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How to Accurately Value Complex Derivatives
May 18, 2017

As an account manager at FINCAD, I’ve been given the opportunity to work with many different clients, each with their own unique stories, goals and challenges to overcome. One of these is the Turkish Economy Bank (TEB).

For those unfamiliar, TEB is a partner of one of the world’s largest financial groups, BNP Paribas, and is active in commercial, private and retail banking. They came to us looking for a solution that would help them calculate options prices and Greeks, as well as cash flows on inflation index bonds.

Initially TEB had planned to calculate pricing for their products using their existing risk management solution. However, the bank soon targeted several new types of instruments that they wanted to add to their portfolio, including options caps/floors, digital caps/floors, cross currency swaps and bond options. These instrument types could not be priced or risk managed with their existing system.

It was a word of mouth referral that ultimately led TEB to FINCAD. Consultants working with TEB on their current risk management system recommended FINCAD Analytics Suite as a powerful tool for helping price complex instruments. Upon further research, TEB management found that the solution was indeed an ideal fit for their business needs.

TEB now utilizes FINCAD Analytics Suite on a daily basis for pricing approximately 3,000 FX and interest rate (IR) instruments. The bank was pleased to find that the FINCAD solution was operational in a rapid timeframe. Using the developer toolkit, the bank was able to set up more than 25% of their products in just three months. “FINCAD Analytics Suite is one of the best solutions for pricing all aspects of derivative products traded in major financial markets around the world,” commented Arzu Aksu, Project Manager at TEB, IT side.

TEB also relies on the FINCAD solution to meet the regulatory reporting requirements of both Basel III and the Banking Regulation and Supervision Agency of Turkey (BRSA). Prices and Greeks generated in FINCAD are used as inputs that feed regulatory reports.

Looking forward, TEB anticipates that the flexibility of FINCAD technology will enable them to easily adapt to inevitable market and regulatory change. Mustafa Ulak, Manager of Risk Management at TEB commented, “FINCAD Analytics Suite has given us access to timely, accurate risk data, and the freedom to price a multitude of different instruments. Having these key abilities will be an important part of complying with current regulatory demands and will help us adapt to future changes in regulation and the overall marketplace.”  

Interested in learning more about TEB’s results using FINCAD? Check out our brand new case study for more information.