Investment Banks

Trading of Exotics and Hybrids

LexiFi offers a complete toolset that accelerates the independent development of trading applications for complex derivatives. The LexiFi solution addresses the needs of investment banks that manage books of exotic interest rate, foreign exchange, equity, and hybrid derivatives and want to overcome the limitations of ad hoc software solutions without surrendering control to a trading system vendor.

The LexiFi solution provides a shared financial product description standard that precisely reflects the evolution of a contract over time, an open pricing architecture that supports multiple integration scenarios with in-house resources, automated event processing capabilities, and tools for the rapid development and integration of trading applications.

Unlike payoff languages that focus exclusively on pricing—and often require manual adaptations as products evolve and lack integration tools—the LexiFi solution provides a foundation for automating the ongoing valuation, risk analysis, and operational management of exotic and hybrid portfolios.

Business Benefits

LexiFi enables product and service innovations with a strict control of market exposures, operational risk, processing costs, and software investments.

7 Reasons to Use LexiFi for Trading Exotics and Hybrids

	Accurate Representation of Exotic and Hybrid Products
	Accurately describe exotic and hybrid products based on any type and combination of underlyings using the Modeling Language for Finance (MLFi), a precise formalism that exhaustively describes the terms and conditions of financial contracts with a limited set of core constructs and reflects the contracts' evolution over time. Financial engineers rapidly design products with MLFi's finance library, which comprises higher level contract assembly components, including functions to handle market conventions, schedule builders, and predefined interest rate, foreign exchange, equity, and hybrid instruments. The finance library is delivered with source code. Traders create entire product families by specifying simple parameters and formulas in graphical trade entry screens. Learn more...
	Open Pricing Architecture
	Leverage in-house pricing resources. The system clearly separates the various pricing-related services and data elements in order to support a multitude of integration scenarios with existing valuation algorithms and calculation platforms.
	Automated Event Processing
	Automate the maintenance of structured products: systematically detect and process events in a portfolio of complex products, keep a full history of events, and perform the required simplifications as a contract progresses in its life cycle. Contract life cycle processing follows directly from MLFi definitions for every product, however complex.
	Proxy Contracts for Pricing and Hedging
	Transparently replace contracts or sub-contracts by proxy contracts for pricing or hedging purposes. For example, when a product exhibits unbounded deltas or gammas, traders may choose to dynamically hedge a substitute contract whose value is always greater than that of the original product. Likewise, a risk department may wish to estimate provisions for model risk by calculating the difference in value between a real contract and a substitute contract that overstates the liability of the real contract. The LexiFi solution automatically adjusts the values of the proxy contract's parameters when they depend on market data. The substitute contract is used strictly in a pricing or hedging context and never impacts the operational management of the portfolio. Hedge of European Digital Option Replace a European cash-or-nothing digital option by a call spread to hedge the portfolio
	Rapid Development of Microsoft .NET Applications
	Automatically generate significant portions of Microsoft .NET applications. For example, financial engineers and software developers derive graphical trade entry screens on the fly from the parameters that define a financial product. At the same time, the new product is linked with a set of suitable valuation routines. Database integration and event processing capabilities follow mechanically. This feature greatly simplifies the new product process and accelerates the development of valued-added trading applications. Generated Trade Entry Screen Derive graphical trade entry screens on the fly from the parameters that define a financial product. Click image to enlarge.
	Simple and Readable IT Model, Comprehensive Integration Tools
	Shield applications from the diversity or complexity of financial products with LexiFi's radically simplified contract representation. Transactions and their life cycle history are represented in a single document that applications may manipulate through a clear, well-documented API. In addition, LexiFi's schema-independent approach to database integration minimizes the number of tables used to represent financial contracts and exposes LexiFi's API to SQL programmers. LexiFi provides mechanisms for integrating MLFi-based applications with a number of technologies and standards, including C#, C++, C, and XML.
	Knowledge Transfer Program, Access to System's Internals
	The LexiFi solution was designed for innovative derivatives dealers who wish to independently develop trading applications. The toolset is delivered with a comprehensive knowledge transfer program that enables users to become fully autonomous. Almost every component in the LexiFi solution is delivered with source code. LexiFi's goal is to provide flexibility and to put customers in control of their derivatives infrastructure, not to tie them to a vendor.