About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

OTC Val Expands Derivatives Coverage to Synthetic and Bespoke Products to Meet Growing Client Demand

Subscribe to our newsletter

OTC Valuations (OTC Val), a provider of independent derivatives valuation and risk reports for structured products and exotic derivatives, has expanded its derivatives coverage for credit, inflation, equity, FX, and fixed income products. The vendor has increased its asset class coverage to meet client demands for both vanilla and complex derivatives pricing.

OTC Val has expanded its valuation platform to include synthetic and bespoke credit products such as CDOs. Its inflation coverage includes Bermudan-callable ZC and YoY inflation swaps and its equity and FX coverage includes structured basket products with barriers, triggers, and TARN features.

The vendor’s fixed income coverage encompasses CMS spread and range accrual swaps, including range accruals with time dependent and stochastic barriers.

The vendor added these derivatives in response to a growing trend in the structured products arena across all asset classes, says Bob Sangha, managing director at OTC Val. “For example, we are seeing an increasing demand for inflation products in response to the current market conditions.”

He reckons these instruments complement OTC Val’s existing coverage, which includes: vanilla as well as capped and conditional variance swaps on equities and indices, equity swaps, equity basket options, interest rate swaps and swaptions, CDS, Index CDS, CMS swaps, and Libor range accrual swaps.

“The new product coverage not only enables clients to fill their exotic derivatives valuation needs, but also offers a single independent valuation source for their portfolios,” he says.

The enhanced coverage will enable clients to fill a valuation gap that cannot be addressed by in-house valuation processes or third party systems, Sangha continues.

It will improve valuation controls and processes by receiving independent pricing of their derivatives portfolios rather than relying on broker quotes or counterparty marks. The service will also allow them to comply with market pressures from associations such as the Hedge Fund Working Group and the Alternative Investment Management Association (AIMA) for independent valuations, he adds.

Furthermore, it will allow them to gain transparency and clarity into complex instrument pricing give them the ability to view a single valuation report or integrate a single valuation feed into their
internal systems.

“While implementing the appropriate models and methods is an important component in achieving valuation accuracy, so too is the use of the right market data in the valuation process,” says Sangha.

“The challenges posed by complex and structured products is the integration of market data in a valuation system such that the appropriate data is utilised for a specific instrument,” adds Sangha. “For example, for instruments with limited price discovery or that cannot be replicated easily selecting the right model and method introduces model assumption risk, as every model needs some sort of justification for the values of its parameters, either via calibration or some other reasonable guess. For illiquid and hard to value instruments, our market professionals offer mark-to-model valuation based on careful calibration.”

Given the growing interest in exotic derivatives and structured products among alternative asset managers, hedge funds, and institutional investors, a need has arisen for accurate, timely, and transparent valuations. Fund administrators, asset servicing firms, and custodians who provide services to clients with exotic and illiquid products require either an in-house solution, or an outsourced solution to a third party vendor.

“There are a number of vendors that offer valuation services for vanilla and commoditised instruments or for structured products in certain asset classes,” says Sangha. “This has created void in the market for one solution to address valuation needs across all asset classes. OTC Val’s mandate is to fill this void and become the leading valuation vendor by delivering the most comprehensive solution in the market.”

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: How to optimise SaaS data management solutions

Software-as-a-Service (SaaS) data management solutions go hand-in-hand with cloud technology, delivering not only SaaS benefits of agility, a reduced on-premise footprint and access to third-party expertise, but also the fast data delivery, productivity and efficiency gains provided by the cloud. This webinar will focus on the essentials of SaaS data management, including practical guidance on...

BLOG

The CSRD – Governance, Workflow, Data and Technology Impacts for 2024

In the rapidly evolving world of corporate governance, environmental, social and governance (ESG) criteria have emerged as a cornerstone of responsible business practice. With stakeholders increasingly demanding transparency and accountability, the need for robust ESG reporting continues to grow. Enter the Corporate Sustainability Reporting Directive (CSRD), the ambitious regulatory framework aimed at standardising sustainability reporting...

EVENT

Data Management Summit New York City

Now in its 14th year the Data Management Summit NYC brings together the North American data management community to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

MiFID II Handbook

As the 3 January 2018 compliance deadline for Markets in Financial Instruments Directive II (MiFID II) approaches, A-Team Group has pulled together everything you need to know about the regulation in a precise and concise handbook. The MiFID II Handbook, commissioned by Thomson Reuters, provides a guide to aspects of the regulation that will have...