HIGHLIGHTS
Client: Aberdeen Asset Management
Business Objectives
Develop derivative trading and hedging strategy for pension liabilities
Requirements
- Introduce valuation and risk that enables flexible modeling, pricing, analytics
- Achieve market data integration
"With FINCAD, all fixed income derivatives instruments applicable to Aberdeen can be valued under one system and accessed globally, which was the main goal of acquiring a new system."
Matthew Lynes, Portfolio Manager, Aberdeen Asset Management.
Background
Aberdeen Asset Management PLC (Aberdeen) is a global investment management group, listed on the London Stock Exchange and headquartered in Aberdeen Scotland, that manages assets for both institutions and private individuals.
Challenge
Aberdeen trades a wide variety of OTC instruments in multiple currencies, including interest rate swaps, credit default swaps, spreadlocks and swaptions. Aberdeen was using proprietary systems to value its derivatives, but needed a new central system in order to value its entire portfolio and provide the dealing desk with real time valuations for all OTC positions. Key requirements for a new solution included:
- flexibility, such that models could easily be modified to adapt to changing market standards
- easy integration with Aberdeen's existing infrastructure to increase efficiency and reduce costs
- powerful and scalable system to support Aberdeen's over US$270.3 billion US worth of assets
Solution
Aberdeen selected FINCAD's software development kit as its derivatives valuations system. FINCAD'S simple API allows for easy integration with Aberdeen's internal infrastructure, and it provides the asset manager with the flexibility it needs to value its derivatives portfolio.
"With FINCAD, all fixed income derivatives instruments applicable to Aberdeen can be valued under one system and accessed globally, which was the main goal of acquiring a new system," explains Matthew Lynes, Portfolio Manager, Aberdeen Asset Management. "The dedicated .NET interface significantly enhances integration as well as its potential to be used in a scalable fashion."
Results
Flexibility: FINCAD offered flexible architecture and the ability to generically represent exotic financial structures. "What attracted us to FINCAD was the ability to model derivatives through a generic approach," says Lynes. "This ensures that almost any swap type can be valued without the need to rely on providers to update the software for each new instrument."
Ease of Integration: "As C# is our universal programming language we can build applications with relative ease based on existing knowledge. We have also been able to incorporate FINCAD into existing systems that retrieve live data feeds from established market data providers. This has enabled us to reduce the numbers of systems we use for our live swap pricing processes, reducing our costs," says Lynes.
Dedicated Support: FINCAD's Client Services Program has helped Aberdeen to speed its implementation process. "Given the flexibility and power of FINCAD access to dedicated quant support helped us get up and running quickly. All of our queries were answered in an appropriate time frame, and FINCAD has also been receptive to feedback for future product development," comments Lynes.
Looking Forward
Aberdeen sees its use of FINCAD expanding in the future. According to Mr. Lynes, "FINCAD is very powerful and flexible, and capable of complex and detailed risk management. We plan to expand our use of FINCAD to include Monte Carlo simulations of portfolios and various forms of scenario analysis in the near future."
"FINCAD is very powerful and flexible, and capable of complex and detailed risk management."