The latest break-through in its Monte Carlo methodology builds on DerivaTech’s proven track record for innovation. DerivaTech solves the scalability problems encountered in pricing exotic options and structures by optimizing its pricing framework to efficiently value portfolios of options. DerivaTech OTC is unique among all vendor systems in its ability to generate market quotes by capturing the path-dependent nature of the structures and the market’s forecast of price distribution, as well as doing so impressively fast for a large number of options.
"OTC Version 5.0 allows for the first time to apply Monte Carlo to multi-leg exotic structures," explained Howard Savery, Senior Vice President, Business Development, at DerivaTech. "A strategy comprising up to 48 individual exotic options can be priced in virtually the same amount of time as a single option and well within tolerance levels for quoting to customers. The commercial potential of this numerical development is indeed significant. Users can effectively value a small exotics option portfolio within OTC. At the same time this methodology is being extended to DerivaTech DTRisk, our critically acclaimed portfolio risk management component, making it possible to accurately value and quantify risk for large exotics portfolios."
The new Strip Generator, with unlimited number of legs, significantly enhances OTC's structured products capability. Traders can quickly create strips of vanilla and exotic options, common vanilla strategies, or any custom strategy, using the strip wizard's built-in efficiencies and DerivaTech's market-proven volatility surface engine.
"Structuring complex transactions is an important business for banks in meeting the ever-increasing demands of customers" comments Savery. "Having the ability to quickly and accurately package ‘product’ provides a competitive edge to our customers. The Strip Generator in OTC 5.0 is the type of real value functionality we provide that increases the business opportunities for even the non-specialist players. Recognizing the increasing role of structures, in 5.0, we have made it possible to assemble deals with any number of components and any degree of complexity."
There are numerous other valuable additions in OTC Version 5.0, many in response to client requests, all resulting from DerivaTech’s on-going R&D program and the company’s unrivalled domain expertise. New derivative measurements, an area where DerivaTech continues to provide market leadership, have been added to the analytics area and their graphing has been improved. Volatility modeling accuracy has been tuned up to account for the complexities of long-dated and emerging market currencies.
"DerivaTech’s business objective has always been to help our clients stay ahead of their competition, maximize profits and minimize the volatility of their earnings by providing them with superior trading applications," said Nicholas Hatzopoulos, President and CEO of DerivaTech. "The significant advances we have made with the release of OTC Version 5.0 underscores that commitment."