Structured products definition.

Choose your favorite way to input a product amongst LexiFi Apropos’ many options.

LexiFi Apropos has been designed from the ground up to accurately record terms and conditions of tailored products and consequently generate their precise definition. Thanks to this unique definition, countless out-of-the-box financial structures based on any type and combination of underlying assets are available and can be managed, analysed and priced from inception to maturity in trading-quality entry screens. The product definitions evolve and adapt automatically in response to lifecycle events so that the definition always reflects the current state of the contract.

Figure 1: Product definition options

Automatic input

Definition differences between market participants for a same contract are one of the main sources of error in financial markets. Therefore, LexiFi has invested a considerable amount of resources in automating the input of financial products in the software database and developed several solutions.

• PDF Importer

An integrated PDF Importer available for a wide list of issuers allows users to drag and drop PDF termsheets directly in the software and automatically create the corresponding product in the system. This tool is constantly improved and the list of supported issuers is regularly expanded.

• Bulk import

Users can leverage LexiFi’s import/export functionalities to bulk import full portfolios of contracts in Excel, xml, csv or textual formats. The import feature is available for the creation of new contracts as well as the synchronisation of existing products.

• STP feeds

The most efficient way to decrease operational risk regarding product definition is to implement a solution from the beginning of the product line. LexiFi is thus working with some issuers, who are now able to directly provide their customers with the xml LexiFi version of traded products.

Manual input

LexiFi Apropos uses entry screens called ‘Instruments’ in order to manually define products. The software comprises two kinds of instruments:

• A long list of specific instruments

• A few generic instruments to allow users to define and process ad hoc or complex products without having to ask LexiFi to extend or develop a new instrument. An example of generic instrument is the user defined DIY (i.e. “Do It Yourself”). The DIY is an instrument based on periods, events and/or formulas.

Conceptually, the difference between ‘specific’ and ‘generic’ instruments is small: both have a set of parameters (e.g. maturity date, denomination, complex schedules, business rules, etc…); but the former typically have ‘standard’ parameters, while those for the latter may be more complex, which are often Excel-like expressions with access to many ‘primitives’. This allows the expression of new complex structures with the power of a scripting-like approach, without its drawbacks. Both types of instruments are mapped to the same formal contract algebra specification, so that all treatments are subsequently identical for both approaches.

The application also contains a notion called Product Types, which customises existing instruments with a predefined set of parameters. It constitutes a useful feature in the context of generic instruments such as the DIY.

The variety of products that can be defined in the application is so wide that it is almost impossible to provide an exhaustive list. We can, however, provide a record of the most common products traded by our clients.

Please note that nearly all our instruments can be used with any of the following underlying forms:

• Equity

• Interest rate

• Inflation

• Foreign exchange

• Commodities

• Credit

• Hybrid structures (combination of different kinds of underlyings).

Some of our specific instruments, with different variations, are the following:

• Capital Protected: single/multi underlying(s), basket, multi-basket, cap, put spread, bonus, Asian performance, up and out, rebate, quanto, compo, lookback strike, rainbow, callable, putable

• Interest Rate Note, steepener, flattener: fixed rate, floating rate, interest rate spread, inflation, scaled interest rate, formula, autocall on coupon sum, callable, putable, cap, floor, spread

• Range Accrual Note: floating rate, interest rate spread, inflation, scaled interest rate, formula, autocall, callable, putable, cap, floor, spread

• Interest rate switchable: fixed rate, floating rate, interest rate spread, inflation, scaled interest rate, formula, issuer or investor switch

• Switcher Growth: switchable product from equity, index, commodity to interest rate, issuer or investor switch

• Autocall: single/multi underlying(s), basket, multi-basket, continuous/daily/final or no barrier, firm or conditional coupon with fixed rate, floating rate, formula, memory effect, quanto, compo, phoenix, range features for bonus coupon, step-down, etc.

• Reverse Convertible: single/multi underlying(s), basket, multi-basket, continuous/daily/final or no barrier, coupon with fixed rate, floating rate, formula, callable, putable or autocall on coupon sum, quanto, compo

• Callable Stability Note: single/multi underlying(s), basket, multi-basket, continuous/daily/final or no barrier, coupon with fixed rate, floating rate, formula, autocall with immediate payment, callable, putable, autocall on total coupon, quanto, compo

• FX Accumulator: payment in different currencies, continuous/daily/final or no barrier, early redemption features

• Equity Accumulator/Decumulator: single underlying, continuous/daily/final or no barrier, single strike or up and low strikes, guaranteed periods and leverage

• FX Option: call/put, KI, KO, one touch, digital

• Bond Option

• Bonus: single/multi underlying(s), basket, multi-basket, continuous/daily/final or no barrier, quanto, compo, participation

• Booster: single/multi underlying(s), basket, multi-basket, continuous/daily/final or no barrier, quanto, compo, participation, cap, callable, putable

• Discount Certificate

• Twin Win: single/multi underlying(s), basket, multi-basket, continuous/daily/final or no barrier, quanto, compo, participation, cap, autocall, step-down

• Himalaya: multi underlying, multi-basket, quanto, compo, participation, Asian performance

• Swaps: support multiple currencies, inflation and overnight rates, rate interpolation for stub periods, etc.

• Inflation Cap/Floor/Swap

• Spread Option

• Swaption: support multiple currencies

• CDS, CDS Option, CDS Tranches

• Credit Linked Note, CLN Tranche: multiple credit references, recovery rate, fixed rate, floating rate, interest rate spread, inflation, scaled interest rate, formula, floor, cap

• Cap CMS

• Dual Currency Deposit

• FX Target Redemption Note: forward, accrual, dual, pivot

• Exotic Option: cross asset, one touch, no touch, digital, multi knock in/out - up/down, cliquet

• Compound Option: use a defined product as an option underlying

• Multi-Leg: combine different products in one structure

• Variance/Volatility Swap: supports products with additional features such as Knock In/ Knock Out/ Range (lower and/or upper), dividend adjustment, Variance/Volatility Cap etc. At maturity, the product is modeled through a generic formula.

The flexibility and the power of the technology behind LexiFi Apropos empower users to quickly define new structures without writing any code and easily design distinctive investment, financing and risk transfer solutions, with analytical tools quantifying their risks and rewards.