WHAT WE DO
WE ARE THE LEADING EXPERTS FOR OUTSOURCING PROCESSES OF VALUTATION, RISK ANALYSIS AND REPORTING OF FINANCIAL INVESTMENTS
Our services in the field of assessing and evaluating financial instruments and transactions are diverse and grow as the tasks and requirements of our customers grow. In all areas where expertise and judgement relating to market experience are required, we are available as a provider of specific and individual solutions.
We stand for the best possible service quality for our customers
Value & Risk was founded in 1996. Over the past twenty years and more, we have grown from being a start-up that initially operated in a niche market to the leading valuation service provider in Europe. Over the years and with a growing number of customers, we have continuously expanded and optimized our service portfolio, and we now offer our customers an unrivalled combination of service, quality and reliability.
Extremely high flexibility and efficiency in putting solutions into practice is one of our strengths and our advantage as a service provider.
Because all developments, processes and calculations are carried out and taken care of by us right here – in our system environment – we can react immediately to customer-specific demands. The fact that we always create individual reports attuned to the customer’s systems and needs, keeps the cost for our customers’ IT and specialist departments at a minimum and allows smooth and trouble-free integration of the solutions provided.
This service is topped off with our ISAE 3402 Type II certification, ensuring the highest quality standards and assurance on an annual basis.
Value & Risk currently has the probably largest team of experts on valuation services in Europe.
Our specialist staff of approx. 25 consists of highly qualified financial experts with academic degrees (master, Ph.D. or similar) and many years of experience in trading, treasury or risk controlling.
By means of continuous trainings and individual specializations on particular subject areas, we ensure that customers, auditors and supervisory authorities will always find a renowned expert as a competent point of contact in us.
These are our fields of expertise:
- Financial analysis:
Includes, among other things, the analysis of financial instruments and financial markets as well as analysis of corporate and financial structures for performing internal rating assessments needed for debt and equity valuation.
- Quantitative analysis:
Includes primarily creating mathematical valuation models and valuation methods and building and maintaining the own model library as well as the instrument and valuation database.
- Financial engineering:
Includes the valuation and assessment of complex and innovative financial instruments and derivates.
To Value & Risk, personal contact and close relations are the foundation of any trusting partnership. We run our operating business from the Opernturm in Frankfurt am Main, a city in the heart of Europe and one of the world’s most important financial centers. Our employees are on site at all hours and will assist our customers in a friendly, solution-oriented and efficient manner of highest “Made in Germany”-quality.
Outsourcing our business is not an option for us and our customers know and appreciate that.
With our contractual model, too, we try to provide our customers with the flexibility our services and solutions offer. Our long years of experience show that financial markets and investors do not form a homogeneous group. Diverse as the range of investment opportunities is, the requirements regarding individual services and settlements are equally diverse. We meet those needs by working out a contractual model for each customer, tailored for their needs and consisting of a framework agreement and an associated individual service level agreement (SLA). This model allows us to offer maximum flexibility while ensuring a high contractual service assurance.
The response times for valuation requests and “challenges” are agreed upon in the respective service level agreement and laid out in a way that ensures a quick reaction under any circumstances.
In order to provide a maximum of security and transparency to the customers, Value & Risk makes extensive documentations available. Not only the valuation reports are adjusted to the respective customer requirements, also the documentation and audit obligations of our customers are met by a wide range of various audit reports and additional services. Generally, we provide audit reports for all valuations in any depth of detail requested. The transparency we achieve goes so far that, if needed, all our valuations can be checked at any time and in detail.
Process safety and assurance are prominent quality features in the financial industry. With its processes, the IT security and assurance as well as the internal control systems, Value & Risk meets the highest quality requirements of the supervisory authorities.
The fact that we meet these requirements is substantiated by the extensive, in-depth quality checks carried out annually by the auditing company KPMG. The audit complies with the International Standard on Assurance Engagements No. 3402, Type II and not only covers the design of the internal processes and quality assurance mechanisms but also determines their effectiveness and efficiency.
This certificate provides a maximum of operational security and assurance to our customers, and allows them to reduce their own efforts regarding controlling, compliance and audit procedures.
