Customers

SG AM Alternative Investments

A custom and integrated solution to support growth in the capital protected, structured investments business

Société Générale Asset Management is the asset management subsidiary of the Société Générale Group. With €393 billion of assets under management as at June 30, 2007, Société Générale Asset Management is one of the world’s leading asset managers.

Business Opportunity

Société Générale Asset Management is one of the European leaders in alternative investments, a business managed by its SG AM Alternative Investments subsidiary. Within it, the Structured Asset Management (SAM) department, through the Structured Investments team, designs and manages option-based, structured investment products indexed on equities, stock indices and mutual funds.

In order to sustain a growing structured investments business and to meet regulatory requirements, the Structured Investments team chose to implement a dedicated software application.

Automated Valuation and Management of Structured Investment Products

SAM's Research team was asked to provide a solution and selected the MLFi language to develop an application that automates the valuation and the management of a portfolio of option-based, capital protected, structured investment products.

The application's main features are as follows:

• exact product definition;
• automated contract life cycle management and ability to replay a contract's event history from an arbitrary date;
• management of corporate actions, including a function to undo and rebuild a contract's history;
• automated generation of pricing code that reflects the state of each contract;
• link with in-house valuation models developed by the Research team;
• retrieval of market data (underlying spot prices, yield curve, exchange rates, volatilities and correlations, dividends) from SAM's database;
• event processing, corporate action, and valuation reports;
• export of valuation results for the production of integrated reports.

Technical Environment

Excel Integration

The structured investments application's front end is Microsoft Excel. The application leverages MLFi's integration module for Microsoft, which provides a simple and robust way of accessing product definition, valuation and event processing functionality from Microsoft products, including Microsoft Office, Microsoft Visual Basic, and applications written using Microsoft Visual Studio.

Java Integration

The structured investments application integrates with SAM's IT infrastructure in order to retrieve market data. SAM's market data service is implemented with Enterprise JavaBeans, a distributed application development and deployment environment in which a component is executed on a server and called from a remote client.

A MLFi program can manipulate Java clients: the structured investments application creates instances of Java classes and invokes their methods through the Caml/Java link and the Java Native Interface. MLFi is implemented as an extension of OCaml, a programming language developed by INRIA, The French National Institute for Research in Computer Science and Control, and benefits therefore from all of the integration tools developed for OCaml.

Benefits

The application frees the Structured Investments team from a number of technical and operational constraints:

• technical hurdles to product innovation are eliminated: new products are quickly described, priced, and integrated in the processing system;
• the automated processing of complex products reduces operational risk;
• a centralized software process avoids the dissemination of contract definition code in a multitude of Excel spreadsheets, which are traditionally difficult to audit and to maintain;
• regulatory requirements are satisfied: SG AM Alternative Investments independently values complex derivatives throughout their life.