Recent advancements in high performance computing technologies from SAS Institute Inc., including an in-memory analytics solution that uses Hewlett-Packard Co. hardware, are expanding possibilities for risk management.
is changing risk management, according to Michael Stefanick, head of the risk management practice at SAS, by integrating both business functions and risk functions into the business decision process. “A business manager can actually look at the risk dynamically as he starts to make decisions,” he said.
Three high performance computing (HPC) solutions are available: in-database processing, distributed grid computing and in-memory. The in-memory analytics solution is the company’s most recent advancement and was formally announced this summer.
SAS says the technology enables simultaneous calculation of complex analytical calculations and instant access to results. The solutions will be generally available in late 2010, starting with risk management and then retail.
The HPC technology provides a way for financial institutions to attack large risk management problems in parallel, perform real time portfolio stress-testing and create detailed cash-flow projects, says SAS.
At a recent high-performance risk briefing for the financial industry in Toronto, Stefanick said applications of the technology include scenario analysis, covariance simulation, current exposure, cash flow analysis, conditional Value at Risk (VaR), Monte Carlo simulations, potential future exposure (PFE), liquidity and stress testing.
The distributed computing solution reduces the probability of loan default calculation time from 96 hours to four hours and the in-database solution reduces scoring of purchase behavior models from 4.5 hours to 60 seconds, he said. SAS in-memory analytics can reduce 8.8 billion portfolio VaR computations from 18 hours to less than three minutes, he said.
IT departments have struggled for years with the amount of historical they need to retain as well as the complex path-dependent mathematical calculations, said Stefanick in an interview with ComputerWorld Canada. And HPC is helping “not only to shorten that calculation time, but on the inputs in terms of the number of data elements that have to be stored,” he said.
“I can just take real time data from sources that are available, put it into this appliance, and it will sort out very quickly which ones are important and which ones aren’t,” said Stefanick. SAS’s HPC technology holds “all those results memory-resident, so the analyst only needs the ones that are important to them at the time of calculation,” he said.
High performance computing is changing risk management by bringing together the front office “earning money” team with the back office “risk control” team, said Nobel laureate economist Myron Scholes, a speaker at the SAS event.