Advanced pricing models

Use LexiFi's state-of-the-art pricing models or in-house models, and relevant market data to value tailored products. LexiFi provides proven implementations of both industry-standard and advanced pricing models that reflect market practice. Key pricing tool features include:

  • Underlyings. Price equity, foreign exchange, commodity, interest rate, inflation, credit and hybrid derivatives.
  • Market data. Access market data snapshots, historical time series and derived data such as yield curves and volatility surfaces from a central location to ensure consistent valuations and analyses across products and portfolios.
  • Calibration. Transform observable market data into relevant model inputs with robust calibration algorithms.
  • Multiple curves. Price with multiple yield curves to reflect the different credit and liquidity risk of Libor rates with different tenors and the overnight discounting of cash flows originated by derivative transactions subject to collateral agreements.
  • Issuer credit spreads. Discount cash flows with risky curves that reflect the credit risk of issuers.
  • Commercial margin. Include a commercial margin, amortised over time, in calculated prices.
  • Market data adjustments. Selectively adjust salient market data items to replicate counterparty prices.

LexiFi provides direct access to the financial engineers who are implementing pricing models.

If required, users may also leverage LexiFi's open pricing framework to interface LexiFi Apropos with in-house and third-party valuation libraries.

Precision, speed and robustness

For more than a decade, LexiFi has been working closely with market participants and drawing on advances in mathematical finance and numerical methods to perfect a financial engineering library that delivers precision, speed and robustness.

Highlights

  • LexiFi's library comprises proven implementations of both industry-standard and advanced pricing models to estimate the value and risks of a product or portfolio. Available model implementations cover all major asset classes.
  • The library is optionally available in source code to ensure complete transparency.
  • With a choice of Monte Carlo, PDE and closed-form model implementations, users choose the right tool for the right problem.
  • All model implementations are delivered with related calibration algorithms and tools to tune calibrations and inspect results. Powerful market data filters facilitate the creation of custom calibration inputs.
  • The library also comprises curve construction algorithms and an extensive collection of utilities.
  • Instead of using LexiFi's market data transformation routines (e.g., curve construction, calibration) users may also feed pre-calculated model inputs.
  • A collection of pricing tools provides detailed insights into price, risk and P&L calculations.
  • Monte Carlo model implementations support high dimensions as well as early decisions through an extended version of the Longstaff Schwartz American Monte Carlo algorithm. This method can be applied to price path-dependent callable products.
  • To speed up the valuation of certain types of path-dependent callable products, the library also comprises path-dependent PDE implementations.
  • LexiFi Apropos users praise the speed of LexiFi's valuation algorithms. Both Monte Carlo and PDE model implementations leverage original compilation techniques designed to translate complex payoffs into highly optimised, native machine code. Additionally, LexiFi exploits an array of financial engineering and software techniques—including automatic variance reduction methods (see our blog), closed-form detection and pricing on multiple CPUs—to boost pricing performance.
  • The library uses multiple yield curves to reflect the different credit and liquidity risk of Libor rates with different tenors and the overnight discounting of cash flows originated by derivative transactions subject to collateral agreements.
  • When pricing notes, users discount cash flows with risky curves that reflect the credit risk of issuers.
  • LexiFi automates the pricing of a product from inception to maturity. Product definitions adapt automatically in response to life cycle events such as payments, fixings, option expiries, barrier crossings and equity corporate actions. A strict separation between product definitions and pricing algorithms ensures that pricing routines do not need to be modified to reflect life cycle events.