Institutions will continue to increase their exposure to digital assets, with adoption guided by increased regulatory guidance from governments and the continual improvement of digital asset infrastructure, according to Elwood Technologies CEO, James Stickland.
“Adoption will continue to accelerate as financial institutions are given more clarity from the government on regulation, and the infrastructure continues to improve to provide more confidence in the ecosystem,” he said.
Stickland also believes that institutions will be experimenting with the tokenisation of assets.
He said that the benefits of blockchain are showcased by crypto and tokens; thus, there will be more tokenisation of assets such as equities, fixed income, real-estate or carbon to “take advantage of this new digital landscape”.
On Tuesday, February 14, Elwood Technologies, a platform providing institutional access to digital asset markets, extended its product offering with advanced Risk Management tools, providing clients the functionality to perform Live Position and Exposure tracking, Scenario Analysis, and Collateral Monitoring.
These features have been made available to Elwood’s institutional client base via their Portfolio Management System (PMS).
Stickland told Traders Magazine that last year’s events highlighted the importance of ensuring the same risk management tools are in place for digital assets as traditional finance.
The advanced Risk Management Technology already deployed across select institutional Elwood clients provides significant new functionality within the PMS, offering clients the tools to perform Live Position and Exposure tracking, Advanced Risk Analytics, Reporting and Collateral Monitoring.
The Live Position and Exposure tracking feature combines all CeFi, OTC, and DeFi exposures in a single dashboard and details Live PnL and Risk (first and second order) per portfolio across all venues.
The Advanced Risk Analytics tool, built on top of 20-year battle-tested quant models, provides a derivative valuation tool and the ability for clients to perform Scenario Analysis by simulating the portfolio’s spot and volatility shocks.
The reporting tool offers daily risk, P&L and accounting reports, including VaR calculation and What-If scenarios.
Finally, the Collateral Monitoring tool allows users to monitor margin across all exchanges and set limits and alerts.
According to Stickland, Risk Management is a critical tool to combat issues arising from overexposure in the market.
He explained that fundamentally, overexposure is the error made when an entity takes on too much risk in its investment strategy.
“The events of last year with the closure of 3AC and Celsius are a cautionary tale of the issues that can arise from making this mistake,” he said.
“This is why good governance and the deployment of market-tested and quant-developed risk management tools are core to the Elwood product suite,” he added.
Stickland said that clients need to have confidence in the digital asset ecosystem, and without institutional infrastructure, they will struggle to gain that trust.
“Understanding your exposure in real-time across several exchanges and counterparties in a single view is paramount,” he stressed.
“But further tools enabling stress testing of your portfolio, monitoring your collateral, and setting custom alerts for market changes are all features with which clients are familiar and, as this asset class continues to grow, will expect,” he added.
To accommodate and support the new functionality within the PMS, Elwood has added over 50 employees with expertise in engineering, quantitative analysis, and product development.
The team is now over 165 members with offices in the U.K., U.S., Jersey, and Singapore.
