Financial products on the TEC10 rate, which is the market rate at which for the French government can borrow for 10 years, were under the spotlights because of the importance of the government issuances. This rate, which was originally 10 to 20 basis points below the swap rates, experienced its level exploding and exceeding the 10 years swap rates by more than 10 basis points since the beginning of the year. TEC10 productsâ marked-to-markets have undergone painful changes and have received particular attention on the investorsâ side. For Pricing Partners, the accurate pricing of these products has become an important priority. Therefore, Pricing Partners developed a new TEC curve, inferred quantitatively from TEC10Â® against CMS10 forwards whose quotation is relatively liquid in the market. A dynamical mathematical model related to this curve exploits also the volatility of the 10 years swaption market in order to price on any TEC10 options. The adjustment in terms of the rate compared to a classic dynamic model is done in vega to maintain a delta level close to the one of CMS products with an equally comparable volatility level.
In the same way, because of the widening of the spreads bias between the EONIA curve and the one based on the Euribor/ Libor, Pricing Partners has also developed an EONIA curve distinct from the one of Euribor/Libor to capture the liquidity impact between these 2 curves
Eric Benhamou, CEO of Pricing Partners comments âthe problem of a more accurate valuation on the products based on TEC10 and EONIA has become a major subject owing to the liquidity impact and government issuances. In order to provide an always improving service, we, Pricing Partners, are striving not only to focus on a more accurate modeling but also to positively respond to the expectations of our customers. We hope to win more reference thanks to this competitive advantage in the independent valuation field.â
Founded by former professionals of the trading floor, working in investment banks like Goldman Sachs, SociÃ©tÃ© GÃ©nÃ©rale, Natixis or HSBC, Pricing Partners has become over the last two years a major player. In October 2008, it launched its Internet independent valuation platform, Price-itÂ® Online, which affirms its leading place in the financial modeling as well as independent valuations provider. Designed for all major assets like Interest Rates, Equity, Inflation, Credit, Foreign Exchange, Commodities, and Life Insurance to Hybrid products, Price-itÂ® comes either as a software or an Internet Platform, providing all the tools for the transparent valuation on structured products. Price-itÂ® online uses cutting edge mathematical models together with a new language to describe the complexity of any structured products.