Faced with the growing complexity of credit-derivative products and the dramatic consequences suffered by the market since the summer of 2007 due to the sub-prime crisis, Smart Financial Data Hub (SFDH) now provides financial institutions with a range of functions for modelling and managing the fundamentals of these products, special purpose vehicles, complex underlying instruments, and the various financial stakeholder players.
Although the main credit derivatives are, of course, represented and managed in SFDH’s Instrument repository (CDS single name), the application also manages CDS Basket and CDOs. Because the Instrument, OTC and Third Party repositories are so complete, it now supports inter-entity links of any type, which are highly relevant and essential for analysing and measuring the risk inherent in these contracts. For CDS Basket in particular, navigation within the basket gives a view, which is both detailed and aggregated, of the risk related to all of the references. SFDH gives quick access to the prices, ratings, analyses and all related data. Similarly, SFDH’s Index Repository can manage CDS indices, together with their composition. Lastly, SFDH integrates data, prices and spreads from standard connectors, such as Markit, CMA and Bloomberg DL.
Structured finance. SFDH’s Instrument repository has now been enhanced with powerful models that transparently support the packaging of operations, taking into account the special characteristics and the view of each interested business player. So, for CDOs, the originator of the transaction, the structurer, the manager of the asset basket, the investors and the trustee all have the level of detail appropriate to the specifics of their business.
Product modelling in the application takes into account all the key mechanisms, such as the ability to group and detail the underlying assets (acquired or synthetic), decoupling the credit-pool risk from that of the originator of the operation and including management of SPVs and the structure of liabilities, with their breakdown into tranches.
Thanks to the flexibility of the application’s data model and because the product’s various repositories (SFDH Third Party and SFDH Transaction) can interoperate, all characteristics can be looked at in detail: debt-portfolio management, credit enhancement, assets and liabilities, rating information, and all links with the various third-parties involved in the management and the administration.
The service covering commodities has also been enhanced, taking into account the requirement for diversification in this area. Listed and OTC contracts are now supported in the application for a large variety of underlying assets, including oil, electricity, carbon emissions, precious metals, agricultural and others.
The highly flexible modelling includes customised processing and calculation rules for those various assets. Prices can be obtained from standard suppliers such as Reuters Datascope and Platts.
The SFDH Instrument repository includes volatility surfaces (Swaption, Forex and Cap/Floor). Their profiles are analysed using the platform’s analysis tools (multi-dimensional analysis). Volatility points are fed via connectors to specialised data providers (Superderivatives, Panorama, internal sources, etc.). Volatility surfaces have been added to the curves management module, which already covers yield, forwards, spreads and commodities curves.
The Smart FDH repositories and the supported business functions are based on SmartPlanet technology, a complete solution for corporate IT data management planning, a technical core for designing solutions that are integrated, focused on data quality, and able to meet evolving business requirements; among other things; they provide a full range of tools for administering the repository (checks on quality, audit, security and connectivity), and advanced customisation functions: dynamic data modelling, business-logic configuration and design of user interfaces.