An Irish based risk management company located in Dublin has developed a proprietary volatility forecasting program for risk management. The forecasting program is a fully systematic program that is designed to forecast stock market volatility from 24 hours in advance to one month in advance, at intervals of 5 minutes throughout the day. The company is looking to enter into licence agreements with senior risk managers and investment managers.
The Irish based company was established in 2000 with the primary aim of delivering an alternative investment approach to a broad range of clients. The recent rise of risk parity and volatility targeting investment strategies, requires a much more accurate and robust measure of volatility. Modern portfolio management is now an exercise in risk management as much as capital allocation. This approach corresponds with the regulators requirements in the EU, for investment products to be risk rated either through the European Securities and Markets Authority (ESMA) or Packaged Retail Investment Products (PRIIPs). Pension funds are also subject to similar obligations (IORP II). It can be argued that it is impossible to accurately make these designations without a precise measure of market volatility. The volatility forecasting program can be applied to multiple liquid indices on the markets. For example: The stock market index S&P 500, MSCI EAFE (Morgan Stanley Capital International and Europe, Australasia and Far East) Index, FTSE, Nikkei Index etc. When building an investment portfolio, it is important to understand the relationship between risk and return. As it is impossible to forecast return it is important to be able to forecast the risk an investment portfolio is carrying and from here the expected return can be estimated. For that reason, it is important to have an accurate measure of risk. Uncertainty is an integral part of any investment process and an inability to forecast returns make the efforts to forecast risk even more important. It is now generally accepted that volatility is the best measure of risk to have in financial markets, so the ability to forecast volatility is critical in making informed investment decisions. The company would like to enter into licence agreements as part of their added value to their business strategy. Further discussions will be at the discretion of the company and can take place under Non-Disclosure Agreements with further information provided at that stage.
Type (e.g. company, R&D institution…), field of industry and Role of Partner Sought:
The volatility forecasting program for risk management will be of benefit to a Risk Manager or Senior Investment Manager in any of the following: • Insurance companies for Solvency II. • Pension schemes meeting IORP II (Institutions for Occupational Retirement Provision) requirements. • Asset managers for risk budgeting. • Multi managers seeking to keep funds in risk buckets for ESMA or PRIIPS (packaged retail investment and insurance-based products) requirements. • A Family Office in the business of finance and investments. An ideal user of the volatility forecasting program might have the following qualifications, Chartered Financial Analyst (CFA), Financial Risk Manager (FRM), or Chartered Alternative Investment Analyst (CAIA).
Stage of Development:
Already on the market
Comments Regarding Stage of Development:
The program is currently being applied to both the currency market and the European equity market and will be applied to the US equity market in 2020.
Secret Know-how,Design Rights,Exclusive Rights
Comments Regarding IPR Status:
The volatility forecasting program is based on a proprietary source code.