Valuation Tool Solution

Credit Default Swaps and other hard to value derivatives are now a common holding in most portfolios. Traditionally, they were priced monthly (or weekly at most) due to the time and expense in getting valuations. Managers had a choice of either manual spread-sheet based tools or paying an outside provider (such as Markit) to calculate the valuations. However, with the combination of today’s volatile environment and increased regulatory and investor scrutiny this is no longer an acceptable practice. Valuations must be calculated daily and the portfolio manager often wants a tool to test how different scenarios can effect valuations. Providing this functionality is not feasible with the traditional valuation process.

The Solution

NorhtPoint’s Valuation Tool can automatically price a CDS book on a daily or ad-hoc basis. It utilizes a Global Securities Master to load underlying security reference data and curves (spread, swap, treasury, etc) on a daily basis to support the calculations for valuation. All data points can be overridden with custom values and alternate custom curves can be used if desired. A pricing calculator allows users to interactively change values such as upfront points, spreads, curves, etc to run different scenarios. If desired these changes can be saved as an override or an alternate valuation. The Valuation Tool seamlessly integrates with most major accounting systems and automatically handles the round trip process of extracting positions, calculating valuations, and saving valuations and prices back to the accounting system. The valuation engine can use the NorthPoint proprietary algorithms or the industry standard FiNCAD libraries.

Features

  • Integrates with a Securities Master for Security reference data
  • Integrated with market data vendors (Bloomberg, Markit, etc) for loading daily curves
  • Allows overrides and custom curves
  • Flattens and populates missing data points on curves according to user defined rules
  • Can be run interactively to run hypothetical scenarios
  • Integrates with most popular accounting systems (VPM, Geneva, Total Return)
  • Robust error handling for dealing with market data exceptions