By Scott Sobolewski, Partner at Acadia
What is ORE?
Acadia has successfully supported the non-cleared derivatives market through regulatory compliance of all six phases of the global Uncleared Margin Rules and emerged as a key industry utility for initial margin calculation, reconciliation, and exchange. In order to accomplish this feat for the world’s 1,000+ largest derivative trading institutions, it developed a standardized pricing and risk framework for calculating risk sensitivities (e.g. “greeks” formatted to ISDA’s CRIF standard), backed by an industry-leading centralized market data service, covering the wide range of vanilla to exotic financial derivative products traded OTC and supporting underlying reference data. At the heart of Acadia’s hosted Risk Services is the Open-Source Risk Engine (ORE).
ORE has a long history of open source support going back to its authorship by Quaternion Risk Management in the early 2010s (Quaternion was acquired by Acadia in 2021), and has historically maintained a delineation between the commercial version of the software (ORE+), licensed by several clients for local production-level pricing and risk calculations, and the free open source version (expanded product coverage and simulation methodologies built on another open source project, QuantLib).
With quarterly open source releases running from 3Q22 through 4Q23, Acadia will be releasing the vast majority of ORE’s commercial functionality into the open source domain for the very first time; from exotic pricing model coverage across all asset classes, par market risk sensitivities and several flavors of Value-at-Risk (including ISDA SIMMÔ), a credit exposure simulation framework (including xVAs) supported by extensions for American Monte Carlo, cross-asset modelling, and multi-threading, to standard regulatory capital metrics like SA-CCR, FRTB-SA, and BA-CVA, and a novel Scripted Trade framework supported by Adjoint Algorithmic Differentiation (AAD) – this is a highly robust sell-side pricing and risk engine, rivaling the capabilities of other large software vendors, all freely available in the open source domain under a modified BSD license.
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