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A-Team Insight Blogs

Interactive Data Extends Its Interest Rate Swap Valuation Service

Interactive Data Corporation’s Pricing and Reference Data business has broadened the capabilities for its interest rate swap valuation service. This service assists clients by providing information they can use to help efficiently value their portfolios containing these OTC derivatives.

The service now covers Canadian dollars and New Zealand dollars. It has also been expanded to offer cross currency fixed for floating swaps for these two currencies, along with any combination of the 13 additional currencies it covers, including: Australian dollars, British pounds, Czech koruna, Danish krone, euros, Hungarian forint, Japanese yen, Norwegian krone, Polish zloty, Swedish krona, Swiss Francs, South African rand, and US dollars. Interactive Data also offers float-for-float basis swaps in 11 major currencies against US dollars.

Interactive Data estimates that it currently covers approximately 97% of the total notional amount of interest rate swaps outstanding. The Bank for International Settlements (BIS), in its semiannual OTC derivatives statistics release at the end of March 2009, found that the notional amount of interest rate and currency swaps outstanding was US$342.8 trillion at year end 2008.

“We expanded our interest rate swaps valuation service to meet the needs of our clients that are increasingly looking for work flow solutions to assist in the management of their interest rate swap valuations,” said Liz Duggan, managing director, Evaluations. “As investment portfolios contain a wider range of diverse and global OTC derivatives, clients can enjoy the benefit of an automated service that delivers independent valuations for these instruments.”

Interactive Data offers the ability to select either “same day” or “buyout” settlement. Same day convention applies the current day’s curve for same day valuation and is targeted toward back office operations. Buyout convention varies depending upon the valuation currency and may be of interest for front office operations such as trading desks.

Valuations are also available for single currency Libor/Libor basis swaps. Furthermore, clients can add up to three additional holiday calendars to every swap, which enables valuations for swaps that have been customized for individual counterparties. Interactive Data has also enhanced its zero coupon curves for most of the 15 currencies as part of the service. The new curves are constructed with either a combination of the domicile country’s cash rate data and Forward Rate Agreements or cash rates and futures data, which is part of a continual effort to reflect current market conventions in valuation methodologies.

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