FRTB includes new stress testing rules and requirements for pricing data going back to 2007. In order to comply, banks face the challenge of identifying and processing appropriate market data sources, filling time series gaps and making justified proxy decisions. The FRTB Scenario Service, which helps banks meet these challenges, is comprised of two distinct products:
- Markit Risk Factor Utility (RFU), a cloud-based risk factor modelling environment
- Markit FRTB Data Service, a repository of historical pricing data and other FRTB-related data
As part of the FRTB Scenario Service, the RFU comes prepopulated with historical pricing data from the FRTB Data Service. Banks have the option of supplementing this time series data with proprietary and third-party data.
The service supports banks by delivering historical time series derivation and producing transparent, scalable, flexible scenarios, which can be consumed by risk engines as part of backtesting, profit and loss attribution (PLA), expected shortfall (ES) and stressed expected shortfall (SES) calculations.
When combined with the FRTB Modellability Service, the FRTB Scenario Service also supports NMRF proxying, which makes FRTB internal models approach (IMA) scenarios fully transparent for ES, SES and PLA.