SuperDerivatives, a provider of derivatives pricing and of multi-asset front-office systems, risk management, revaluation and online options trading solutions, has announced it will provide the liquidation or exit price for all derivatives held within clients' portfolios as part of its independent portfolio revaluation service.
The service addresses the need for valuations of portfolios that might be liquidated and aims to provide a fair value disclosure for investors that foresee a liquidation event. The demand for liquidation price-based valuations has been amplified during the recent financial crisis, as well as by specific regulatory requirements such as FAS 157.
SuperDerivatives will use its benchmark model for bid and ask prices to calculate the liquidation price for all types of financial portfolios, including those that contain illiquid OTC derivatives.
The firm says the service addresses various challenges facing the industry today by accurately calculating the specific bid-offer spread for each structure, replicating actual market entry and exit prices, adapting spread levels to changing market conditions based on inter-product correlations - a need that it says has been dramatically demonstrated during the current crisis - and assessing a total portfolio's collective impact on liquidation price.
Under the terms of FAS 157, firms are required to define the exit price of all instruments to calculate fair market value or 'the price that would be received to sell an asset or paid to transfer a liability'. Additionally, during times of distressed market conditions, the exit price is the only price that matters to the portfolio manager looking to redistribute risk exposures.
'The recent market turmoil has highlighted the need for accurate, independent valuation,' says Dani Weigert, SuperDerivatives' head of revaluation services. 'Determining the liquidation price of derivatives, necessary for both regulatory compliance and to instil confidence in the investing community, can only be achieved with a combination of sophisticated modelling techniques and market data expertise.
'Today's financial crisis has proven that none of the available models, or standard analytics, can be used for universally calculating the fair value of options - and there is no off the shelf model for determining bid-ask spread. SuperDerivatives' liquidation price-based valuation is therefore unique and cannot be generated by other revaluation providers.'
SuperDerivatives' products and services are used by companies from both the buy- and sell-side. Its real-time pricing platforms are used by almost all banks around the world, as well as corporations, asset managers, hedge funds, auditors and central banks. SuperDerivatives' revaluation service, SD-Revaluation, is used by banks, hedge funds, asset managers, fund administrators and auditors.
The company also provides risk management systems, an online trading platform, derivatives data and portfolio revaluation services that use its benchmark pricing model and independent global market data network. SuperDerivatives has clients in more than 60 countries and offices in London, New York, Buenos Aires and Paris.