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The derivatives market ecosystem today faces a wide range of challenges. Recognizing these challenges, however, is the first step toward successfully addressing them. Market participants may need to begin pursuing bolder initiatives to shift the discussion from “industry problems” to “industry opportunities.”

In this new article Numerix technologist, Linus Yu joins Heads of Collateral and Liquidity Management, Treasury and Market Risk at some of the world’s leading banks to discuss where they see the path forward for building a more impactful future-state infrastructure for a derivatives business.

These experts share their viewpoints and observations into what’s driving change and opportunity for derivatives management and offer insight into how firms can achieve a more focused view of transactions and risk post Covid-19. Read the article to explore:

  • The impact of the Covid-19 pandemic on collateral management.
    • The pandemic resulted in a steep rise in initial margin held by custodians. Increased market volatility has also led to more margin calls and collateral being posted on a bilateral basis at central counterparties. Are firms technologically prepared to handle these shifts?
  • How the LIBOR transition increases the complexity in valuations.
    • Concern is expressed around the maturity of the alternative reference rate (ARR) market and that there is currently not enough liquidity for certain ARR-related products, such as swaptions and caps/floors. Experts examine the complexity for market makers.
  • Regulatory changes and rising transaction costs.
    • Regulatory capital requirements for over-the-counter (OTC) products are becoming more stringent. At the same time, transaction costs are increasing but margins remain unchanged. Learn how firms are finding ways to stay competitive and manage transaction costs more effectively.
  • The opportunities in digitalization of derivatives trading.
    • The experts focus on the application of blockchain technology in certain asset classes and how this technology could have a significant impact in the derivatives trading space.
  • The need for sophisticated risk management technology for a more complex market.
    • Current market challenges may likely magnify over time, increasing stress on operational processes and risk management. This amplifies the focus on adopting leading-edge, innovative financial technology solutions.

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