With a new analytics product on the market and a significant tie-up with Bloomberg, Numerix has made significant moves to cement its offerings to those pricing structured products in the America. It's cross-asset pricing and risk management system is being adopted by an ever-wider number of users, who relish its ability to price almost any type of structured product, no matter how complex.
"By their nature, structured products cut across all the traditional asset classes, and the fact that there are very few systems capable of handling them means you need a flexible structuring environment, which is what we provide," says Vall Herard, senior vice-president of Numerix's product marketing group in New York. With its core Numerix 6.0 and Numerix Portfolio 2.0 products, the firm has secured pole position when it comes to systems pricing technology.
For example, take start-up benchmark pricing company Prism Valuation, which launched in June last year. "I haven't seen another vendor that is able to match Numerix's selection of models," says Keldon Drudge, one of the firm's principals in Toronto. "We use the Numerix package as a fundamental building block for our valuations. We use the suite of models they have available and then add our experience to determine how they should be calibrated and which models are appropriate."
Prism is an outsourcing service for structured product valuation and risk management. The firm aims to provide a benchmarking service for interest rate, inflation, foreign exchange, equity, credit, commodity and hybrid products. It can also price and perform risk analysis on deals that have yet to reach the broader market for clients involved in newer structured products, or for those that require initial risk assessment of new deal types prior to execution. As it gets off the ground it is currently focused mainly on rates-based products, though Drudge says it has also performed independent pricing on structured credit and structured equity investments.
"We provide an outsourcing service where people provide us with confirms or term sheets for structures. We then put together monthly mark-to-markets based on our use of Numerix analytics, our sourcing of data from reliable and liquid data providers and from people that know what's going on as far as where instruments are trading," says Drudge.
For Prism, only Numerix offers all its valuation needs on a single platform. "You tend to get a lot of bang for your buck in terms of performance per unit of time. I think the implementation is superior in the sense that the models tend to have very good numerical convergence properties, and they tend to be very quick and robust," Drudge says.
Indeed, for pricing complex derivatives products in general, Numerix has established itself as a market leader. "Their product makes calibrating our volatility surfaces a lot easier," comments Jeff He, a quantitative analyst at Long Island-based American Home Mortgage Investment Corp, which uses Numerix's interest rate model to simulate exotic derivatives.
One of Numerix's most significant achievements last year was its strategic tie-up with Bloomberg, such that Numerix now powers Bloomberg's Professional Services Terminal's internal calculators and provides the same analytics in its trade capture systems. This marked another step towards creating a one-stop-shop for pricing complex structured products.
The firm also launched Numerix Portfolio last year, which comes with a range of new technologies that allow multiple users to easily capture and manage their structured products data. The product comes with a scalable 'grid', for example, where trades can be rapidly farmed out to dedicated valuation servers and idle desktop computers. Mark-to-market, total return and risk reports can be set up to run on the grid to increase speed of reporting. The product also has feeds for importing market data and for exporting trades and reports to back-office accounting and other systems.
WHY NUMERIX WON
Numerix currently has 150 direct customers and 80 indirect customers through its 38 strategic partners. As well as the Bloomberg relationship, Numerix also has tie-ins with most of the major risk analytics systems providers. It continues to amass clients from structured note issuers, buy-side fund managers and others.