In addition to a number of highly efficient automated quality assurance mechanisms based on both statistical/mathematical models and heuristics, all important production process steps as well as market data and customer reports are always monitored according to the four-eyes principle (two-man rule) by our qualified experts and the results are constantly subjected to critical judgement. That way we managed to reach a level of quality probably unmatched in this business.
Value & Risk has an extensive quality assurance system whose monitoring objectives cover two interconnected core areas – the valuation process and the operational risk management (esp. data security and business continuity).
The monitoring system is based on the following basic principles: separating the functional responsibilities of production and quality control (four-eyes principle), unrestricted access to information and independence of controls, complete (and mostly automated) documentation of all work steps.
The control objectives within the valuation process comprise the following areas:
- Customer requests. Monitored are: authentication of customers and the regulatory standards and SLAs to be used.
- Instrumental analyses. Monitored are: identification of the instruments to be evaluated and correctness of chosen valuation approaches.
- Model valuation. Monitored are: correctness of valuation setups, suitability of valuation models, correctness and consistency of market data, correctness of calculations, plausibility and consistency of valuation results.
- Customer reports. Monitored are: completeness, correctness, and timely delivery of reports.
The control objectives within the operational risk management cover the following areas:
- Business continuity and security of IT. Monitored are: introduction and proper communication of internal security guidelines; implementation of controls in human resources (contractual matters and termination of work relationships); implementation of physical and virtual security systems (security regulations, access controls, fire protection, secure storage of hardware); implementation of a communication security system and operational security management (protection from malware, audit recording, monitoring third party services); implementation of access controls (user registration, special rights, password management); implementation of an incident business continuity management and a business continuity management.
Since 2010, the processes of quality assurance are audited annually in accordance with the International Standard on Assurance Engagements No. 3402, Type II. The external audit covers both the organization of internal control systems and its effectiveness. Further details can be taken from the current KPMG audit report.
We valuate virtually all financial instruments and portfolios
from the simplest financial derivatives to the most complex structures.
Actively traded market prices – ideally from regulated or organized markets such as stock exchanges but also from OTC transactions – should serve as the primary data source for an adequate valuation of financial instruments. If reliable prices, i.e., prices from credible sources with sufficient sales volume, are observable on the market, Value & Risk collects them from various market data providers, corrects them for potential data errors and uses a specially developed statistical procedure to calculate a valuation corridor, i.e., an upper and lower price limit that the instrument can be bought/sold for on the market under fair conditions.
In cases where an appropriate “mark to market” valuation according to the method described above is not possible, due to the lack of availability of liquid market data or a lack of market depth, Value & Risk is able to create a “mark to model” valuation using appropriate valuation models for almost every financial instrument. For this, we have an extensive model library which complies with the latest professional standards. Our highly qualified experts subject every trade to a detailed analysis, and a broad repertoire of quality-assured market data form the basis of a sound valuation.
IFRS 9 set out the principles of accounting for financial assets and liabilities, defining the term “fair value” as the objective market/time value that would be determined by knowledgeable willing parties.
For the calculation of the “fair value”, the IFRS provide a three-stage procedure, which is based firstly on directly observable, traded market prices. If these are not available, due to insufficient liquidity, the calculation should be based on “comparative values”. The third and last option provided by the IFRS uses estimates, i.e., a model valuation.
With our access to numerous market data providers and the expertise of our team, Value & Risk ensures a reliable supply of valuation results across all three categories.
UCITS (Undertakings for Collective Investments in Transferable Securities) defines investment funds whose investment universe is restricted by the European Union to highly liquid securities (eligible assets), generally equities, bonds and derivatives.
These funds, or their managers, are subject to the admission requirements of the relevant supervisory authority as well as to regular controls by the same.
In addition, UCITS funds are required to regularly value their assets. If the valuation is made in-house, EU directives require it to be conducted independently of trading and portfolio management, to avoid conflicts of interest. The guidelines also allow the outsourcing of the valuation process. With its rigorous quality standards audited under ISAE 3402 Type II, Value & Risk is available as a strategic adviser on UCITS valuation challenges or an external valuation partner. This applies both to the supply of previously validated and quality-assured market prices for “mark to market” valuation of liquid securities and to the “mark to model” valuation and risk measurement of illiquid securities and derivatives based on the latest financial mathematical models.
