Derivatives Replication System
The Derivatives Replication System exploited state-of-the-art financial and software technologies to provide a complete front-office interest rate derivatives pricing, hedging and trading capability.
LORGB's experience and expertise in "derivatives" ensured that modern, effective hedging strategies were evaluated and recommended. This system provided daily mark-to-market of derivatives positions and recommended delta-neutral hedging positions. Unique features of this system included:
- Advanced methods of interest-rate term structure construction that eliminated the need for smoothing forward races
- An explicit correction for the difference in futures and forward rates®
- Market-implied forward rate volatilities and correlations
- Extensive contract coverage, including a wide variety of exotics
- Advanced no-arbitrage methods of valuing European and American swaptions and bond options
- Gamma-based trade triggers for determining when to rebalance hedges
- A variety of risk and P&L reports
LORGB supported this application with a variety of services, including: daily transaction auditing; trade execution; verification and validation of hedging policies, procedures and executions; customization of reports, algorithms and input formats; and fallout analysis and modeling.
LORGB Investment Advisors. Inc