DFA Capital Management - GEMS

By: Dfa Capital Management  09-12-2011
Keywords: modeling, Gems, Hedging Strategies

GEMS is a cutting-edge Economic Scenario Generator (ESG) that enables users to simulate future states of the global economy and financial markets including the pricing of derivatives and alternative assets. It uses financial models that are the most technologically advanced in the industry, ensuring that models perform consistent with history, provide a realistic representation of extreme events and support hedging strategies with market consistent pricing. Leveraging the underlying technology of GEMS, DFA now offers an expanded product line that includes an online solution and three premises-based ESGs to meet unique needs of economic modeling.

This online service gives clients the ability to access simulated economic and financial scenarios as well as analytics produced from GEMS simulations. With no software to install, clients can easily purchase prepackaged scenario sets or build their own customized scenario sets using a flexible configuration tool

A general purpose ESG, GEMS – Scenario Master provides advanced modeling and estimation technology, and is the baseline product from which GEMS – Portfolio Analyzer and GEMS – Enterprise Modeler are built upon. GEMS – Scenario Master features best-in-class capabilities for modeling interest rates, inflation, corporate credit risk, equity markets, and foreign exchange. Additionally it provides the ability to model factors such as GDP and unemployment and includes asset aggregation at the individual security level.

Clients can also use GEMS – Scenario Master to meet Solvency II requirements, as well as for economic capital modeling, stochastic liability and capital valuation, product design, and market consistent embedded value calculations. Outputs from GEMS – Scenario Master can be easily imported into existing modeling tools.

For users who need to model multiple investment portfolios, GEMS – Portfolio Analyzer includes all the capabilities in GEMS – Scenario Master with added functionality to handle applications such as strategic/dynamic asset allocation, variable annuity hedging, pension management strategies, and risk attribution. Portfolio managers can take advantage of the rich set of financial instruments available in GEMS – Portfolio Manager such as floating rate notes, interest rate swaps, interest rate derivatives, inflation-linked derivatives, and equity derivatives for their modeling needs.

Additionally, GEMS – Portfolio Analyzer enables companies to model different trading strategies and is the only ESG on the market with the ability to model asset aggregation at the portfolio level.

As an ESG for whole company modeling, GEMS – Enterprise Modeler is the most comprehensive of the three new GEMS products. It includes all the functionality of GEMS – Portfolio Analyzer and adds capabilities for asset aggregation at the entity level as well as the ability to do investment and capital management within several accounting/regulatory regimes. GEMS – Enterprise Modeler can be used for many modeling applications such as multi-entity risk management, financing and accounting-driven decisions, risk diversification strategies, and reverse stress testing.

Flexible Implementation Options

The GEMS Technology Difference

The advanced modeling and estimation technology used by all GEMS ESGs produce empirically validated, realistic economic behavior to give you a better understanding of the risk in managing your business. The comprehensive set of economic models and financial instruments available in the GEMS product suite offer superior calibration & validation, which produce more accurate scenarios, with more realistic tails, something other models don’t offer. Other features common across all GEMS products include:

  • Consistent Real World and Risk Neutral scenarios
  • Superior technology for modeling equities, interest rates, and inflation
  • Ability to build custom correlated market indices
  • Realistic relationships between asset class returns
  • Ability to model at the security level, which can save capital
  • Exceptional validation and calibration
  • Multi-currency and multi-economy
  • Powerful analytics and reporting
  • Asset aggregation capabilities
  • Flexibility and user customization
  • Transparency and documentation
  • ODBC data access
  • A Monte Carlo stochastic modeling platform that is fully scalable, from a laptop to a full grid computing environment.

Keywords: Economic Scenario Generator, Gems, Hedging Strategies, modeling,

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