As AIFs (Alternative Investment Funds), EU law applies to all investment vehicles that are not UCITS. With the Alternative Investment Fund Managers Directive (AIFMD), the EU Parliament and the EU Council created in 2011 uniform standards for open- and, for the first time, closed-end funds, designed to protect investors. In Germany, the AIFMD was transposed into national law by the KAGB in July 2013. As a result, AIFs are also subject to the legal requirements for admission, as well as to supervision and regular valuation of assets.
In contrast to UCITS, AIFs are characterized by a much broader range of investment opportunities – beyond the standard instruments. This increases the complexity of complying with the regular valuation and associated documentation obligations. As in the case of UCITS, the valuation, if carried out by the AIF itself, must be performed by designated experts and must be independent of trading and portfolio management, according to the AIFMD Level 2 Regulation. The process can also be outsourced and handed over to an external service provider. Value & Risk has suitable experts for virtually every asset class and acts as an independent valuation service provider with no conflict of interest with the AIF.
With strong internal procedures and controls certified according to ISAE 3402 Type II and with many years of valuation expertise, Value & Risk acts as a strategic adviser on AIFMD valuation challenges or as an external valuation partner. Our offer spectrum covers almost the entire range of alternative investment opportunities, ranging from securities and derivatives (of any complexity) to private equity and real estate, projects in renewable and conventional energies, infrastructure projects, aircraft and ship financing and much more.
We offer efficient solutions for analyzing transactions, ex ante as well as ex post.
Before a transaction can be completed, asset managers and custodians are confronted with a multitude of questions.
Is the product comprehensively and fully described in the accompanying documentation and are all the risk factors clearly identified?
Is the negotiated/announced price fair?
Can the regular valuation required by the regulations be ensured, even after the transaction?
We support our customers in addressing these issues in advance of the transaction. Our experts analyse the prospectuses of the instrument, make sure that the information and market data supply allow for a regular valuation and determine a first fair price, which can serve as a basis for the negotiation.
Value & Risk offers special validation reports that validate the prices of third parties. For each product, we verify the counterparty price with liquid market prices or a calculated fair valuation corridor, based on up-to-date market data, product risks and market conditions.
The Minimum Requirements for Risk Management created by the German Banking Supervision Authority (BaFin) for banks and their counterpart for capital management companies (KAMaRisk) demand that both these types of institutions check their trading activities for market conformity. This test must be carried out by technically qualified personnel who are independent of the trading department. This applies to both the choice of calculation methods and the valuation infrastructure, as well as the underlying market data – a process that entails high costs and considerable manpower.
Value & Risk is available to you as an external partner with a cost-effective and easy-to-integrate solution. We offer a qualified market conformity check (MCC) for all financial products, from liquid securities to complex derivatives, based, where available, on market prices or on a model valuation. Depending on the requirements of the customer, daily high-low margins or tick-based intraday quotes of arbitrary fineness serve as the data basis. Only those transactions which do not pass the critical assessment by our experts, considering all transaction-specific and accompanying market circumstances, are identified as being not in line with the market.
Part of the European Union’s PRIIPs rules is the obligation to calculate the transaction costs incurred in the creation and management of a fund. For the calculation of these transaction costs, Value & Risk, in cooperation with Thomson Reuters, offers a service based on intraday data. For all fund-specific transactions, including the legally prescribed period of the past three years, the transaction costs of each fund component are calculated based on the difference between execution price and market price at the time of order.
Extremely high flexibility and efficiency in putting solutions into practice is one of our strengths and our advantage as a service provider. Because all developments, processes and calculations are carried out and taken care of by us right here – in our system environment – we can react immediately to customer-specific demands. The fact that we always create individual reports attuned to the customer’s systems and needs, keeps the costs for our customers’ IT and specialist departments at a minimum and allows a smooth and trouble-free integration of the solutions provided.
