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Risk Management
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BrainMatics’ factor model is the first comprehensive model based on research conducted in India. The model comprises of Fourteen factors and eleven industry groupings that affect risk and returns on stocks systematically . The return of a stock that is not explained by these factors is called specific return. The exposures to the factors are standardized so that the market as a whole has a zero exposure to each of these factors.

Similarly , the Fixed Income factor model has factors which dissect the return due the movement in interest rate curves and the spreads.

The risk factors on the equity side include Momentum, Growth, Value etc. and shift, twist, spread etc. on the fixed income side.

Factor Model with BMOptimizer can be used as a very powerful portfolio management tool using which fund managers can build active portfolios. For example, a portfolio manager may want to tilt his portfolio towards ‘value’ stocks. This can be provided as an input to the BrainMatics Optimizer and the optimizer would construct a portfolio that will use this intuition while controlling the risk.

Besides, a fund manager can use these tools for conducting style analysis, active benchmark creation, mirroring an index, risk-return analysis, portfolio hedging etc.

Key Benefits

  • Comprehensible identification of drivers of risk and returns
     

  • Ability to create customized benchmarks
     

  • Ability to implement investment strategies
     

  • Factor-based hedging and tilting of portfolio
     

  • Comprehensive Style analysis