3.3. Limit System

3.3.1. Risk Types

The Limit System handles three base types of risk:

Market risk

A mark-to-market evaluation of all deals is the base of market risk evaluation.

Settlement risk

RxDS allows the online monitoring of all future settlement conflicts and bottlenecks.

Credit risk

Following the recommendations of the BIS the credit risk is calculated in RxDS based on the different parameters, mainly value date, amount and instrument.

3.3.2. Instruments

Instruments can be freely defined with their properties. Every instrument allows the individual definition of its risk exposure.

3.3.3. Counter Parties

Counter parties can be grouped to hierarchical structures. On each level either an own limit can be defined or the limit of level above is to be used. The structures can be nested to unlimited depth.

Thus complex structures of dependencies can be modelled concerning subsidiaries or partnerships. The standing data allow multiple configurations.

A daily overdraft report will be generated showing also overdraft reasons, as the deals causing overdraft, changed standing data configuration or changed market rates.

3.3.4. Limit Administration

The limits are divided into tenor groups. The tenor groups and their limits can be defined for each counter party individually. To simplify standing data administration, so called line groups describing tenor groups and limits can be defined. These line groups can be applied to several counter parties.

The limits can be defined in any currency, e.g. banks in USD, customers in DEM.

Every limit has usually an expiry date. A report shows limit definitions that are to expire soon.

At deal capture a possible limit overdraft will be checked and eventually displayed. Counter parties are locked during deal capture to prevent simultaneous deal entries and possible overdrafts.

3.3.5. Reports

Daily a limit overdraft report will be generated as well as a report showing standing data modifications. On request a report showing average limit usage in the past can be produced.

3.3.6. Online Limit Monitoring

Every deal entry causes a check of existing limits. In case of conflicts, automatically a screen showing the overdraft details will be displayed (see picture 5). The same screen can of course be used at any time to get an overview of the counter parties' limits and its current exposure.