Derivatives

Despite, or perhaps because of the current turmoil in the world equity markets, and the subsequent focus on risk and outcome based investing makes the ability to create new investment strategies in absolute returns, LDI, alpha porting etc. highly desirable. This requires increased use of ETD and OTC derivatives, but many organisations still do not have the systems, processes and infrastructure to supporting these instruments in any significant volume.


Bluerock has the experience and capability to work with clients in a number of areas:

Advisory

Evaluation and validation of high level operating model and plans for all key functional areas, setting out the systems architecture and the applications roll out route maps including;

  • Develop instrument trading and position volume projections for use in business cases and for forward modelling
  • Evaluation of applications to support FI OTC derivatives, covering the key areas of portfolio modelling, trading, valuations, instrument data management and exposure monitoring
  • Assessment of equity business requirements for portfolio modelling, trading and management of OTC and ETD positions
  • Review provisions for investment risk management and exposure monitoring across portfolios,
  • Report on a range of possible exposure and cover monitoring methods to support different fund types and mandates, including netting requirements and the instrument classification principles required
  • Review options for affirm and confirm linkages, advising on market utilities available to support these processes (swapswire, DTCC)
  • Liaise with investment administrator to determine capability to support the proposed instruments through settlement and valuation processes
  • Advise on OTC valuation options for primary, secondary and tertiary pricing

Implementation

Bluerock has delivered projects to deliver a range of requirements including;

  • OTC data recording, maintenance and management within the corporate asset master database,
  • An OTC trade capture application, supporting all business areas and automating the capture of OTC data, providing affirm and confirm updates from swapswire and DTCC and including extensive data defaults and validations
  • An exposure monitoring application supporting multiple fund types and mandate requirements, scaling exposure processing, reducing user intervention to a minimum and parameterising methods and calculations. This development also included definition of an instrument classification hierarchy to support netting of asset types
  • Data feeds from the asset master to the third party administrator and to various downstream applications (swap valuations, attribution)