Pricing Partners was already known to have a very broad coverage since its flagship software Price-itÂ® already permitted to value derivatives on interest rates, equity, index, funds, credit, inflation, foreign exchange, commodities, and hybrids. With this new module specialized in life insurance products, Pricing Partners makes an important step towards universal coverage. Price-itÂ® library now counts 8 asset classes.
This module is available in Price-itÂ® Excel and Price-itÂ® Source Code. It should arrive shortly on the independent valuation platform Price-itÂ® Online, which has been recently supported by Microsoft as part of its assistance program to innovative start-ups working on the most promising Microsoft technologies. Price-itÂ® Online has thus been the subject of a strategic partnership between the French company and the Richmond giant through the IDEAS program.
This module enables to value virtually any variables annuities products thanks to a powerful scripting language. The solution includes many turn key examples like customized GMAB, GMDB, GMIB, GMWB with a Lapse component and the possibility to switch between deterministic and stochastic rates. The enriched language is intuitive and flexible. It can describe the intricate details of variables annuities with specific terms like ratchets and dynamic lapses. In terms of new models, Price-it now contains a deterministic mortality model allowing the user to provide his own forecasts and the Lee Carter model, similar to the one of JP MorganÂ®âs LifeMetricsÂ® platform. Finally, the "Lapse" keyword has been empowered to allow combination between dynamic and optimal lapse.
Pierre Gauthier, financial engineer adds: "This new module is a breakthrough in the life insurance industry as it enables insurers to measure their risk exposure to interest rates and equity markets with the same accuracy as leading investment banks. In addition, the transparency of Price-itÂ® Excel gives access to very useful information, such as the price of the product for each Monte-Carlo simulation, giving very meaningful insights."
Eric Benhamou, CEO of Pricing Partners comments: "We are achieving our ambition of being the world largest pricing library in terms of covered asset classes. With our revolutionary technology of generic cash flow description Price-itÂ® language, we are able to provide models, tools and independent valuation on almost all products traded in the world. With the simultaneous launch of our life insurance module and our Price-itÂ® source code solution, we are also becoming the world most transparent solution in the valuation space."
This module has been the result of fruitful discussions and exchanges with leading insurance companies. It has required substantial work to include in the software all the tiny details of life insurance products. Pusca Ana, head of customer service, adds "Pricing Partners new client should find in this new module a key combination of finance and insurance specificities making the tool very helpful and constructive for the proper risk assessment of their life insurance products."
The announcement comes at a time where transparency and independent valuation of products like "variable annuities" becomes a burning issue for insurance companies. These products are relatively complex and illiquid, making their objective valuation demanding. Following the recent crisis, these products have come under scrutiny with the growing concern around non-liquid and complex products.
This extension to this new asset class makes perfectly sense for Pricing Partners. 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 cutting edge models, analytics for OTC derivatives and structured products as well as a provider of independent valuations and revaluations with a very large asset coverage. In October 2008, it launched its Internet independent valuation platform, Price-itÂ® Online. It also partnered with NYSE Euronext via Primesource to reach a more global scope. Indeed, Pricing Partners intends to give to the financial community an effective response to the recent problems and concern of lack of transparency in this financial crisis.