eCalma – an Interest Rate Market and Risk Management System

eCALMA is a proprietary framework designed by Endekus Corporation for measuring and reporting on an institution’s exposure to interest rate risk. eCalma is provided as a native Platform-as-a-Service (PaaS) application, designed for the Microsoft Windows AzureTM cloud platform. Accessed via a webbrowser and available 24x7, eCalma is a turnkey and vertical solution for financial institutions, which does not require any purchase of hardware or software to operate. As a result, eCalma leverages all of the benefits of the cloud including availability, scalability, secure multi-user access, and the ability for a cost-effective per-user subscription fee model.

Risk Analysis for a Fraction of the Cost

The eCalma system is designed for the accounting, treasury, and budget management departments of any bank or depositary institution that issues or lends the following financial products to retail customers:

• Mortgage loans;
• Consumer loans, credit lines and loans for small / medium businesses;
• Car loans;
• Visa, MasterCard credit cards;
• Floating rate instruments;
• Depositories (fixed non-term deposits);
• Current accounts (in rubles or other currency);
• Derivative financial instruments, derivatives (interest rate swaps).

The Problem

Interest rate risk is the risk that the value of an existing asset or liability will change due to changes in interest rates or market credit conditions. For example, the price of a bond falls when interest rates rise. Interest rate risk is closely related to liquidity risks or funding risks, determining the ability to lend to the future activities of the enterprise in granting loans and attracting a depositary.

The interest rate risk and liquidity risk are the main part of the market risk of financial institutions and directly affect its risk to net interest income and value risk. For example, in the case of a fall in interest rates, the return on a portfolio decreases (because interest rates on loans are lowered), while the value of existing transactions in a portfolio grows, and vice versa.

Managing these risks in a different way is present in each financial company and is usually imposed on the Head of Treasury and/or the Asset/Liability Committee. This includes defining the company's strategy in terms of portfolio composition, launching new retail products, interest rates on retail products, and hedging existing risks. Analyzing these risks is also relevant in the case of sales or amalgamation transactions between financial institutions.


eCalma assesses market risk exposures in 4 directions:

1. Basis Risk
2. Mismatch Risk
3. Yield Curve Risk
4. Optionality Risk.

The assessment of these risks is provided in the form of the following analytics for the portfolio:

1. Balance Sheet and Gap Analysis - portfolio simulation on a monthly basis for a period of 5 years.
2. Duration and Price Sensitivity Analysis (DV01, Modified Duration)
3. Income-at-risk
4. Equity at Risk (NEV) and Fair Value Analysis
5. Scenario Analysis
6. Simulation analysis
7. Value-at-Risk
8. Maturity Term Preference Analysis
9. Margin Analysis

All analysis is detailed at the level of each instrument in the portfolio.

Operating Principles

The system works on the OAS principle (option-adjusted-spread valuation) discount cash flow analysis. Market yield curves, custom modeling settings, and portfolio transaction data are used for evaluation.

It is important to note that the system does not require any personal data about the bank’s clients; work is done only on an array of general financial information. Only 6 fields are required for each transaction in a portfolio:

1. Balance
2. Percentage
3. Transaction date
4. Completion date
5. Payment frequency
6. Payment amount

Depending on the type of financial instrument, some fields may not be required. For example, for current accounts, it is necessary to provide only an aggregate balance of all accounts and the average percentage. All data is provided in Microsoft Excel format.

The system user enters the modeling settings. These settings include the following parameters:

1. New business forecasts (volumes, forward spreads, deal terms)
2. Operating expenses and other income (non-interest income)
3. Market spreads (to calculate market value and PV01)
4. Attachment factors for shifts in market rates (instruments with floating interest rates).
5. Forecasts for prepaid loans and early issuance of the depository (optionality) if the tool properties allow it
6. DB - curves for simulation in different market scenarios and VaR.
7. Settings for wholesale tools - Capital Markets, and derivatives - SWAPS.

With this information, the system lays out all the incomes and expenses of $ (cash flow analysis) and determines the level of bank risks within the framework of the above analysis.


The system is implemented as a native Azure application (PaaS) and is a specialized vertical solution for financial institutions and banks. The system takes full advantage of the Azure platform - scalability, the ability to simultaneously process a large number of users, and payment for resource consumption after the fact.

The system does not require the purchase or installation of additional infrastructure (hardware) or software on the client side and is available around the clock via an Internet browser.

Additional Information

The eCalma system is already used in Western banks and meets the requirements of OSFI, a Canadian regulator. A professor of finance and quantum risk management from the University of California participated in creating the system.

Currently, the market has a number of other, significantly more expensive systems designed to service larger (from $ 10 billion) and complex financial portfolios from the following vendors:

• SunGaard
• Algorithmics
• Baker’s ALM
• Oracle Financials

By contrast, the eCalma system is designed for a more mass bank and lending institution market, specifically those that offer their services to small and medium businesses, does not require significant investments in deployment (available as a service) and provides a higher level of “price-efficiency”, allowing you to get results immediately and pay only for services rendered.

Who is it for?

The product is designed for professionals directly involved in ALM (Asset & Liability Management) and managers of the operational capital of the bank.

In practice, due to the fact that the more expensive solutions are unavailable due to their price, market risk management is often done manually or in Excel tables developed by internal bank employees. Risk modeling is a relatively narrow specialization and often requires substantial investment, which is not always relevant. As a result of the lack of resources and specialists, the assessment of these risks in many institutions is insufficient and inferior to larger competitors.

The eCalma solution significantly reduces these operational risks, modernizes the risk management practice of the company and offers a modern analytics package for assessing the financial risks of the portfolio.