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HOT features in ACUMEN
This part gives a description of the developments finalised in the latest releases of Acumen. Simply click on the topic you are interested in to find out more about it.
Credit Risk based on third type of add-on matrix
It is now possible to run the CREDIT RISK module of Acumen based on "Basel Add on factors". This means that now three different matrices for add-on factors can be used, allowing for example to compute credit risk based on Basel, national, and internal add-on factors.
New rate charts
New types of graphs have been added in Acumen. They can be found at the RATE MANAGER level, in the rate historics consultation area, when asking for a graph (other types of charts have not yet been changed). Chart Director is used to build the new graph. Various settings can be defined, type of graph, color, time range, and analysis tools such as Bollinger Bands, different average value calculations, and performance indicators such as the Rate of change. Similar new types of graphs could be used elsewhere later in Acumen.
New display of order deals depending on their status
In the ORDER MANAGEMENT module, limited orders are now displayed in different colors. In case an order has once hit the market rate, it is displayed in green color and shown on the specific page "Reached". In case it has never hit the market conditions, it is displayed in red. The "Ok" and the "Out" displayed in the "Leg" column then indicate if the current market value (e.g. exchange rate for forex orders) is generating a profit (OK) or loss (OUT).
Multiple validation information
A new table "User_validation" has been created in order to record the number of times a deal or a static table has been validated. Every time this is the case, this table is incremented. It shows among other things the record type and id, and the validation user. So it is especially useful for audit purposes to know when a deal has been validated in the past, and by whom.
New interest calculation method
A new interest calculation basis ACT/364 is now managed by Acumen. This calculation basis has been created to handle specific African markets interest calculation, used for example in Kenya. It is similar to ACT/365 except that the fixed number of days of the year is 364 instead of 365. A corresponding accrued rule has been created also to handle bond accrued interest calculation.
Export of calculated information
A new keyword is now available in SQL requests of export interfaces: $CURRENTVALUE(xxx,0) allows to export the calculated values of the chosen xxx parameter. Possible parameters are OUTST (outstanding nominal), BEGPER (beginning of current period), ENDPER (end of current period), NBDPER (Number of days of the current period), RATEPER (Rate of the current period), INTPER (Interest amount of the current period), NEXTPAY (Next payment date).
New rate sending methodology
Communication between the DATAFEEDER and Acumen has changed: Now, the DATAFEEDER program sends real time rates only to the Information Server (IS), and the IS sends them to workstations (before rates were sent directly to workstations). This new functionality secures the sending of rates and prices, avoiding the loss of information. It also solves other problems that occurred from time to time.
Information about application server status
In the "Messages from servers" window that is open alongside the ACUMEN window, two icons inform the user on the status and the availability of the main two application servers: LRMS-IS and QSCANNER. Indeed, in this window, two traffic lights have been added. The first one gives the status of the Information Server, the second one the status of the Qscanner. The traffic light is normally green when everything is OK. If the servers are inactive during 15 seconds, the traffic light becomes orange. It becomes red after 1 minute of unavailability. This helps an Acumen user understand why for example a contract has not been created from a pricing. If the light is orange or red, the user should contact the administrator, because maybe the Qscanner timer has been switched to 0 seconds, or the application is working hard on an import, or it has been stopped by IT staff.
New Deal Type: Commodity derivatives
Commodity derivatives can now be managed in ACUMEN. The commodity table allows to define the main characteristics of the underlying: name, currency, unit, classification, etc. Four regrouping tables have been added for the purpose of commodities definition. Futures and options on any type of underlying commodity (energy, cereals, etc) can be input, using all standard functions (quick input, default values, internal deals, etc). Valuation is based on the market price (for futures) or forward price (for options valuation) calculated with the convenience yield. Standard processing applies, like validation, export to external systems, ticket printing… Commodity derivatives are integrated in all Acumen modules, specifically the "Future position" module that allows to follow positions expressed in units.
