Hi all,
Keeping up with the latest trends and innovations in financial instruments can be challenging, especially when it comes to maintaining efficient booking, pricing and management workflows. At LexiFi, we value the importance of staying ahead of the curve, which is why we have developed a generic solution allowing you to welcome financial product innovation.
In that context, and as synthetic dividends and transatlantic indices continue to gain popularity among our clients, we understand the necessity of being able to easily book, price, and monitor products based on these underlyings, from the simplest to the most complex ones.
Synthetic dividend-linked products booking - simplified
You can book every variation of synthetic dividend-linked products whether it is at the underlying level or the product payoff level. The basic cases of underlying assets incorporating synthetic dividends can be defined in the Static Data as underlyings with a specific dividend kind mechanism. Our team of experts has created a specific configuration to ensure a seamless booking process. Users can define the underlying in the Static Data, set the dividend type to synthetic, and adjust the decrement amount in percentage or points. They can also select the underlying reference, which is then utilized as a proxy to estimate volatility.
Once the underlying is set up, clients can easily validate the payoff and verify the integration of synthetic dividends using quantitative visualization tools such as the forward curve inspector.
For the more advanced cases, users can define the dividend mechanism within the payoff definition through LexiFi Apropos’ generic templates, e.g. DIY (for Do it Yourself). LexiFi Apropos allows specifying a given dividend mechanism within the payoff thanks to the DIY flexibility. In the case of complex mechanisms, our Product Specialist team is available to assist with the booking process. The added benefit is that these newly defined financial instruments can be saved as product types in the database for future use.
Going transatlantic? Discover ‘how to’ in Lexifi Apropos
Transatlantic indices are designed to provide exposure to a fixed count of stocks across different equity markets (US and Eurozone for example). It is now easier to book transatlantic products by defining underlying proxy indices directly in the underlying definition (i.e. Static Data page) and assigning a distribution weight. Static Data was extended to be able to configure them.
The proportion of each currency/index can be specified in the underlying definition. For example, an index 70% EUR 30% USD can be configured as 70% EURO STOXX 50 and 30% SP 500. We can choose to observe each component either compo (the proxy value is converted on the index currency) or quanto (the proxy value is observed on its currency).
Pricing wise, the index is automatically replaced by a performance basket with a strike set at the pricing date (with weights as defined in Static Data), normalized by the spot:
I(t) = I(pricing_date) x sum (w_i x Proxy_i(t)/Proxy_i(pricing_date))
Thus, market data necessary for the pricing will be:
- Index spot price
- Proxies spot prices
- Proxies Volatility and forwards
- Index currency rate curves
Greeks and VaR are calculated in reference to proxies.
CVA will behave in a similar way as if a contract was created by entering the proxy manually (exactly like a contract with the underlying being the performance basket, with a strike at transatlantic index spot price).
Everything is possible…
More globally, LexiFi Apropos clients benefit from a powerful booking process and immediate access to features and tools:
- Book any product:
“One of the biggest differentiators of LexiFi is their modeling of financial products through a clearly defined grammar with a very good extensibility. The simplicity of the interface is also a notable competitive advantage.” Manfred Beckers, CEO of Fact.
“LexiFi Apropos allows Natixis Investment Managers International (NIMI) to Prototype, define, value and manage tailored products through easy access to functions and data. The software has enabled NIMI to price 99% of the products from complex to vanilla.” Abdoul Aziz Diallo, Head of Structuring at Ostrum. “We have access to a large choice of pricing models in LexiFi Apropos for all asset classes. Plus, pricing and calibration are fast, well documented and easily audited!” Jordan CHU, Quantitative Analyst at CIC Market Solutions.
What we're reading
Eurex dividend derivatives report: Undividend Attention
Latest client stories
QUINTET PRIVATE BANK: Fabrice Todeschini, Group Head of Global Structured Solutions, explains the success of the collaboration between Quintet Private Bank and LexiFi.
SILEX: Alexis de Bernis, Chief Technology Officer at Silex, speaks about Silex’s main achievements with LexiFi Apropos, and more
Features in focus
Structured products definition
OTC derivatives and structured products golden database
Pricing methods
Pricing models
Thanks!
LexiFi Team