Middle Office Professionals

Before LexiFi

The maintenance of complex derivatives contracts is rarely automated. Consequently, even a limited volume of structured transactions can have a significant downstream impact. Manual processing of complex contracts increases operating expenses and operational risk, and, in the end, prompts controllers to limit the flow of business.

After LexiFi

Key Features

• Precise and Exhaustive Product Definitions.   LexiFi enables users to precisely and exhaustively describe sophisticated financial products with complex option clauses, based on any type and combination of underlyings. Errors in financial product design are detected at the earliest possible stage. LexiFi checks types, date consistency, and other elements at design time, as opposed to run-time.
• Automated Processing of Structured Products.   Once a contract is defined, LexiFi enables middle office personnel to:
  • Systematically detect and process all events in a portfolio of complex products and perform the required simplifications as a contract progresses in its life cycle. LexiFi implements a formal operational model. LexiFi's event manager is designed in the spirit of a finite automaton: a contract starts its life in an initial state and migrates from state to state upon the occurrence of messages, which represent possible life cycle events, including time-related events, fixings, option exercises, and barrier crossings. Once an event is processed, the contract is translated into a new, simpler contract that incorporates past event information and describes the residual rights and obligations of the parties.
  • Keep a detailed record of all processed events and replay the history of transitions from state to state.
• Event Planning.   LexiFi provides tools to systematically detect contract life cycle events and to analyze the potential behavior of a contract in the future. Users may visualize a contract's entire execution calendar: for example, the list of possible life cycle events may be displayed in calendaring and scheduling applications.

  Microsoft Outlook Calendar Life cycle events may be posted in a number of calendaring or scheduling applications such as Microsoft Outlook. Click image to enlarge.

  Gantt Chart The chart illustrates possibles sequences of states for a given contract. Transitions are labeled to facilitate contract tracking. Click image to enlarge.

  In addition, a contract explorer enables users to exhaustively analyze all potential contract execution paths.

  Contract Explorer Monitor the execution of a contract and audit complex payoff formulas. Click image to enlarge.

  LexiFi's formal product description and related tools improve communication between parties and increases the skills and comfort levels of middle-office professionals with exotic products.
• Contract Life Cycle and Pricing Synchronization.   LexiFi guarantees that pricing code always mirrors the state of each contract. This feature enables the ongoing valuation of complex portfolios as products evolve in their life cycle.
• Reporting.   LexiFi provides immediate operational reporting capabilities for all contracts, regardless of their complexity. Pre-packaged management reports cover transaction activity, event monitoring, and payments. Users may also create precise, domain-specific queries and reports with SQL-compatible tools.

Benefits

LexiFi reduces operational risk, lowers operating expenses, and improves customer service:   

• Systematically Detect and Process Events in a Portfolio of Complex Derivatives.   When dealing with complex products, the middle office frequently lacks tools to systematically detect and process events, and to automatically produce confirmations and other messages sent in response to those events. LexiFi consistently processes time-related events, fixings, option exercises and barrier crossings for all contracts, and optionally generates messages whose content may be used to replace keywords in user-formatted templates. Events and messages may be driven by an external workflow engine and integrated into other applications. Process automation reduces operating expenses and operational risk.
• Improve Communication throughout The Firm.   Operations, risk management, and other departments within the bank sometimes have difficulties in understanding the products that the front office is trading. LexiFi may be used to educate operational and functional units about the definition and behavior of complex contracts. LexiFi descriptions establish one consistent "definition of record" for each contract that the various departments may learn to read, but not necessarily to write, either by looking directly at the LexiFi code or with the help of visualization tools: for example, a contract execution calendar helps to understand the potential proliferation of contract transitions and states. Better transparency among stakeholders eliminates bottlenecks, reduces operational risk, and ultimately expands derivatives trading capacity.
• Offer Self-Service, Customer-Orientated Applications for Complex Products.   Customers will increasingly demand to monitor and process executed transactions online as they do not always have the technical resources to implement systems that are sufficiently agile to keep pace with financial innovation. LexiFi may be used to develop information delivery applications that provide visibility into the contract's life cycle, and processing capabilities—e.g., customers notify option exercise decisions online-both of which contribute to increase customer retention, reduce costs, and limit the potential for errors.

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