Pricing and analytics – structured products/cross-asset: Bloomberg

Abdessamad Khaled, Bloomberg
Abdessamad Khaled, Bloomberg

Structured products are becoming increasingly popular but, in a low-yield environment, there is little margin for error. Firms must differentiate their offerings and ensure they have the right structure, payoff and underlying for the risk profile of their customers. Bloomberg’s Derivatives Library (DLIB) offers a one-stop shop for trading and managing structured products, bringing tier-one structuring capabilities to the buy and sell sides. The highly automated hosted application is designed to cover any product, even the most exotic, offering scenario analysis, stress-testing, collateral management, and market, counterparty and credit risk management.

DLIB allows buyers and sellers of structured products to view and share their deals, portfolios and ideas on the Bloomberg Terminal, perform backtesting and define key terms. Bloomberg’s payoff scripting technology can add coverage for the most customised exotic products in a matter of minutes. It can also be used to compute relevant metrics such as the probability of hitting a barrier or expected coupons.

Since DLIB provides automatic lifecycle management, it can help users comply with the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation by generating the PRIIPs output throughout the life of deals. DLIB also helps users understand the major aspects of a deal, including lifecycle events, probabilities, scenarios and backtesting.

DLIB can be accessed through Bloomberg’s Multi-Asset Risk System (MARS), which provides buy-side clients – such as insurers and pension funds – with tools that automate report generation and manage the asset-liability management of their portfolios.

Bloomberg’s cross-asset, real-time and historical market data sits at the heart of DLIB, and is available as standalone feeds or integrated with desktop analytics and risk systems. Coverage for the most customised exotic products can be added in a matter of minutes.

Users have access to pricing libraries for vanilla and exotic instruments, and pre-integrated input data for valuations. Positions and prices flow through to all other Bloomberg products, allowing consistency from execution through to risk management and back-office functions. This integration means structured products can be analysed alongside any other financial instruments in a portfolio context.

Throughout 2021, Bloomberg updated its market data analytics, deploying machine learning techniques such as unsupervised clustering to weed out unreliable data sources. Bloomberg expanded its mapping technology, mapping complex fixed income structured notes to DLIB, with the aim of firms being able to manage structured products as easily as managing bonds. It also continued to update its Libor transition products, adding support for pricing risk-free rates-based structured notes using DLIB functionality.

Judges said:

  • DLIB can add coverage for the most customised exotic products in a matter of minutes.”
  • “Integration of data and analytics across systems allows structured products to be analysed as part of a wider portfolio.”

Abdessamad Khaled, Head of Structured Products and Derivatives Pricing at Bloomberg, says:

“Bloomberg’s goal is to make trading structured products as simple as it is for bonds. We understand that cost efficiency and ease of access are a primary focus – hence our automated solution allows clients to access products easily, spending less time and money doing it. Bloomberg’s automated workflow solutions for structured products are an integral part of our risk management offerings. These capabilities are already helping brokers scale up their structured products coverage to meet growing demand from the buy side. The technology enables innovation and allows new products to launch in an unrivalled time-to-market.”

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