Convertible Bonds

ACUMEN can now price convertible bonds with Call provisions, "Soft" or "Hard" calls or holders put provisions. On the input side, the underlying security can be linked to an equity. Convertible, as well as callable, puttable and trigger set of dates can be defined using a standard schedule process including conversion prices.

After this set up, once a deal is done on such a security, an option deal is automatically created along with the standard bond deal. This option, which groups an embedded bond and equity option, is valued using our API technology: an external program file values the deal.

The pricing method is based on events upon default, behaviour of stock prices and recovery rates ("hedge model", based on HJM one factor).

Convertible bonds are integrated in the COMPLEX BOND STRUCTURE license.

Inflation Linked Bonds

Information necessary for the input, pricing and reporting has been added in a new "Inflation" button in the "Bond" table. It allows to manage the main types of inflation index notes available on the market (US, France, Japan...). The underlying inflation index is input in the already existing "Index" table.

The formula for the definition of the index factor has been implemented. It is used to find the daily revaluation of the position used in deals and modules (Cashflow valuation, Bond position). Cashflow discounting is based on specific inflation yield curves used to derive yield from price and risk factors.

Inflation linked bonds are part of the MBS license.

Equity Repos

A new mask has been created (pricing and leg) to input all deal related elements: spot and maturity price, rate, yield curve, etc. All standard features such as portfolio information, brokerage and internal spread definition can be accessed.

Once created, the deal is taken into account in all modules such as the payments report, PV per Leg, etc. The "Equity position" module integrates equity repos in a special column to follow the equity related products position.

A custodian set up also allows to monitor the position per custodian managing the underlying security.

Equity repos are part of the EQUITY license.

Non Deliverable Forwards

For these specific forward Forex, the settlement amount is calculated as the difference between the spot rate at the maturity date and the agreed transaction rate. This amount is paid in one of the two currencies of the trade.

To create such deals a new radio-button has been added in forward Forex masks (pricing and leg): When "Non deliverable forward" is chosen, ACUMEN defaults several specific NDF fields in order to produce correct results. On the fixing date, the new "NDF Fixing" module can be run to display the deal rate and the spot rate. A settled rate and corresponding amount are saved and taken into account in cash reports.

NDF are part of the standard ACUMEN upgrades.

Exotic deal pricing by API

Many enhancements have been brought to our API methodology for exotics pricing:

On a technological point of view, the development of pricing functions has been made easier by removing the ODBC connection, and replacing Visual Basic code by function calls; It is also now possible to work first with a development environment using the Excel sheet for test purposes, and then to transfer it into a standard Visual Basic code integrated in an "Exe" file, called by ACUMEN User Models.

On a functional point of view, we have used our API technology to price convertible bonds (see "Convertibles"). We have also developed models (Monte Carlo, Hull and White, HJM) to price a cliquet option, and several path dependent Libor and CMS interest rate products with caps and floors, callable or trigger: target redemption note, callable Flip/Flop, Zero coupon bullet and Callable CMS spread.

This is part of the API license.

IAS/IFRS

Additional developments have been done in ACUMEN to fully comply with the new IFRS international accounting standards, especially rules IAS 32 and 39. ACUMEN can now provide full intermediate deal data, calculations and reports to the accounting system.

Two new tables have been created to store deals structure corresponding to IFRS rule: "IFRS group" and "IFRS hedge". These tables can be used to store grouping information like "Held to maturity", "Trading", etc.

On a calculation point of view, various user definable methods allow to produce fair value results per deal: Mark to market valuation whenever possible, discount method based on zero coupon rates for user definable yield curves, different types of option valuation formulae, and a new method where up-front payments can be incorporated to compute effective rates used to find the effective present value of a swap or a bond. Also, accrued interest can be withdrawn from the PV results, or specifically calculated.

Once the deal and valuation parameters are set-up, reports can be run gathering all relevant information. These reports can be printed on paper, or exported to files or saved in database tables allowing extraction of information for interface purposes.

The new regrouping fields and calculations are part of the IAS license.

On-line Help

The on-line Help project, started in release 5.40, is now fully completed in ACUMEN release 5.50.

First, "Help" buttons and "?" menus have been added everywhere they were missing. Also, a "Doc.ini" file has been created. Installed on the client network, it contains all the links between ACUMEN masks and User Manual pages.

Now, when clicking anywhere in the system on any "Help" button or "?" menu, Acrobat Reader(TM) will open and display the relevant page of the User Manual (Version 4) where you will find the necessary information relating to what you can do.

This is part of the standard ACUMEN upgrades.

Custodian for security related deals

The Custodian management has been extended in ACUMEN:

A Custodian account is defined as a special "Account per Counterparty". In the "Settlement Details" mask of deals, a "Custodian" group of fields have been added where it was not available. This applies to all security related deals: Bonds and Equity transactions, Collaterals, Certificate of Deposits, Commercial Papers and Repos.

This allows to monitor in the "View Payments" module where the security (bond or equity) is physically located, whatever the deal type. 4 columns have been added to view our and their custodian accounts. Totals allow to group deals per custodian.

This is part of the standard ACUMEN upgrades.

Management of limits breaks

This development allows to follow and authorise limit breaks. Limits can be of different types: credit risk, settlement risk, trading and portfolio limits. For each transaction generating a limit break, a new "Excess" button displays all the limit excesses linked to the deal.

A limit break can be authorised by a user with proper rights. The date, time and user of authorisation is recorded, along with an authorisation comment. A set-up allows to forbid an over-the-limit deal to be validated.

Specific access rights have been added for the authorisation of each type of excess.

This is part of the standard ACUMEN upgrades.

HTML tickets and reports

Formats (deal tickets and confirmations, or table reports) can now be generated (and printed) as HTML documents to produce paperless trading. The HTML document can be modified or sent by email. The style sheet is for the moment hard coded.

Also, it is now possible to send by email reports produced by ACUMEN batches and saved in the HTML format. In this case ACUMEN will send in attachment the html file together with all necessary data files (one data file per currency).

This is part of the ADVANCED COMMUNICATION TOOLS license.