Commodities can also be used as underlyings of structured deals, where the forward price or rate of a loan, swap or bond for example can be based on a commodity price. This is possible by using the "Cmdty" keyword in complex formulae: it finds a spot price or computes a forward price for commodities (based on interest rates and the "convenience yield"). The next step (planned for the next release) is to develop commodity deals, where it will be possible to buy and sell the commodity directly (not in the form of a derivative).
Inflation linked operations
It is now possible to manage inflation linked loans. The set-up should be done through a dummy static "Bond" definition, used as a function in complex formulae: 'Indinfl(Bond name)'. Acumen will use the set up done in the "Bond" table in order to compute index and the inflation linked rate used for the calculation of the current interest amount. For example in case an inflation index should be linked to a fixed rate of 5%, one should use the following formula in the "Complex formula" part of the floating rate leg: 'Indinfl(Bond name)*5'. Then, on each period, the inflation factor calculated at the bond level is applied on the floating leg calculations. Note that the "Indinfl" function recalculates the CPI index at issue date using the value date of the deal and not the bond issue date, allowing to create only one reference bond for all Inflation Linked Deposits.
Variable annuity loans
Two kinds of deals with floating annuities are now available in Acumen:
- Variable annuity amount: a check box "Adjust annuity" has been added in the schedule part of the floating leg. The maturity is kept unchanged. On each fixing date, a new annuity amount is calculated, using the new Libor rate, the current balance, the remaining time to maturity. It is equivalent to a "Fixed rate annuity leg" recreated on each fixing date;
- Fixed annuity amount: a new field "Fixed annuity" has been added in the schedule part of the floating leg. It corresponds to the amount of the fixed annuity and it should be input manually. The variable part is the maturity date in the schedule, knowing that the maturity date of the leg will not be "bypassed". The remaining balance will be paid off in full on this maturity date. One has to put this date as far as in the future as needed to avoid an early maturity of the deal. On each fixing date, the FIXING module will recompute the future reimbursement, using FRA rates and the fixed annuity amount.
New Acumen-Numerix pricing features
Several enhancements have been brought to the Digital Trigger deals. The main change consists in a new method of input for the "complementary details", the fields that need to be populated for each structured deal to describe all its exotic features. The idea is to homogenize the input. The PAYOFF line becomes the key element allowing to differentiate the deals. It applies to the following types of deals:
- Snowball deals, Accreting CMS and CMS Spread payoff are managed with the new generic model CMS;
- FX linked deals are managed with the new generic model FX LINKED. A new EQUITY generic model for equity/index linked deals has been created, and it is the only user model used for deals having a payoff linked to an equity (it replaces the following user models: INDEX_TRIG, ASIAN_AN, CLIQUET, EQ_BONUS, INDEX_CMS, Worst of equity swap).
A detailed documentation is available on request.
FRN bonds discount margin
Acumen can now calculate the Discount Margin for FRN bonds using the same methodology as Bloomberg. This measure assesses the average margin that an investor in an FRN can expect to receive over the life of the instrument. It will change daily according to market conditions and any change in the credit risk of the issuer. It can be seen as a floating bond’s equivalent of a fixed bond’s yield to maturity. Acumen can compute a discount margin out of an input bond price, and vice versa.
P&L Evolution analysis
A new module has been developed, allowing to show the P&L variations per portfolio since yesterday, beginning of month and beginning of year.
- The portfolios to use in the P&L calculations, and their hierarchy is done through the "Association" table, allowing to create flexible portfolios, not always linked to existing portfolio structures;
- Daily present values and interest amounts must be saved in the "pnl" tables stored in the database. The saving is different depending on deal types, so that a realized/unrealized P&L is calculated on bonds and futures, but a present value is calculated for deposits, forex, loans and swaps;
- Once this is done, the P&L can be calculated both for market data and interest income variations. A new treatment type has been added, called "P&L analysis". The final HTML output file produced by the treatment proposes three levels of analysis: two levels showing P&L figures year-to-date, month-to-date and day-to-date, one global level per portfolio (for the management) and one detailed level per deal, and a third level per deal for each four key dates.
