Open pricing framework
LexiFi clearly separates the various pricing-related data elements and services in order to support a multitude of integration scenarios with existing valuation algorithms and calculation platforms.
Linking contract definitions with pricing models
LexiFi's generic pricing framework relies on code generation techniques to derive optimised pricing code from MLFi contract definitions. The resulting pricing code is then linked with pricing model implementations using a well-defined programming interface. LexiFi's customers can choose to rely on LexiFi's pricing models or use instead, or in addition to them, their own in-house or third-party pricers.
As an illustration of how LexiFi's unique code generation approach allows customers to leverage existing investments in pricing technology, here are some examples of integration with LexiFi's pricing architecture:
- LexiFi's implementation at Natixis Asset Management: in the early phases of the project, the customer has integrated some Monte Carlo pricers from Pricing Partners (now Thomson Reuters) into LexiFi Apropos, using LexiFi's pricing API.
- LexiFi's integration in SimCorp Dimension: to complement the use of LexiFi's pricers, SimCorp, FinCad and LexiFi have jointly developped a generic bridge between LexiFi's pricing architecture and FinCad F3 pricers.
- LexiFi's integration in the Bloomberg Professional service: Bloomberg's proprietary Monte Carlo pricers and calibrated quant models are dynamically linked with pricing code generated by LexiFi's instrument box. Learn more...
- LexiFi's implementation at E.ON Global Commodities: LexiFi Apropos is integrated with the customer's pricing servers.
Maintaining the contract-model link as contracts age
The MLFi language fully describes the semantics (i.e., the meaning) of contracts from inception to maturity: on each date, the state of the contract precisely describes the residual rights and obligations of the parties.
LexiFi's pricing framework is able to derive optimised pricing code from a MLFi contract in an arbitrary state. This guarantees that pricing code always mirrors the state of each contract. The combination of MLFi's pricing and operational management frameworks provides a uniform setup for valuing complex products as they evolve in their life cycle, for simulating the value of a contract over a set of future dates and for calculating value at risk and potential credit exposures on a portfolio of exotic products.The fact that MLFi correctly reflects the evolving structure of financial contracts has two additional benefits:
- Optimal pricing. MLFi updates pricing code as contracts transition from state to state. This provides an opportunity to use the most efficient pricing algorithm, including closed-form solutions when they exist, in each contract state. For example, MLFi generates pricing code that accurately reflects the decreasing dimension of certain basket-based equity derivatives in which underlying assets are progressively removed from the reference basket.
- Correct handling of time-related events. The impact of time-related events such as coupon payments on the behaviour of a contract must be carefully reflected in traditional pricing algorithms. MLFi eliminates this important source of programming errors by generating valuation code that exactly mirrors the state of each residual contract.