September 2023

Vermiculus’ Real-Time VaR calculations down to microseconds

Vermiculus’ risk microservices within VeriClear™ have pressed down time for historical Value At Risk (VaR) calculations with 10 years’ worth of scenarios to just microseconds.

As part of Vermiculus´ state-of-the-art product development, the real-time clearing and risk management product, VeriClear, can now compute historical Value at Risk (VaR) for a derivative portfolio with thousands of positions using a 10-year lookback period in microseconds.

VaR is a statistical measurement used to estimate the worst possible losses over a specific time frame. One common type of VaR is the historical VaR, where historical observed changes in market data from one day to the next are applied to the current market data and the portfolio is re-valued. It is used by clearing houses to measure and control the level of risk exposure. In today's fast-paced financial markets, VaR in real time is essential for clearing houses to maintain market stability and comply with stringent regulatory requirements.

To demonstrate the power of these extremely fast calculations, the risk microservices in VeriClear simulates a trader’s behavior, performing a what-if analysis of a new trading strategy, or a clearing house updating its initial margin for a member when receiving a new trade. In this scenario, a derivative portfolio with thousands of positions is created and random updates of positions in the portfolio are sent to the risk microservices, where the new VaR result for the updated portfolio is calculated and published. The risk microservices continuously receive updated positions and measure the calculation latency, which consistently stays under 1 millisecond. This shows the feasibility of clearing houses recalculating VaR-based margins for every new trade, giving a real-time view of members’ risk.

As previously announced, VeriClear is live at MGEX' new real-time clearing platform and is also being implemented in B3’s new Central Security Depository project, and CERC, the Brazilian financial market infrastructure specialized in receivables, as well as in an undisclosed internationally scaled clearing house.

About Vermiculus Financial Technology

Vermiculus Financial Technology AB provides cutting-edge trading, clearing, and CSD solutions to market participants around the world. Vermiculus’ solutions are the first to bring state-of-the-art advances in dynamic microservice architecture together with vast experience in clearing house, exchange, and CSD business requirements.

With its headquarters in Stockholm, Sweden, Vermiculus consists of hand-picked teams, trained to deliver mission-critical solutions. With decades of accumulated knowledge and expertise, the team has previously completed 75+ projects for the world’s largest exchanges, clearing houses, and CSDs.