RE covers a large set of instruments from financial and non-financial portfolios in different industries:
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Equities:
- Share
- Fund
- Commodity
- Index linked
- Index linked cash
- Private Equity
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Capital instruments with optionally embedded spread risk:
- Bonds: straight, floater, inflation
- Money markets: bullet, capitalization, rollover
- Loans: annuity, regular (fix, float)
- Deposits: Savings, user defined
- Swaps: FX, CC, IR (fix/fix, fix/float, float/float)
- UVG
- Other: cash accounts, CDS, credit line, FRA, FX Outright,
- User defined by RBI
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Derivatives:
- Option on bond future, commodity, FX, IR, stock, stock index
- Swaption
- Cap / Floor
- Future on bond, commodity, FX, IR, stock index
- CFD on instrument, stock index
- User defined by Rule Based Instrument (RBI)
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Modeling and pricing of structured products and exotics by the RBI (Rule Based Instrument)
- A multi-factor trigger market defines market factors on future time points
- Expectations for future values, volatility and correlation are used in trigger market simulation
- Free behavior definition of structured products based on pay off expressions
- Simulation of price distributions, calculation of mean, risk and other figures
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Modeling and pricing of structured products and exotics using the Multi-Factor approach
- A sub-set of known market factors (rates, prices, indexes, etc.), with time series, is selected from a large set of factors, using similarity search to target product time series
- A regression is then used to find a pricing expression, including known factor sub-sets, weights and functions, such as exp, log, power, etc.
- The pricing expression replicates the product’s historic behavior and can be used for pricing and for the calculation of the instrument’s future behavior.