CTC
strives to optimize exposure to the various risk factors that are
inherent with trading a multi-product book. As the options market has
matured, efficiency and competition have increased to such an extent
that many of the best opportunities lie not within a particular trading
crowd or product, but across multiple products traded as a portfolio.
As recognition by the investment community of volatility as a separate
asset class becomes more widespread, liquidity providers will
increasingly be separated by their ability to manage a broad-based
volatility portfolio.
- Global risk assessment
and management requires rapid communication between our traders
and risk managers regarding the quantification of changing risk
factors and the market conditions producing such changes.
- The cooperation and
close interaction between our trading and technology groups
harnesses our analytical strengths to create a comprehensive and
integrated real-time risk management system that provides the
foundation for our marketmaking.
- The ability to assess
risk on a company-wide basis represents a crucial component that
allows CTC to inventory options profitably – a necessary
characteristic of today’s successful liquidity providers.
In
order to capitalize on profit opportunities, CTC has created
significant infrastructure, both in terms of technology and risk
assessment. CTC’s proprietary options valuation model represents the
lynchpin of our risk management infrastructure.
- Our proprietary risk
factors include several parameters developed internally.
- Once we identify a risk
factor that impacts an option’s value, we quantify the impact of that
element upon the option’s value and incorporate that parameter
into our valuation model.
- Dynamic risk assessment
allows for the anticipation of changes in both risk factors and
market conditions that may impact our firm’s portfolio.
