In continuity with the significant innovation realized on the latest release 6.0, MasterFinance 6.1 will be released on the second part of 2009 and is the result of important activities of research & development led by THEMAâs specialists.
Major enhancements of MasterFinance 6.1 services include:
Price engine extensions
The new sophisticated price engine of MasterFinance integrates the latest math-libraries and models provided by our partner NumeriX (e.g. HW 1 Factors - Multi-Factors, Libor Model, Black-Karasinksy, including several calibration methods) to price further instrument classes:
o Floating rate notes
o Structured Bond
o Callable & Puttable Bond
o Quanto & Cross Currency Bond
o CMS linked.
MasterFinance price engine, integrated with the Front-to-Back instruments management, has been enhanced to allow multi-library capabilities. In addition to the increased NumeriX integration, the new release permits to use within a unique framework the latest math-libraries and pricing models, including those developed by THEMA as well those provided by other leading analytics & math providers, such as Fincad and GFI-Fenics.
Credit Risk extensions
MasterFinance new release improves the Risk Management capabilities addressing users in monitoring counterpart default risk, fitting Basel 2 standards. The extensions of the Credit Risk Service permit to evaluate the credit risk component embedded into the OTC derivatives market value, through models based on default probability, implicitly estimated through rating spread market curves. These credit risk components are evaluated for each single counterpart, through rating attribution and for single financial instrument. The platform un-bundles âexpected lossâ and âunexpected lossâ values, and calculates losses deriving from the credit migration. Summary outputs allow to aggregate risks by counterpart and give a consolidated view at the position, portfolio and company level. The Credit Risk Limit Management also supports credit risk monitoring through âstop-lossâ limits. The MasterFinance Credit Risk Service has been enhanced to be easily integrated with the rating spread and default probability providers, to assure that input-data is continuously updated to the market changes.
KRS Market Risk Hedging Methodology
Addressed to Risk Manager and Front Office, the MasterFinance new release implements the KRS (Key Rate Sensitivity) methodology. KRS enhance the interest rate and volatility risk hedging effectiveness, particularly for portfolios containing interest rate derivatives. Through the detection of an arbitrary number of key maturities of the yield curve on which it is possible to apply shocks to the rates and the instrumentâs full evaluation, KRS computes specific sensitivity indicators for each single yield curve time-node. Continuously measuring the interest rate risk exposure, MasterFinance allows to monitor in real-time the exposure of a single financial instrument and portfolio, as well as provides the âoptimal allocationâ of the quantity of instrument that is necessary to hedge the position on the due sensitivities time-buckets. By measuring the risk exposure for the selected segment of the yield curve, KRS support dynamically the risk hedging strategies and improves effectiveness through a Benchmarking technique that optimize the allocation of the hedging instruments on the time-bucket more sensitive to the interest rate risk exposure.