Interactive Data Corporation, a provider of financial market data, analytics and related services, has announced an exclusive agreement with Prism Valuation that will give its pricing and reference data business the capability to provide valuations of highly complex OTC derivatives and structured products.
Prism Valuation, which was founded in 2006 and has offices in London, Melbourne and Toronto, provides valuations of complex OTC derivatives and structured products based on a wide range of underlying markets including interest rates, foreign exchange, inflation, equities, credit, commodities and hybrids.
Prism Valuation's primary strategy in providing independent valuations, transparency and risk analysis of structured products is to emulate the capabilities of a structured products dealer by synthesising underlying market data and appropriate valuation models and implementing relevant calibration and valuation strategies.
The firm can evaluate and perform analysis on deals not yet in the broader market domain for clients involved in newer structured products. It has strategic relationships with Icap, the world's biggest interdealer broker, for up-to-date underlying data, and NumeriX, a provider of cross-asset pricing and risk analytics for exotic derivatives and structured products. Under the agreement, Interactive Data has purchased a stake in Prism Valuation, joining Icap as a minority shareholder.
Interactive Data's clients will be able to request valuations on a per instrument basis, which will be calculated by Prism Valuation's quantitative analysis team and delivered via FTS, Interactive Data's securities administration tool. Interactive Data already has clients who that subscribe to these valuations.
Interactive Data will offer a service including valuation transparency reports that provide a breakdown of the method to achieve a given valuation for each deal, including a detailed discussion of the models and calibration strategies selected, to help clients comply with regulatory and auditing requirements.
'We are delighted to enter this relationship with Interactive Data, which has many years of experience in evaluated pricing, and extensive global distribution channels,' says Prism Valuation president and chief executive Greg Cripps.
'We look forward to offering our independent valuation services of complex products via Interactive Data, and delivering valuations and risk analysis transparency to help customers adapt further to an increasingly regulated global business environment.'
Roger Sargeant, managing director of Interactive Data (Europe), adds: 'Financial institutions continue to invest in ever more complex financial instruments in order to achieve portfolio diversification, hedge risk, optimise performance and drive growth.
'As part of our strategy to address our customers' evolving needs, we continue to expand the breadth and depth of our coverage by adding pricing and valuations of more complex, esoteric structured products. Given the current credit and trading conditions, our relationship with Prism Valuation will help customers meet their mark-to-market pricing obligations as well as the demands of credit and risk management and portfolio management.'
Through its pricing and reference data business, Interactive Data is an independent provider of daily evaluations for fixed-income securities, with teams of evaluators operating in three time zones evaluating some 2.5 million issues every day on behalf of more than 5,000 financial institutions worldwide ranging from central banks to large investment banks. The company has 2,300 employees at its headquarters in Bedford, Massachusetts and offices throughout North America, Europe, Asia and Australia.