Further Sophistication >>>
Evolving and complex markets require alternative investment strategies, and the Portfolio Manager Workstation supports such a global approach. As a tool used throughout financial institutions, thePortfolio Manager Workstation offers a wide financial instrument coverage that encompasses the assets (stocks, bonds, cash accounts) and contracts (options, futures) held in an investment portfolio, as well as any underlying instruments (indices, rates) that influence valuation mechanisms.
An optional component of the Portfolio Manager Workstation, Advanced Analytics adds a further layer of sophistication for more complex investment and analysis. In particular, it uses interest rate term structures or yield curves in its pricing and risk functions.
In liquidity markets, this enables portfolio managers to view the theoretical price of money market instruments and bonds. A user-defined spread may be added to reflect the credit rating or liquidity assessment of the instrument. Alternatively, the Portfolio Manager Workstation can calculate the implied spread from the market price. Also, future cash flows of floating rate bonds are determined using implied future rates and on the risk side, the sensitivity of the market price to movements in the yield curve is computed. This more precise estimate of the traditional duration measurement allows investment professionals to monitor the interest rate risk more closely.
Expanding Instrument Coverage >>>
Advanced Analytics enables users to handle OTC products such as interest rate swaps, currency rate swaps, Forward Rate Agreements, FX swaps and interest rate options. Subject to the same consistent approach, such instruments are priced according to a yield curve, and sensitivity measures such as Basis Point value can be computed. Instruments with hybrid risk exposure such as convertible bonds, equity swaps, index derivatives and currency options can also be priced and sensitivity to interest rate and equity risk factors measured.
Finally, Advanced Analytics covers a host of exotic option price and sensitivity measurements. These include barrier, binary, choosers, Asian, forward start, double knockouts, price and strike look-backs and contingent premium options. For each, the Portfolio Manager Workstation can compute the theoretical price and the sensitivity to underlying price movements (delta and gamma), underlying price volatility (Vega), etc.
Advanced Pricing and Analytics >>>
With Advanced Analytics, the institution controls which formulae are used within the calculations, using a flexible script language to define the various analytical indicators. Advanced Analytics uses a discount factor model or flows from a given zero coupon or spot rate curve to represent the term structure of interest rateinstruments. Multi-curve pricing can also be applied to allow users to simulate the price of interest rate instruments if the yield curve changes. Scenario yield curves can be defined for each currency and used to compare the value of portfolios under stress conditions.
As a Portfolio Manager Workstation module, Advanced Analytics can be integrated into the centralised portfolio management engine; it does not run as an external process requiring complex and expensive interfaces. By combining analytical analysis and what if scenarios with the ability to calculate underlying exposure, Advanced Analytics also ensures that investment portfolios can be managed with regard to their risk exposure.