Pricing of complex products

Deriving asset values for a portfolio of securities is relatively straightforward when the financial instruments in question are listed, liquid and transparent (equities, bonds, debt securities, futures contracts…).

However, the challenge becomes far more complex when dealing with complex or structured products. This category of leveraged instruments, until recently restricted to market specialists, is developing rapidly within the asset management community in terms of both volume and complexity.

Adaptation of the regulatory environment

The increasing use of complex products has led regulators to impose new regulatory requirements:

  • Marked-to-Market valuation,
  • The obligation for asset management firms, to:
    • be able at all times to provide accurate, independent valuations of assets and off-balance instruments,
    • to follow a strict set of rules setting out the technical means used to achieve this activity.

Expanding the investment scope of asset managers

In response to the evolution of management techniques and regulation, SGSS offers a pricing service which is independent of asset manager counterparty price quotes. This service is based on sophisticated tools used internally by a team of dedicated financial engineers. Our goal is to enable investment managers, whether they use traditional or alternative management strategies, to significantly expand their opportunities for diversification, and to place emphasis on risk control.

Cost pooling

For an individual management firm, developing and maintaining an in-house asset pricing solution, would entail costs for additional human resources, technical equipment, implementation of calculation libraries and access to financial data.

By entrusting this task to an independent specialist, the investment outlay can be pooled. A source of savings for the manager, pooling also ensures access to expertise and responsiveness built on a network of relationships.

SGSS offers to assist you with dealing complex products on the following levels:

  • Technical: Implementation meetings aimed at determining the best approach to modeling
  • Operational: Delivery of the instrument price and usual risk measures (DV01, sensitivities, greeks...)
  • Result restitution: Forwarding of regular reporting setting out essential information.