meetings, sometimes for regulators and as a marketing tool for positioning with investors.
Recognizing these shortcomings, in 2001 FinAnalytica launched the Cognity risk management software platform introducing profound improvements in underlying methodology for modeling the real world phenomenon of fat-tails, asymmetric dependence, volatility clustering and risk asymmetry.
Cognity risk analytics transform risk management from a mundane, static reporting process into an interactive dialogue on portfolio dynamics with accurate, predictive estimates of risk and return. Cognity’s patented fully transparent analytics provide asset managers with actionable day to day insights. Cognity clients monitor and pinpoint changing market dynamics through side by comparisons of Cognity fat-tailed models, historical scenarios and even the legacy normal distribution models of the RiskMetrics 1994 approach.
Supporting global multi-currency and multi-asset class portfolios, Cognity leverages transparency at any level - positions, exposures or returns. Portfolio and risk managers are armed with proactive decision solutions for:
Multi-factor Risk Modeling
Eclipsing standard risk analytics platforms that impose specific factor models at their core for measuring risk, Cognity’s holistic approach integrates factor modeling as a component of the overall process for accurately estimating and aggregating multi-asset class portfolio risk. Cognity intrinsically understands that fat tails in portfolio assets arise from exposure to fat-tailed factors. It utilizes our patented fat-tailed distributions framework to achieve the highest possible explanatory power.
Cognity’s open factor modelling environment applies the appropriate factor model type for any given asset class including factor-based time series models for equities and funds, full Monte Carlo re-pricing for derivatives and PCA models to improve yield curves, spread curves and implied volatility surfaces. Exposure is seamlessly aggregated for a full enterprise view of factor and specific risk.
Qualitative input and flexibility include single and multi-factor regression analytics with both linear and non-linear settings as well as direct input of custom factors and manager provided exposures.
Quantitative Risk Analytics Monitoring
Combing years of proprietary quantitative science, including four awarded patents and additional pending patents, with practical application, Cognity risk management software delivers early warning indicators that work across all markets, across all asset classes and most importantly, across all market regimes – rally, crisis or calm. Cognity’s quantitative monitoring capabilities:
Cognity’s fat-tailed multi-factor stress scenarios more accurately estimate likely portfolio performance than first generation risk management software systems. Pre-defined historical scenarios provide a starting point for construction of complex custom macro-market views. Realistic assessment of positive and negative tail impact along with corresponding dependence shifts, highlight portfolio weak spots and validate defensive hedges.
Offering precise tail loss and tail return comparisons, Cognity risk analytics accurately gauge the impact of adjusting allocations or adding and removing positions. With Cognity's what-if interface and scenario engine, users can quickly create what-if portfolios and analyze the impact of potential changes simultaneously across multiple scenarios. The Cognity simulation engine caches previously run scenarios, dramatically reducing the what-if “time to results” down to seconds for a typical portfolio. Cognity runs the complete suite of fat-tailed risk measurement and risk budgeting analysis. Intuitive comparative reports pinpoint the impact of the what-if changes to both expected tail loss and expected tail return.
Version 4.0 offers enhanced ‘Tempered' Stable Distributions modelling and increased performance through new scenario caching. Users have access to expanded upside tail returns analytics and enhanced tail risk hedging models