In order to provide a maximum of security and transparency to customers, Value & Risk makes extensive documentation available. Not only are the valuation reports adjusted to the individual customer requirements but also the documentation and audit obligations of our customers are met via a wide range of audit reports and additional services. Generally, we provide audit reports for all valuations in any depth of detail requested. The transparency we achieve goes so far that, if needed, all our valuations can be checked at any time and in detail.
Value & Risk offers various solutions within the International Financial Reporting Standard 9 (IFRS 9). Alongside the solutions for hedge accounting, Value & Risk also offers solutions for implementation of the Expected Loss Impairment Model, which applies to the financial assets held at “amortized cost” or at “fair value through other comprehensive income”.
“There is no such thing as a free lunch.” This was already known and postulated by the economist Milton Friedman. Return always involves risk. Classifying and quantifying this risk adequately, whether for a single investment or an entire portfolio, represents a major challenge for many market participants in terms of both personnel and resources.
Thanks to many years of experience in the valuation of financial instruments in all asset classes, Value & Risk serves as highly qualified partner in the analysis and calculation of risks.
As part of a specific risk analysis, we calculate risk figures for financial products or portfolios considering market, liquidity and default risk.
Since its inception in the mid-1990s, value at risk, together with its expansion, the expected shortfall or conditional value at risk, has become the benchmark for risk quantification and has gained recognition from regulators regarding the risk-management process.
Ensuring a reliable database and the required ongoing reviews of the model, including back testing, poses a major challenge for many investors. For products whose complexity and structure cannot be mapped with the risk measurement systems used by financial institutions, Value & Risk carries out the risk calculation and ensures the correct representation of the products in the risk of the customer.
Numerous factors determine the development of a financial product. On behalf of the customer, Value & Risk determines the individual risk factors of a product and quantifies the influence of each factor. The sensitivity measures thus determined enable the customer to calculate future price changes by varying a single risk factor or any possible combination of risk factors. We are happy to advise you on the selection of the driving factors as well as their possible bandwidths.
The advanced risk analysis also includes scenario calculation. In this type of stress test, extreme market situations are simulated by varying the different risk factors that are relevant for the determination of the price of an instrument. Thus, their impact on individual instruments or whole portfolios is measured. We support our clients in the adequate selection of scenarios and carry out the calculations based on our own model library.
Value & Risk is one the leading businesses for evaluating illiquid and complex financial instruments in Europe.
Thomson Reuters is a globally leading provider of market data, financial information and economic information. By combining business expertise and innovative technology, Thomson Reuters provides decision-makers and market players with crucial and intelligent information and solutions.
With ValPoint Value & Risk and Thomson Reuters jointly offer a comprehensive solution, which combines independent valuation, plausibility assessment of market prices and extensive documentation. ValPoint is a joint solution of both houses for covering all current valuation needs of banks, asset managers, depositaries, insurance companies and pension funds. We unite the strengths of both companies to offer a unique solution.
ValPoint’s service is a comprehensive evaluating solution for financial products. On the basis of Thomson Reuters’ data platform “DataScope Select” all financial instruments are assessed regarding their market liquidity and price reliability and classified into one of the regulatory predefined valuation categories.
The solution includes the following services:
- Valuation of portfolios according to § 26 ff KARBV: This includes the entire process from qualifying instruments according to diverse valuation requirements to providing conforming prices along with accompanying documentation.
- Calculation of model-based or “fair value” prices: Should a market price valuation be ruled out due to lacking trades or insufficient market depth, Value & Risk can provide “fair value” prices in accordance with § 28 KARBV on the basis of suitable valuation models for nearly all assets.
- Price validation and plausibility check: As a part of evaluating investment certificates, Value & Risk offers services as well as reporting solutions and documentation solutions to support the investment company and depositaries in their monitoring function.
Valuations of Assured Quality
Independent, high-quality, and entirely transparent portfolio valuations and price validations on front office level complying with all actual auditing standards.
100 % Coverage
Coverage of all financial asset classes (e.g. interest rates, equites, FX, fixed income, ABS, commodity, inflation etc.), both active and inactive markets and all levels of complexity.
