Reference Data Scrubbing for Credit Derivatives
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Existing systems for managing reference data in credit derivative transactions lack accuracy and efficiency, leading to disputes and losses due to incorrect characterization of reference entities and obligations, particularly in cases where the reference entity is not contractually obligated.
Innovation Solution
A networked system for updating, monitoring, and maintaining reference data through a reference data system that allows users to input, scrub, and link reference entity and obligation data from various sources, ensuring accuracy and timeliness, and supports derivative transactions by providing a database for accurate enforcement of credit risk agreements.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If manual data entry and verification methods are used for reference entity and obligation data, then system complexity is reduced, but data accuracy and reliability deteriorate leading to disputes and losses
Solution Approach 1:
The system performs preliminary data verification and validation before data is entered into the database. Reference entity and obligation data are pre-screened against multiple data sources to confirm accuracy before being made available for derivative transactions, preventing erroneous data from causing disputes later
Solution Approach 2:
The patent introduces an intermediary reference data system that acts as a mediator between raw data sources and derivative transaction systems. This intermediary layer validates, standardizes, and verifies reference data before it reaches the transaction processing systems, improving reliability without significantly increasing overall system complexity
2Measurement precision
If comprehensive data verification and scrubbing processes are implemented, then data accuracy improves, but processing time and operational complexity increase
Solution Approach 1:
Data verification and scrubbing processes are performed in advance before data is needed for transactions. Reference entity and obligation data are validated against multiple sources beforehand, so when transactions need to be executed, accurate data is already available without time-consuming verification delays
Solution Approach 2:
The system implements continuous data verification and updating processes that run ongoing in the background. Reference data is continuously monitored and updated across multiple sources, ensuring accuracy is maintained without requiring intensive batch processing that would cause time delays
3Loss of information
If multiple data sources are integrated for reference entity and obligation information, then data completeness and accuracy improve, but system complexity and difficulty of integration increase
Solution Approach 1:
The reference data system is designed with universal interfaces and standardized data formats that can integrate multiple data sources through a common platform. The system handles various types of reference entity and obligation data from different sources using unified validation and verification processes, reducing integration complexity while maintaining data completeness
Data Source
AI summary
A system, medium storing processor-executable process steps, and method for supporting a derivative transaction, the method including receiving data identifying a reference entity participating in the derivative transaction; receiving data identifying at least a first reference obligation associated with the derivative transaction; identifying a contractual relationship between the reference entity and the at least first reference obligation; and generating a data record associated with the derivative transaction, the data record including the data identifying said reference entity, the data identifying the at least first reference obligation, and data identifying said contractual relationship, wherein the data record is verified as accurate as of an issue date of the derivative transaction.