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

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

Market conditions changed dramatically in 2022, with a correction in the equity market, high volatility, increasing rates and high inflationary pressure creating a challenging backdrop for the structured products market. While the sector has shown a trend towards automation; consolidation; standardisation of payoffs; an increased focus on environmental, social and governance (ESG) factors; and improved portfolio management, demand is growing for new structured products with more conservative barriers. These would help take advantage of high volatility to generate higher yields, while taking measurable risk.

Bloomberg, which has won the Pricing and analytics: structured products/cross-asset award at the 2023 Risk Markets Technology Awards, offers a singular front- to middle-office solution that makes trading and managing across various asset classes, including structured products, a seamless process for the buy and sell sides. Bloomberg’s Derivatives Library (DLib) allows users to save and share deals, portfolios and ideas, and speed up negotiation and agreement. DLib also offers greater transparency and helps clients comply with packaged retail and insurance-based investment products and new regulatory technical standards. 

Bloomberg is committed to supporting market participants’ efforts to improve their knowledge of structured products. DLib helps clients understand the major aspects of deals, including lifecycle events, probabilities, and scenarios and backtesting, which is useful both at the inception phase and for secondary market trading. 

Clients benefit from access to real-time and historical market data across all asset classes, pricing libraries for vanilla and exotic instruments, full model and data transparency, industry-standard analytics tools and fast implementation. Bloomberg’s solution brings tier one structuring capabilities to buy- and sell-side clients, enabling them to access products seamlessly and efficiently, get to market faster and utilise their resources more efficiently. 

The firm continues to support clients with pricing and risk analytics during the Libor transition by adding support to new currencies, expanding International Swaps and Derivatives Association fallback coverage and introducing new methods to handle risk-free rate constant maturity swap (CMS) and CMS spread deals. Bloomberg also developed virtual dimensional reduction – a new approach to speed up calculations such as value-at-risk and expected shortfall without reducing accuracy. 

Bloomberg also saw increased demand for structured products issuance on ESG underlying. The firm provides ESG data for 15,000 companies and 474,000 securities in more than 100 countries with over 15 years of historical data. This includes reported and estimated carbon emissions data, analytics, scores, indexes, regulatory solutions, research and news to help investors better evaluate their assets under management, capital allocation, lending and reporting on sustainability disclosure requirements and performance. 

Bloomberg continues to deploy artificial intelligence and machine learning in managing structured product market data and trading capabilities. For example, machine learning techniques are used to find market consensus, identify reliable sources of data and build models for trading system compliance.

Amid challenging conditions, Bloomberg’s derivatives analytics have remained resilient, enabling clients to understand and manage their various risks during extreme market movements. 

Judges said:

  • “Impressive. A comprehensive entry, demonstrating consistent customer focus and strong innovation in this category.”
Chase Van Der Rhoer, Bloomberg

Chase Van Der Rhoer, head of structured pricing and derivatives at Bloomberg, says:

“Bloomberg’s continued focus on client needs and the development of innovative solutions for structured products has helped us win this award for a third time. As clients navigate changing market conditions they rely on Bloomberg and our commitment to deliver reliable data and in-depth analytics to manage their risk.”

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