Matching Any Demand
Wide range of solutions for valuation of financial instruments and validation of third-party prices with Valuation Corridor© approach.
Security for regulatory requirements.
Coverage of all current regulatory requirements and preparedness for incorporating future regulations.
Certificated According to ISAE 3402 Type II
ISAE 3402 Type II assured process. Compliance with the strict quality standards for the banking sector.
Transparency + Documentation
High transparency thanks to production process with assured quality and complete documentation of processes and methods.
Extensive Audit Support
Special (expert opinion) reports generated by our analysts support the alignment process between customers or internal and external auditors.
Premium Support: Service Level Agreement
Professional support by our expert team in Frankfurt for the entire chain of valuation and validation. Clear escalation levels and reaction times (price challenge) according to SLA.
Solution approaches adjusted flexibly and individually to the respective customer’s demands.
Service from one provider with consistent processes, interfaces and contact persons for all questions.
Established Technical Platform
Market proven and scalable technical platform using Thomson Reuters’ DataScope Select.
A benchmark is a figure used to measure the performance of investment decisions or to calculate an index.
In order to protect investors, the European Parliament issued the Benchmark Regulation in June 2016, which establishes a legally binding European framework for the determination of benchmark values. This stipulates that the providers of indices or benchmarks must be approved by the relevant supervisory authority and must publish their procedures for determining the benchmark and the possible risks involved. In addition, the regulation makes strict demands on the quantity and quality of the data used, as well as the quality assurance process and methods of dealing with potential conflicts of interest.
The motivations for using benchmarks or indices are diverse. Regardless of whether our clients want to assess the performance of their investments using their own comparative calculation, or whether they have invested in an individual index product and need to validate the values published by the index sponsor for prudential or economic reasons, Value & Risk is able to create or reconstruct almost every benchmark or index in the customer order.
Value & Risk assesses a broad range of different liquid and illiquid financial instruments on a daily basis. From these results, and with the help of the market data used, we can derive a variety of data, which in turn are used in the valuation of other illiquid instruments with scarce market data supply. Through this so-called peer method, Value & Risk is able to provide credit curves, volatility surfaces, yield curves, currency curves, commodity curves, implicit dividends and much more, for numerous illiquid underlyings.
Value & Risk possesses an extensive and highly performant data and model library which is taken care of every day with great effort and expert knowledge. Especially generating interest rate and credit spread curves on a daily basis as well as volatility surfaces for a large number of currencies, issuers, subordination levels and product categories can be rendered by our unique combination of technical sophistication and professional judgement alone.
That way hundreds of credit spread curves are generated every day for single issuers or peer groups, by converting thousands of bond prices into spreads, filtering them by various criteria such as issuer, industry, currency, subordination, rating etc. and condensing them into specific credit risk profiles. From these clusters of spread points, high-quality credit spread curves are generated using mathematical methods of regression and optimization.
For all products with default risk, for which no risk assessment by a renowned rating agency is available, Value & Risk determines the risk by means of an “internal short rating analysis”. For this purpose, various recognized rating procedures and models are available, from which our experts calculate the best possible result for the assessment of the relevant default risk.
Of course, our service is not limited to the valuation and topics affiliated to it. We also provide support, consultation and trainings to our customers in all subject areas related with our services. For example, in establishing new product processes, performing audits, or acquisitions. We support projects or help out our customers with our expert opinions in cases of borrower default, over the course of creditor meetings or in taking investment decisions. To be as efficient as possible, we always adjust our consulting services to our customers’ individual needs.
Assessing financial instruments and financial markets as well as analyzing corporate structures and financial structures for deriving company ratings or performing investment valuations fall under the category of financial or investment analysis.
The financial market is constantly undergoing changes. New products are created, new markets opened and new, complex valuation models developed. Thanks to our specialization on valuations, we are able to follow all trends and adjust to changes quickly. We pass on this expert knowledge to our customers during training courses in which we shed light on current market trends, new financial products and markets as well as developments of models and valuation approaches.
For clarifying valuation discrepancies or to assess financial instruments and financial transactions, we create reports and expert opinions for our customers.