New York (February 11th, 2003) - In response to new accounting standards and well-publicised problems associated with assigning a fair value to derivative positions, GFI, today announces the launch of a new service that provides risk managers with access to independent data for the estimated $2.6 trillion FX options market.
GFI, a leading broker in FX options will set daily, at 10am EST1, implied volatility surfaces for over-the-counter ("OTC") FX options for 20 of the most frequently traded currency pairs. Risk managers in banks, other financial institutions and buy-side firms that use FX options, are expected to find this data invaluable for revaluing their FX derivative portfolios. The data will reflect actual, traded, inter-bank prices "live" with GFI, supplemented with quotes from the company's brokers.
The GFI "revaluation fixings" can be easily downloaded directly into institutions' risk management systems or into GFI's FENICS FX software, which has over 10,000 users globally and is considered the benchmark in FX option pricing and risk management. GFI is also partnering with Moneyline Telerate to deliver the revaluation service directly to Moneyline Telerate market data screens worldwide. The service will be displayed on Telerate pages 3760-65 and 3771-75. A subset is also published daily in the Financial Times.
"Current and future regulations2 require institutions to precisely and independently revalue their derivative contracts so that changes in their market value can be recorded. To date there have been no means to do this for FX Options. Whilst capturing the correct spot, forward and deposit rates necessary for revaluing FX positions has been straightforward for some time, obtaining the correct implied volatility parameters for FX options remains a problem," said Mike Binns, FX Market Specialist, GFI.
Tim Leitch, Global Head of FX Options, JP Morgan Chase said; "The market is in need of a transparent, independent, comprehensive and reliable service that delivers the FX volatility parameters necessary to revalue individual and aggregated FX options."
Jeff Maron, Vice President Global Content, Moneyline Telerate, said; "GFI is in the best position as an independent market participant to provide impartial data that meets this demand. The new revaluation fixings cover more data points within each currency pair and more currency pairs than any other FX option data service. This makes their data easily the most comprehensive and reliable offering in the marketplace."
GFI will provide daily, implied volatility data for each of the twenty currency pairs in which the vast majority of business is transacted from one week to 12 months. For each time period GFI will provide not only At The Money Forward ("ATMF")3 and 25 delta points, but will also, uniquely generate 10 delta points in order to achieve a high degree of accuracy.
Mike Binns continues; "We believe that providing the revaluation fixings and in a format which allows risk managers to input these into their own software promotes the most transparent solution for the whole marketplace - both buy-side and banks. Our early investigations concluded that any attempt to produce a "black box" that simply delivers actual market prices would not offer a transparent solution and would ignore interdependencies between options within a portfolio."