More information on this development can be provided on request.
Interest Income based on various types of spreads
It is now possible to run the ACCRUED INTEREST and INTEREST INCOME modules based on different types of spreads input in the "Spread" button of the deal. New choices have been added in the rate type section of the "Options" button of the two modules to allow to calculate the amount of interest based on any of the spread fields of the deal (transaction rate, margin rate percentage, internal base rate, transaction cost, risk cost, sales cost, spread over libor). Acumen uses the "Margin amount" field of the schedule and converts it to an amount corresponding to one of the spreads above. The new choices can also be defined at treatment level. Note that for FRN bonds, the only choice applicable is the rate type "Spread over the libor", where the actual bond spread defined at the static definition level is used.
Futures Margin Trading
It is now possible to link future transactions to a collateral agreement (the 'Agreement' field and the 'Is collateralized' box have been added in futures pricing and leg). Thus futures transactions can be shown and taken into account in the COLLATERAL MONITOR module, allowing to manage Futures Margin Trading (as the COLLATERAL MONITOR module is able to compute the PV difference since the last margin call and create the corresponding cash movement, this facility can be applied on futures to generate the proper payment of gain or losses due to future price changes).
New Deal Type: Dual Currency Bonds
It is now possible to input in ACUMEN Bonds that pay interest and nominal in a different currency. For this purpose a new sub-mask "Dual Currency Bond" has been added to the "Bond" table. Once the two currencies have been defined at the static level, FX deals are created automatically at each coupon date to convert the coupon amounts and reflect the exchange rate risk and valuation included in the structure. Fixings, payments and cashflows are also managed in the same way.
Initial break even rate
The field "Original Break Even" is now filled in for the different types of transactions. This rate displays the current market rate or price as at deal's creation date and time and is not re-calculated in case the deal is updated. It can then be used in reports to the Central Bank, showing the deal rate and the market rate at the time of dealing. This is especially useful for some IAS/IFRS reports.
Filter function
LOGIN has developed in Acumen a similar function to the "Automatic filter" function of MS Excel. In the different Acumen modules it is now possible to filter the data according to whatever column of the module: by doing a right-click on the chosen column and selecting the "Filter" function. All records having the chosen value will be displayed. It allows, for example in the "Bond position" sub-module, selecting only the bonds which issuer has a particular activity by clicking on the column "Issuer activity".
Multiple Selection results
It is now possible to open the Selection module several times in parallel. So it is for example possible to open two or more selections on the counterparty table, or to open one selection of counterparty and one selection of deals. The output is available for consultation, reporting and comparison of results on screen.
Interface Documentation
It is now possible to generate formatted interface documentation based on the XML output. Login has created special style sheets that allow defining a nice format, showing all details of the interface, and using a different format depending on the contents (different colour or font for SQL requests, constants, sub interfaces, etc). Please contact us for further information on how to produce this report and eventually change the report presentation.
Portfolio Limits on Duration
It was already possible to define a deal limit in terms of duration; it is now also possible to define a portfolio limit based on the duration of the portfolio. Depending on the user choice, an aggregate duration will be calculated on all deals, or only Receive side or Pay deals. If the deal exceeds the portfolio limit, the user will be informed upon input.
Acumen in Spanish
It is now possible to have Acumen menus and messages appearing on screen in Spanish. So now, Acumen is available in English, French and Spanish. Specific set-up is required to be able to get these translated versions.
Orders
Several enhancements have been brought to our Order management module, including:
- A function that automatically cancels orders that have not been executed 10 days after the maximum execution date;
- A function that automatically changes the nominal or price of the client orders when the market deal is updated;
- An enhancement of the links between client order, bank and market deals in order to easily view the related deals;
- New columns that have been added in the ORDER MANAGEMENT module to allow producing even clearer reports with more detailed information.
