J.P. Morgan & Co. and Reuters are joining forces to develop what they say will be a better risk management tool for investors in derivatives and other financial products.
By combining the bank's RiskMetrics data base with Reuters' risk management systems, the companies hope to establish a central repository for risk data flexible enough to help sophisticated investors understand the financial risk.
"We think that using both firms' respective strengths in certain domains is clearly what is going to advance the whole business of risk management most efficiently," said Jacques Longerstaey, a vice president with J. P. Morgan's risk management unit. "Our objective is to give users significantly more flexibility in how they look at the data."
Since its introduction in late 1994, the bank's RiskMetrics data base has given banks, corporations, investors, and central banks free information on the riskiness of financial instruments. The information on the volatility and correlations between various instruments is used in value-at-risk calculations.
But users found the data cumbersome and inconvenient. Many expressed an interest in only select portions of the data base.
"Everybody has different requirements in how they want to look at the data," said Mr. Longerstaey.
The bank turned to Reuters to provide the technology to give RiskMetrics users the flexibility to choose what information they need.
Reuters said the venture will complement its existing systems, including Sailfish, Kondor-Plus, and the company's new Deal Manager system, all bought or developed since 1993.
Mr. Longerstaey said it is in the bank's best interest to have an educated client base and regulatory environment.
"We have a significant risk advisory business that clients come to because we are known to have built the product that has the benchmark status on market risk," he said.