Improved eBusiness Treasury Risk Management Using Intelligent Agents

Following the global economic downturn and a collapse in international equity markets, many financialinstitutions and corporations have sought the higher returns associated with higher risk from trading in foreignexchange derivatives. These derivatives have become increasingly complex to the point where few specialists areable to accurately determine the level of exposure. Top traders seek high rewards for their successfulinvestments. Rogue traders seek high rewards by concealing their unsuccessful gambling, sometimes to the extentof endangering the viability of their employers. Current technology copes poorly with dynamically changingbusiness requirements and conditions so there is little technological support available for organizationssensitized by reports of rogue trading and increasingly obliged by financial regulators to improve their riskmanagement practices.This paper proposes a risk management framework that can support FX derivative monitoring and trading basedon the Williams-Elliot Agent Architecture. The framework uses agent technologies jar improved management oftreasury risk by continuous monitoring of all transactions across an organisation; continuous evaluation ofexposures compared with prescribed parameters across an organisation; instantaneous reporting to seniormanagement where trading begins to approach or violates the parameters. Rigorous examples of typicaltransactions illustrate how intelligent agents can be used to monitor risk and to make trades within a powerfulrisk modelling and management framework.