Moody’s Analytics, the risk management service provider which is part of the ratings agency Moody's, has unveiled an updated version of its portfolio management and economic capital product for financial institutions such as banks and asset managers.

RiskFrontier 2.5 includes a new trade optimization feature – called Trade - which is designed to help portfolio managers to make better informed trading decisions and maximize the risk/return on their investment portfolios. The tool achieves this by enabling managers to calculate a trade’s optimal buy or sell price, thereby improving performance, the firm said.

“Trade allows portfolio managers to identify a target portfolio and specify instruments in a trade, including constraints like max buy, max sell and trade amount. It then computes the optimal holding amount for each instrument in the trade,” said Vanessa Wu, managing director of portfolio products at Moody’s Analytics.

The updated version of RiskFrontier also features a new SME correlation model, which it the latest addition to Moody’s Analytics Global Correlation model – a diversification model designed to help reduce concentration risk. Based on Moody’s Credit Research Database, which holds financial data for non-listed companies, SME correlation model facilitates the accurate measurement of the benefits of diversifying SME exposure for firms in the US, the UK and France.

Another enhancement that has been made to RiskFrontier 2.5 is the addition of a tool to help firms meet regulatory requirements regarding model transparency and data validation – the Pairwise Correlation Utility. This produces correlation matrices of pairwise asset correlation, default correlation and/or joint default probability, using either Moody’s Analytics Global Correlation model or one provided by the user.