Method, system and program for credit risk management utilizing credit exposure

Abstract

Software aggregates and integrates credit exposure data across accounting, trading and operational systems within an energy trading organization. A comprehensive model of exposure to all counterparties, across all of their divisions and subsidiaries, is then assembled, enabling the creation of a hierarchical view of each counterparty that models its real-world parent-child relationships, and taking into account netting, setoff, and margin requirements, collateral requirements and contract terms, internal and external views of exposure and liquidity, and risk concentrations based on both system and user-defined risk categories. After aggregating the exposure information, credit, transactions, risk and other properties are determined at any level in the hierarchy and then the system presents a comprehensive, detailed, real-time, enterprise-wide view of current exposure, collateral requirements and outlays for both a company and its counterparties. Walkforward views of potential credit exposure taking into account current and future prices and volumes are also provided.

Description

PRIORITY CLAIM [0001] The application claims the benefit of priority under 35 U.S.C. §119(e) from U.S. Provisional Application No. 60 / 503,429, entitled, “Method, System and Program for Credit Risk Management Utilizing Credit Exposure,” filed on Sep. 16, 2003, and U.S. Provisional Application No. 60 / 503,422, entitled, “Method, System and Program for Credit Risk Management Utilizing Credit Limits,” filed on Sep. 16, 2003, which disclosures are incorporated herein by reference. CROSS-REFERENCE TO RELATED APPLICATIONS [0002] The present application is related to co-pending U.S. patent application Ser. No. 10 / ______, (ROME002US1), filed on even date herewith and assigned to the assignee hereof, and incorporated herein by reference in its entirety.TECHNICAL FIELD [0003] The present invention relates generally to methods, systems and programs for credit risk management. Still more particularly, the present invention relates to methods, systems and programs for credit risk management based ...

AI Technical Summary

Benefits of technology

"The present invention provides better ways to manage credit exposure. It creates a model of all the legal relationships and transactions between a company and its counterparties. This model is organized in a hierarchical way, with different levels containing different types of agreements and transactions. The model calculates the overall financial exposure of the company based on these agreements and transactions. This invention helps companies better manage their credit risks."

Problems solved by technology

For example, energy companies have been reeling from corporate scandals, increased scrutiny and disclosure, and several well-publicized bankruptcies.

Some companies do business with hundreds of different counterparties and, therefore, have risk associated with hundreds of different legal entities based on a myriad of different commodities.

Unfortunately, the commodity-based nature of enterprise resource planning, integration, trading and risk management software currently used in most industries revolve around accounts and transactions as opposed to customer relationships or counterparties and their associated contracts.

Yet, no current solution provides an effective method to track and analyze credit exposure and liquidity obligations across multiple systems.

In addition to data aggregation limitations, the current offerings do not take advantage of contemporary technologies that allow for simplified adaptation of changing functional requirements and near-real-time processing.

Images