Cost at Risk for Debt Managment

A treasurer that manages a debt portfolio must always balance financial certainty vs cost. Being able to realistically age a debt portfolio and re-finance distributions and principals using relevant assumptions is key. Our treasury module in the ARMS risk management system solves this not only by providing stressed interest scenarios, but simulating a complete set of possible futures. Using these scenarios, probabilities of future re-financing costs can be visualized. Adding overlay instruments such as swaps and caps & floors will show how the future re-financing distribution changes by taking hedging costs today.

New Issue Pricing using Benchmark

Using a set of Fixed Income Workspaces in Quantlab a corporate treasury client can analyze different aspects of its issued bonds. Using modern financial tools such as asset swaps spread creation using a multi-curve framework, the treasurer can use one credit spread curve to price all issues, both floating and fixed rate bonds. Tools to compare and price new to-be-issued bonds using peer spread comparison gives confidence in discussions with the issuing banks. In the current negative rate environment, the price of the coupon floor can be calculated. Both historical and real time pricing can be done using any of the major data vendors feeds.

Calculation Engine

A cost efficient way of solving financial data requirements of a portfolio system or just for display on a web site is using the History Server together with the calculation capabilities of the Quantlab Batch Server. For several corporate clients we have done just that. Within a very limited time and cost budget we have delivered a solution to import raw market data and calculate a range of financial metrics such as correlations, bond analytics or currency implied yield curves. Usually, we have also delivered the customized data on the format of the receiving systems and hence solved the whole problem from start to finish within one easily maintained solution.

FX Risk Management

Together with an industrial corporate treasury we calculate Value-at-Risk and stress testing for the treasury fx and ir hedging operations. Since the treasury must handle large potential future currency flows, a bespoke instrument type was developed to get probability of deal metrics into the ARMS market risk solution. Using such metrics, it is possible to stress portfolios of future deal probabilities in different deal currencies to see how the fx market hedges are performing under such scenarios.