Automated Counterparty Classifier - Tying to Risk Management
The classifier sorts counterparties into risk-based strategy buckets based on their past and live performance and observed trading behaviours. When this is tied into risk management and execution decisions, workflow can be automated based on assigned Classifications allowing you to manage the flow optimally with reduced time-to-action.
Tying the different auto-classifications into hedging allows for a dynamic hedging strategy that updates in real-time as counterparties trading styles evolve. The hybrid is fully configurable meaning holding periods, spread targets and thresholds, and trading signals can be configured to best manage the different types of identified flow. Take a look at the different Classifications and Suggested Risk Management Strategies here.
To link an automated classification bucket to a hedging rule dynamic counterparty lists need to be setup (this will be done as default when setting up a new hybrid).
The client trade trigger criteria then needs to be set to this dynamic list, all other parameters can be adjusted according to the observed flow, however the hedgers will be setup with tried and tested default parameters which can optionally be switched on/off.
As the classifier continuously updates in the background, new flow from new and existing counterparties will dynamically change the classification assigned to the counterparty and hence the hedging strategy.