Three years after Lehman Brothers defaulted, the asset management group set up to manage and maximise the value from the firm’ legacy and less liquid instruments, has gone live with a new, centralised risk and valuations platform from Calypso Technology to deal with both live and historical credit and interest rate derivatives trades.
The move is driven by a need to consolidate disparate systems and make use of more sophisticated pricing and risk capabilities across multiple asset classes for the Legacy Asset management Company (LAMCO), which is a fully owned subsidiary of Lehman Brothers Holding Inc. The asset manager was able to consolidate over 500,000 trades to a single platform with the new service.
“LAMCO wanted a single platform to house our vast portfolio of rates and credit trades for valuation and risk…with robust trade mapping tools to migrate our large population of trades and historical market data, along with the advanced pricing and risk capabilities across multiple asset classes for our counterparties and/or select trades on demand, Calypso allows our team to analyze our trade population more efficiently,” said Savvas Mavridis, managing director, at LAMCO in a press release.
A major challenge for the asset manager prior to the migration to the Calypso SaaS service was the management of more than a dozen vendor systems and spreadsheets, a Calypso spokesperson told DerivSource. LAMCO also wanted to improve the pricing of instruments.
“One of the key issues was price transparency because some of the swaps were using blackbox models,” the spokesperson said. ” Consistent valuation across multiple asset classes was another concern.”
LAMCO also needed the capability to handle a wide range of instrumental trades using a single platform that could execute all the pricing and processes for vanilla OTC derivatives as well as exotic trades.
Use of more sophisticated risk tools, including use of street-tested models and mapping tools was a major advantage of the migration to the Calypso system for LAMCO.
“In discussions with its counterparties to optimize swap settlement, LAMCO wanted the ability to view and present each transaction’s risk profile in a number of perspectives, ” said the Calypso spokesperson. “Other critical risk areas included the ability to price CVA (credit valuation adjustment) in order to determine the value and impact of the counterparty risk.”
Despite the complexity of LAMCO’s swaps portfolio, the asset manager was live with the first phase of implmentation within 3 months of initation. This speed in time-to-market is often associated with use of a Software as a Service (SaaS) where the firm can use Calypso’s technicial resources via this hosted enterprise trading and risk management platform.
