Financial Markets Portfolio Revaluation System

Abstract

This paper considers a paradigm financial markets trades booking and valuation, data subscription and portfolio revaluation system. Traded instruments covered include: spot and forward exchange rates (FX); credit default swaps (CDS); total return swaps (TRS); commodity and bond futures; traded and OTC options on exchange rates, equities, market indices, futures, bonds and bond-futures; interest rate caps, floors and swaptions; floating rate, fixed rate, asset backed (ABS) and structured product bonds; interest-rate, cross-currency and exotic swaps. Market data covered include: spot and forward exchange rates and non-deliverable forwards (NDFs); credit default swap curves, spreads and recovery rates; equity prices and dividend rates; futures prices; actual and implied option-type volatilities, smiles and skew; implied correlations; historical price series; bond prices and reference spreads; Libor-type and bespoke fixings; swap curve, basis curve and Treasury and credit-adjusted yield curves. Operational and market risk reporting covered includes: data quality and completeness, P/L sensitivity analysis, BPV and interest rate risk, portfolio VaR and market risk scenarios; ISDA collateral revaluation and collateral call management. Revaluation methods considered include: market pricing, market quotation, benchmarking against reference instruments, analytic valuation and quant computational (e.g. Monte Carlo, trinomial tree).

Keywords: FX, CDS, TRS, OTC, options, derivatives, yield curves, ABS, BPV, VaR, collateral

JEL Classification: C12, C13, C15, B23, C52, C61, C63, E47, F31