Development and implementation of a risk management system for a leading airline company in Russia
The system for this airline was designed to automate the processes associated with assessing the compounded impact of financial risks on the company's financial results, modeling and maintenance of payment schedules for operational and financial leasing.
The primary targets for this system include:
- modeling of risk forecasting and the budget line
- accounting and maintenance of payment schedules for operating and financial leasing
- reporting risk assessments and leasing payments
The architecture of the system was implemented by using a three-step approach:
- backend — Java
- frontend — JS
- modelling — R
The database management system being used is Oracle.
The duty cycle in the system includes the following steps:
- data import from external systems
- simulation and scenario development
- regular reporting
As a base of data input becomes market data in real time, it is downloaded from the Bloomberg and Platts systems. These include:
- exchange rates (US Dollar, Euro)
- cost of Brent oil
- LIBOR rates of 3М and 6М
- forward rates (US Dollar, Euro)
- cost of Platts oil
Then the system carries out modeling and forecasting that is based on historical data that was downloaded. The system uses three types of factors calculation:
- formula calculation
- deterministic methods
- stochastic models
The Stochastic version of the calculation uses Monte Carlo simulations with Cholesky factorization.
The results of collecting statistical information are tested by expanding the Dickey—Fuller test.
Forecasts are based on the data obtained. The system has the ability to build a long-term forecast of monetary flows for operational and financial leasing based on the budget scenario.
All reports provide information about factors, objects and financial results indicators. Comprehensive reports are founded on data obtained from the simulation results.
There is also an opportunity to generate a report based on probabilistic statistics, representing sets of percentiles for each factor.
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