The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

More Formal Management of Instrument Valuation Needed, Says Xenomorph

Xenomorph, the analytics and data management solutions provider to global financial institutions, has today released its white paper “Instrument Valuation Management: management of derivative and fixed income valuations in a multi-asset, multi-model, multi-data source and multi-timeframe environment”.

The white paper expands on the “Rates, Curves and Surfaces – Golden Copy Management of Complex Datasets” white paper Xenomorph published recently and describes how, despite the increasing importance of instrument valuation to investment, trading and risk management decisions, valuation management is not yet formally and fully addressed within data management strategies and remains a big concern for financial institutions.

Too often, says Xenomorph, valuations (and the analytics used to process input and calculate output data) fall between traditional data management providers and pricing model vendors. This leads to the over–use of tactical desktop spreadsheets where data “escapes” the control of the data management system, leading to an increased operational risk.

Whilst instrument valuation is certainly not the primary cause of the recent financial crisis, the lack of high quality, transparent valuations of many complex securities resulted in market uncertainty and in the failure of many risk models fed by untrustworthy valuations.

“A deeper understanding of financial products reduces operational risk and promotes quality, consistency and auditability, ensuring regulatory compliance,” says Brian Sentance, CEO Xenomorph. “Clients’ requirements have evolved and portfolio managers, traders and risk managers recognize that it is no longer sufficient to treat valuation as an external, black-box process offered by pricing service providers”, he adds.

Nowadays, regulators, auditors, clients and investors demand even more drill-down to the underlying details of an instrument’s valuation. It is therefore important to implement an integrated, consistent analytics and data management strategy which cuts across different departments and glues together reference and market data, pricing and analytics models, for transparent, high quality, independent valuation management.

“Our TimeScape solution provides a valuation environment which offers rapid and timely support for even the most complex instruments, allowing our clients to check easily the external valuation numbers, based on their choice of model and data providers,” says Sentance. “Otherwise, what is the point of good data management if the valuations and the analytics used are not based on the same data management infrastructure principles?”

Related content

WEBINAR

Upcoming Webinar: A new way of collaborating with data

Date: 15 April 2021 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes Digital transformation in the financial services sector has raised many questions around data, including the cost and volume of reference data required by each financial institution. Firms want to pick and choose the reference data they need to fulfil...

BLOG

Alveo Adds Postgres to Roadmap Combining Open Source Components with Core Data Management Solutions

Alveo, formerly Asset Control, continues to build its commitment to open source solutions with the addition of support for the Postgres open source relational database within its Prime, formerly AC Plus, financial data aggregation and mastering product. Postgres provides an optional replacement for Oracle database technology used by Alveo and its clients, and can reduce...

EVENT

TradingTech Summit London

The TradingTech Summit in London brings together European senior-level decision makers in trading technology, electronic execution and trading architecture to discuss how firms can use high performance technologies to optimise trading in the new regulatory environment.

GUIDE

Impact of Derivatives on Reference Data Management

They may be complex and burdened with a bad reputation at the moment, but derivatives are here to stay. Although Bank for International Settlements figures indicate that derivatives trading is down for the first time in 10 years, the asset class has been strongly defended by the banking and brokerage community over the last few...