Risk Engine covers the following (financial) instruments:
- Index-linked Cash;
- Private Equities.
Capital instruments with optionally embedded spread risk:
- Bonds: straight, floater, inflation;
- Money Markets: bullet, capitalisation, rollover;
- Loans: annuity, regular (fix, float);
- Deposits: savings, user-defined;
- Swaps: FX, CC, IR (fix/fix, fix/float, float/float);
- Other: cash accounts, CDS, credit line, FRA, FX Outright;
- User-defined by Rule-Based Instruments (RBI).
- Option on bond future, commodity, FX, IR, stock, stock index;
- Cap / Floor;
- Futures on bond, commodity, FX, IR, stock index;
- CFD on instrument, stock index;
- User-defined by RBI.
Modelling and pricing of structured products and exotics through RBI:
- A multi-factor trigger market defines market factors in future time points.
- Expectations for future values, volatility and correlation are used in triggering market simulation.
- Free-behaviour definition of structured products, based on pay off expressions.
- Simulation of price distribution: calculation of mean, risk and other figures.
Modelling and pricing of structured products and exotics using the multi-factor approach:
- A sub-set of known market factors with time series (e.g. rates, prices, indexes, etc.), is selected from a large set of factors, using similarity search to target product time series.
- A regression is 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 historical behaviour and can be used for pricing calculations, as well as for predictions of the instrument’s future behaviour.