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How One Bank Gained Total Confidence in their Derivatives Valuations
By Rob Garfield | March 29, 2017

Today we published a new case study about our client, Yapi Kredi Bank Nederland N.V. This firm is the Amsterdam branch of Yapi Kredi, the fourth largest bank in Turkey. The case study gives good insight into how this firm gained greater confidence in their valuations with a solution that offers an accurate, third-party validation of their results. 

Validation is important to many banks, as fair value calculations of derivatives are volatile, potentially differing greatly from month to month. Therefore the ability to confirm the accuracy of these calculations is key.

As they kicked off their technology search, management at Yapi Kredi knew they would require a robust valuation solution that would be affordable, easy-to-use and web-based, so as to not require a lengthy implementation. The new technology would be used to optimize asset liability management (ALM), helping to accurately determine the fair value of approximately 100 trades.

Fortunately, Yapi Kredi didn’t need to look far for a suitable solution. In fact, an enthusiastic recommendation led the bank to investigate FINCAD. “We first learned of FINCAD when our external auditors introduced us. They had been using the Fair Value insight solution with success, and thought it would be a good fit for our needs too,” commented Gokhan Demir, CFO of Yapi Kredi Bank Nederland N.V. Demir oversees accounting, reporting and budgetary planning.

Today Yapi Kredi uses FINCAD to calculate the mark-to-market fair value of cross-currency swaps, cross-currency interest rates swaps and options used in ALM. The calculations generated in the solution are then compared to manual valuations generated using data from Bloomberg and other relevant sources. This approach gives the bank a third-party validation of their valuations.

“Using FINCAD to do a parallel run to our manual fair value calculations give us total confidence in the accuracy and reliability of the data we submit to our auditors. Additionally, if there does happen to be a disparity, it’s easy for us to see how FINCAD arrived at a given result,” said Demir.

Demir added, “While currently we are doing manual valuation runs that are the same as the valuations being generated by FINCAD, in the near future we plan to get to a point where manual calculations are no longer necessary, and we can fully rely on the FINCAD solution. This will be a large time-saver over the long term.”

Get the full story on Yapi Kredi. Download the newly released case study