Over the past few years, pricing practices have changed dramatically, in particular to capture the credit value adjustment (CVA) that reflects the chance a counterparty will collapse while owing money on a trade, and to discount collateralised trades at an overnight indexed swap (OIS) rate determined by the currency of the collateral – a simple enough shift in theory, but one that has forced the industry to draw up a standardised collateral agreement in an attempt to remove some of the complexities involved.
With industry practice changing so rapidly, technology providers also have to be nimble when creating or updating pricing and risk management tools that reflect the new reality. Gone are the days when a bank could acquire front-office or risk management systems and allow a couple of years for implementation – the need for accurate pricing and valuation is urgent. Making matters worse, banks have also reined in their spending, so a primary criterion for new technology is cost-effectiveness.
New Jersey-based Quantifi scores highly on all the above, the firm’s clients say. It was among the first technology suppliers to support OIS discounting, CVA – and the latter’s more controversial twin, debit value adjustment (DVA). Founded in 2002, it cemented its reputation for accurate pricing with its initial credit pricing library in 2006, and has maintained the quality while branching out across other asset classes such as interest rates and foreign exchange. Its technology is relatively light and slots into a bank’s infrastructure quickly. And, while a number of banks have implemented Quantifi Risk on an enterprise level, it also offers a cost-effective option for individual business units or smaller institutions.
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