The enhanced offering addresses the need for valuations of portfolios that might be liquidated and aims to provide a fair value disclosure for investors that foresee a liquidation event. The demand for liquidation price-based valuations has been amplified during the recent financial crisis, as well as by specific regulatory requirements such as FAS 157.
SuperDerivatives will use its benchmark model for bid and ask prices to calculate the liquidation price for all types of financial portfolios, including those that contain illiquid OTC derivatives. This addresses many daunting challenges facing the industry today by:
â¢ Accurately calculating the unique âbid â offerâ spread for each specific structure, replicating actual market âentryâ and âexitâ (liquidation) prices;
â¢ Adapting spread levels to changing market conditions based on inter-product correlations - a need that has been dramatically demonstrated during the current crisis;
â¢ Assessing a total portfolioâs collective impact on liquidation price.
Under the terms of FAS 157, firms are required to define the exit price of all instruments to calculate fair market value or "â¦the price that would be received to sell an asset or paid to transfer a liability." Additionally, during times of distressed market conditions, the exit price is the only price that matters to the portfolio manager looking to redistribute risk exposures.
âThe recent market turmoil has highlighted the need for accurate, independent valuation. Determining the liquidation price of derivatives, necessary for both regulatory compliance and to instil confidence in the investing community, can only be achieved with a combination of sophisticated modelling techniques and market data expertise,â said Dani Weigert, head of revaluation services, SuperDerivatives. âTodayâs financial crisis has proven that none of the available models, or âstandard analyticsâ can be used for universally calculating the fair value of options - and there is no off the shelf model for determining bid-ask spread. SuperDerivativesâ liquidation price-based valuation is therefore unique and cannot be generated by other revaluation providers.â
SuperDerivativesâ products and services are used by numerous companies from both the buy and sell side, including the majority of the banks worldwide, numerous corporations, asset managers, hedge funds, auditors and central banks. SuperDerivativesâ Revaluation service (SD-Revaluation) is used by numerous banks, hedge funds, asset managers, fund administrators and auditors and is widely considered as the most accurate service on the market.