The Department of Finance Canada has selected Reval Centre for independent derivatives valuations from financial risk management solution and service provider Reval. The government body will use the solution to provide option fair values for its Canada Savings Bond (CSB) and Canada Premium Bond (CPB) retail bonds.
The vendor has an existing relationship with the Department of Finance Canada to provide valuation of the special redemption features of the CSB and CPB bonds. Under the previous agreement, Reval priced options over US$1.9 billion of these types of bonds issued by the department last year.
In an effort to consistently price embedded options in CSBs and CPBs with the Government of Canada Bonds, the Department of Finance Canada is using Reval Centre to provide option prices for the structured bonds. The options are valued under a number of methods taking into account historical redemption patterns, funding costs, and multiple future market environments, according to Jiro Okochi, CEO and co-founder of Reval.