Pricing and Quantitative Analytics.

Pricing and Quantitative Analytics.

Good Afternoon,

Welcome to this month’s focus! This edition gives you a brief overview on some possible uses of LexiFi pricers. We remain at your disposal if you need specific information.

LexiFi’s pricing engine is fully integrated within the software as opposed to an external pricing library or an Excel add-in. This technological integration makes it easy to pick up on the tool. But most importantly, it gives users access to an exhaustive and scalable quantitative kit.

According to LexiFi users what’s special about our quantitative tools is the:

  • Speed
  • Access to a list of relevant models generated automatically for any given product; as well as a default model to price in one-click
  • Advanced quantitative analytics accessible through a user-friendly tool
  • Choice between “one-click” pricing calculations and different levels of parameter customization
  • Complete auditability of pricing and quantitative calculation steps
  • Total integration with both the reporting and the document modules

Beside usual valorizations and risk analyses, concrete use cases include the generation of regulatory documents such as the KID, the computation of capital requirement ratios such as SCR and initial margin requirements following the EMIR rules. LexiFi teams keep eyes and ears open to remain ahead of the latest regulations and provide clients with necessary tools to help them remain compliant.

YOU NAME IT, WE PRICE IT

Provided models cover all asset classes: equities, foreign exchange, commodities, interest rates, inflation, credit and hybrids. Users can perform a full quantitative analysis as LexiFi gives access to structuring tools, in-depth pricing and scenario analysis at any point in time (backtesting, forward simulations, stress testing, etc.)!

THE BACKSTAGE

LexiFi pricers offer instant pricing, in one click. LexiFi users cite the pricing speed among the biggest advantages of the engine. This ready-to-use tool is also highly customizable for users who wish to use specific models and parameters.

There are 3 steps behind the pricing:

1-Model selection:

Each model is scored based on the product’s characteristics. The best-ranked model based on these scores is the default model for the product of interest. Pricing can be executed with the preselected model or users can select a different one from a list of eligible models.

2-Parameters selection:

Pricing parameters are automatically pre-defined, but users have the ability to customize all model parameters to obtain pricing specifications meeting their needs. LexiFi’s software allows to store model and parameter choices as “Pricing Profiles” that may be associated with contracts for future use.

3-Market Data, Calibration and Rate Curve:

LexiFi automatically generates a query that is sent to the market data source, based on the combination model/product. As a result, users do not need to bother with the listing of all required market data. Regarding rate curve stripping and model calibration, the tool provides an auto mode allowing a one-click pricing process, or users can input their own yield curve and pre-calibrate the model with their preferences and assumptions. User calibrations can be stored and reused anywhere within the software.

THE EXTRA MILE

Our technical team went even further by adding an Extra Results option which opens the door to other crucial information, such as cash flow details, probabilities of barrier crossing and early redemptions. Other quantitative metrics such as Greeks, Value at Risk (VaR), scenario testing, etc. are derived from pricing and made accessible within LexiFi’s pricing tool.

A GLASS BOX

We provide our users with a detailed pricing documentation so that they can inspect and verify our model implementation and assumptions.

Moreover, we provide interactive tools such as the PDE Inspector and the Monte Carlo Simulation Inspector to help users better understand and explain computed prices. These tools display pricing details, graphs, distributions and tables which are easy to read and conveniently exportable for additional post-treatments.

Whether it is for an audit, regulatory and business requirements, or simply intellectual curiosity, saved prices are easily accessible with all relevant details. Users therefore, keep an exhaustive audit trail of price calculations.

AT THE FOREFRONT OF INNOVATION

Our team of quants and developers combines the best ideas from academic research with cutting-edge technology to keep up with financial market challenges.

On the one hand, our clients allow us to constantly learn and adjust pricers by challenging LexiFi prices and methodologies against current market practices.

On the other hand, our quant team is able to promptly implement innovative academic publications using LexiFi’s technology efficient technological infrastructure. Recent additions and developments include but are not limited to: Multidimensional static replication, Cheyette model extension, and adjusters’ implementation.

This approach is consistent with our corporate culture of constant innovation and inspired by a number of LexiFi employees who have been actively involved in the academic sphere.

HOW CAN IT BE GENERIC AND FAST

LexiFi’s formal description of financial contracts — sometimes assimilated to a “DNA string” for derivatives— makes it possible to price almost any financial product entered in the database.

What? What does that even mean?

Well, what makes our pricers generic and fast is that LexiFi’s technology defines payoffs using an algebraic representation (LexiFi’s syntax) reflecting their evolution over time (i.e. lifecycle event monitoring). As a consequence, inside the software, there is a strict separation between product definitions and pricing algorithms which ensures that pricing routines need not be modified to take into account new lifecycle events.

If a new pricing model or a new financial instrument is added, there is no need for heavy error-prone and time-consuming developments. The compatibility is automatic: any new model can be applied to all relevant financial products; any new financial structure is eligible to any relevant model. Same goes for all quantitative analytics, ensuring an almost effortless longevity to this tool without compromising its power and its scalable signature.

Quantitative Analytics for Dummies

Read more about LexiFi pricing in general

Many thanks!

LexiFi team