LiquidAsset 2.1 Helps Muni Advisors and Issuers Effectively Manage Muni Derivatives
Numerix, the leading provider of cross-asset analytics for derivatives valuations and risk management, announced the most recent release of Numerix LiquidAsset, the easy-to-use, rapidly deployable solution to price the most common set of liquid OTC derivatives. Numerix LiquidAsset, version 2.1 introduces new support for municipal (“muni”) derivatives and securities, including vanilla Muni Swaps, Muni Basis Swaps, Muni Swaptions, Muni Swap Curves and Bond Curves, Muni Variable Rate Demand Obligations (VRDO), and fixed rate Muni Bonds.
At the height of the 2008 financial crisis, many muni VRDO issuers who had hedged with derivatives were stung by large losses when their hedges became ineffective. VRDO issuers paying SIFMA-based floating rates and hedging with LIBOR-based swaps suffered large losses on their positions, as the SIFMA-LIBOR basis spread widened substantially. To compound matters, accurate valuations became difficult to obtain as market liquidity decreased and volatility increased, stressing the resources of both issuers and their advisors as they scrambled to understand the extent of the losses. Without timely and accurate information, muni boards of directors and CFOs found it difficult to make effective financial decisions quickly in the midst of the crisis.
As a result, many issuers and their advisors now require faster, more nimble solutions to calculate accurate derivatives valuations and perform risk analysis on trades and portfolios. With LiquidAsset, advisors have increased confidence that their derivatives valuations are correct, and they can provide value-added analysis to their clients when they need it. Issuers now have an independent tool to confirm and complement analysis from their advisors, helping increase their confidence and their understanding of the risks and rewards of taking different hedging actions.
“The ability to calculate mark-to-market valuations quickly, as well as perform scenario analysis and stress testing on-demand, enables clients to understand their risk exposure at any given moment. Flexible in nature, the intuitive function-based interface of LiquidAsset empowers users, enabling the highest level of transparency and speed for derivatives analysis,” said Udi Sela, Vice President of the Client Solutions Group at Numerix. “While the US financial markets are relatively calm at the moment, many clients appreciate that the future may not be as tranquil, and they are putting better valuation and risk processes into place now so that the next crisis will not be as painful as the last.”
“Clients now have the broad muni coverage and sophisticated functionality needed to price their muni portfolios in totality. Advisors are better equipped to document and explain the various risks tied to muni derivatives, and muni issuers can provide internal stakeholders with a holistic view of risk for better contingency planning and liquidity management,” said Steven R. O’Hanlon, President and Chief Operating Officer of Numerix. “With LiquidAsset, advisors can be more proactive with clients and alert them to potential problems, before they become critical issues. By providing faster, more comprehensive derivatives analysis, advisors can differentiate themselves from competitors and deepen relationships with their clients.”
Built on Numerix CrossAsset, the industry’s leading pricing analytics platform, LiquidAsset is available on the desktop through Microsoft Excel, or can be integrated into proprietary or third-party systems with the Numerix LiquidAsset SDK.