Apr 2, 2013

Yankee Legend Tommy John, Numerix and Counterparty Credit Risk - The Right Team | Risk Executive Series

RISK EXECUTIVE SERIES: PART III

Yankee Legend Tommy John, Numerix and Counterparty Credit Risk - The Right Team | Risk Executive SeriesJames J. Jockle, Chief Marketing Officer at Numerix, discusses lessons learned from Yankees great Tommy John at the Inaugural Waters Magazine Sell-Side Technology Awards. In baseball, groundbreaking surgery, and risk management, having the right team in place is key. 

On a cool spring evening it was a night for New York winners.  The Yankees beat the Devil Rays, the Knicks beat the Celtics, the Islanders made the playoffs and Numerix was recognized by the judging panel of CIOs, Consultants and the Waters Magazine’ senior staff for the “Best Sell-Side Credit Risk Product” and “Best Overall Sell-Side Product of the Year”.  The connection this evening between financial technology and professional sports was the key note speech by legendary New York Yankee pitcher, Tommy John.

Tommy John’s Major League Baseball career spanned 26 seasons.  The average baseball career is 5.6 years.  The average football career (although hotly debated) is 3.2 years.  So 26 seasons, is an incredible accomplishment.  Moreover, he won 288 games and had over 2,245 strikeouts.   JimTommyJohn2But arguably, Tommy is more famously know for the revolutionary surgery that was named after him to repair a potentially career ending tear to a ligament in his pitching arm.  

During his talk he recounted the event and his discussions with Dr. Frank Jobe, who pioneered the surgery.   His story of course led to the pinnacle decision and famous statement by Tommy  regarding his decision to move forward with the procedure where he proclaimed to Dr. Jobe - ”let’s do it”. 

 

Part of the story that never made the pages of ESPN or Wikipedia was the fact that when Dr. Jobe proposed the surgery to Tommy, Tommy said let’s do it now and Dr. Jobe said Dr. Jobe said he couldn’t do it alone and that he needed to confer with specialist colleagues up and down the eastern board.  Months later once the team was assembled, the surgery went on as planned.  The end result was that Tommy returned to baseball and won more games after the surgery than he did before.

So how does this connect to counterparty credit risk?

In a recent report from CEB Tower Group, Spotlight on CVA: Trends, Perspectives and IT Implications, Senior Research Director, Dushyant Shahrawat stated the following:

“Alot of firms still consider CVA as a straight-forward activity to essentially calculate counterparty exposure and factor this into the pricing and management of OTC Derivatives. Thinking of it myopically as a simple ‘calculation’ exercise is a mistake. Besides the regulatory requirements and accounting rules requiring firms to measure and report CVA, greater utilization of OTC Derivatives by more firms, and employing them in ever more investment and trading strategies means firms need to have a long-term strategic view on managing CVA. This includes executive commitment to handling CVA effectively, a clear well-thought out CVA strategy, and the requisite investment of data, analytics and infrastructure required to perform CVA effectively. A mature, long-term view about CVA has major consequences for a firm’s capital structure, competitive positioning and ability to manage Derivatives risk.”

It is clear the Dr. Jobe’s view of the surgery was not myopic. While he was on uncharted ground, he brought together the right people, with the right vision, and the right technology (at the time) to do the job, while a man’s career was on the line.

Numerix is honored to be recognized in the industry for the best overall sell-side product of the year and proud to be on the team of so many leading institutions.

Blog Post - Sep 24, 2010

Implementing Change in Derivatives Regulations

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