NEW YORK -- RAROC 2020, Bankers Trust Co.'s pioneering risk management service, soon will be available to clients through the World Wide Web.
Moving delivery of RAROC 2020 to the Web will make it easier for clients to access Bankers Trust's risk analyses, said Kathy Condon, managing director.
Moreover, the Web product allows clients to "drill down" to look at risk at different levels, such as at the portfolio or asset class level, and to perform selected "what if" analyses.
The shift to the Web coincides with an updating of RAROC 2020's reporting capabilities that resulted from consultation with Bankers' risk management clients, Ms. Condon said.
Although the hard-core risk calculations of RAROC 2020 will continue to be performed by Bankers Trust, the Web version allows the user to see the effects of hypothetical changes in various market conditions.
So if a client thinks the Standard & Poor's 500 stock index is going to drop 10%, and U.S. Treasury bond prices will rise 3%, the client can enter that into the system and RAROC 2020 will calculate an estimate for how the portfolio will be affected.
"I like the idea of being able to go in and drill down on what's important," said Steve Fierstein, senior financial analyst for GE Investments, Stamford Conn. "I was very impressed."
GE has been testing RAROC 2020 and will be using it for its entire portfolio of publicly traded securities.
Still, the biggest change will be that RAROC 2020's on the Web, and is more easily used, Ms. Condon said.
"Here is a new and better way to deliver the information," she said.
Pricing for the service begins at $25,000 annually, with higher costs associated with more complex portfolios, she said.
At the core of RAROC 2020 is a value-at-risk methodology using what is called a Monte Carlo simulation process.
Value at risk is a number that is calculated to represent the most an investor would lose for a portfolio, with a specified degree of confidence, say 99%, and for a specified time period, say one month.
Outside of that confidence level and time period, though, the potential losses will be greater.
In a Monte Carlo simulation, VAR is calculated by performing thousands of simulated market scenarios based on historic volatilities and market correlations.
The Web-based version offers clients the ability to examine the VAR for their portfolios at various levels, such as at the aggregate level, the asset class level, or the fund level.
In addition to looking at how a given asset class contributes to the aggregate portfolio's riskiness, the effect of taking the asset class out of the portfolio also can be calculated, Ms. Condon said.
In a demonstration, she noted that it's very common for the removal of currency exposure to actually add to the riskiness of a portfolio.
Another feature of the Web service is the availability of performance distribution charts for the various levels of the portfolio.
Putting RAROC 2020 on the Web also eliminates the hassles involved with trying to set up a client computer with software and the necessary adjustments to dial directly into a huge computer system like RAROC 2020, Bankers Trust executives say.
The system can be accessed by clients using browser programs Microsoft Internet Explorer or Netscape Navigator. Reports can be downloaded directly using Adobe Acrobat.