Jun 9, 2010

Historical Pricing Transparency for Derivatives with Numerix XML

An interesting subject reported on by WatersTechnology’s Carla Mangado at the Xtrakter Conference:

http://www.waterstechnology.com/inside-reference-datanewsroom/1651664/pricing-methodology-explanation-raises-concerns-despite-increased-focus

On the panel, CEO Brian Sentance of Xenomorph (a Numerix partner), discussed the growing demand from clients and regulators for firms to be able to explain and justify prices in detail—for both current and past trades. With a closed system, this can involve a pretty large IT effort to reconstruct the pricing environment and model assumptions. But with Numerix, you won’t need to bother IT at all. 

Deals priced with Numerix analytics can be easily serialized and archived into self-contained “Numerix XML” files. The XML captures all inputs in the valuation process: market data, model calibration and assumptions, calendars, T&Cs and everything else that went into the price. So if you ever need to evaluate a past trade, whether tomorrow or 50 years from now, simply “rehydrate” the deal from the XML and you have a 100% transparent, fully-auditable representation of the trade exactly as it was when it was originally priced. Numerix analytics are also used by many audit firms, so when it’s time for your audit, you can simply give them the XML files. Now that’s easy.

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