List of Data
It is now possible to filter the list of static records displayed when a right-click "List" is performed in field having a combo box. It allows having user-defined lists in deal input, per user: for example, for the Sales Desk, only the corporate clients list will be displayed in the "Counterparty" list. Only the records matching the specified query are displayed. This facility is available everywhere, on fields that are linked to lists (deal and static table).
Forex
In the FX market, especially for forward forex operations, it is common for customer deals to change the operation during the life of the deal, in the following ways:
- With a Total early termination;
- With a Total extension of the deal;
- With a Partial early termination;
- With a Partial extension of the deal.
It is now possible to perform these actions using the RENEWAL module on forex trades. This module shows on its main page the FX trades maturing in the interval specified when starting the module. When choosing to Extend or Early Terminate an FX trade, a new mask opens, containing the same information as the original deal, except the trade date. The Maturity date, the Nominal amount and the Exchange rate of the deal can be changed. After confirmation of this new deal,
- If it is an extension, ACUMEN will create a new deal with the characteristics just input and update the original deal to set the trade cancellation date and cancellation date to the trade date input in the deal;
- If it is a partial termination, If the nominal amount of the new deal is smaller than the original nominal amount, a new trade is created to replace the part which is neither extended nor early terminated of the original deal (same information than the original deal, except the "Nominal1" and "Nominal2" fields).
Scenario analysis module
A new sub-module of the CASHFLOW VALUATION module is now available: "Scenario Analysis". It allows computing options premium and theta according to a change in both the yield curve and the volatility matrix. Results are displayed in a board made of 5 lines & 5 columns and linked to one combination of a yield curve and a volatility matrix. Each cell shows the difference between the initial PV (or theta) of the deal (or selection) and the new PV (or theta) recomputed after a change of both the yield curve and the volatility matrix. Basically, the yield curve and the volatility matrix are shifted by a percentage (standard deviation) input in a specific table. Five scenarios are then created according to this figure : twice the standard deviation, once, no change, once and twice. With this principle applied on both volatility matrices and yield curves, this leads to 25 different calculations.
Search function
A "Search" function is now available for deals and tables. It is a simplified SELECTION mode. When activated on any record, all fields of the mask are accessible. Values can be typed in any field (dates, codes, text…) for search purposes. If the result is one element, then this element is displayed on screen. If there are more then one records, a list appears. Several criteria can be input at the same time. Special codes have been added to manage specific cases, like the star to request all elements where the field value is empty, or the percentage sign (%) to find all elements starting by, ending by, or including a specific value.
Order deals management
The management of order deals is now available in Acumen release 6.90. It covers orders on various types of deals: bonds, equities, futures, spot forex, money market transactions and discounted papers. The order deals can be input, based on a requested nominal, or price, and other conditions. They are handled by the Order Management module to transform them into real deals when necessary, and are also integrated in the valuation and back office modules. The integration in valuation modules is done using the current market rate/price, but if the order is limited, it is shown only if the current market price makes it executable. Complex formulae can also be input in order to define complex cases when the order must be executed.
Portfolio Limits
Several enhancements have been brought to the PORTFOLIO LIMITS calculations and module of ACUMEN:
- New functions allow computing the limit defined as a percentage of a portfolio, with indication of the maximum percentage authorized, the limit available before the deal, and the percentage of the level of the sub-portfolio compared to the global portfolio taking the current transaction into account.
- It is now possible to check the stock of bonds during the input of new deals in order to know if one goes short or not.
- Portfolio limits on FX deals allow now two methods: take into account only one side (buy nominal amount) or both sides of the deal (The nominal of the buy and the sell sides converted in the currency of the limit).
Portfolio composition
This new module shows the distribution of a selected portfolio or set of transactions according to user defined totalisation criteria (portfolio level, counterparty type, instrument type…), in absolute and relative term (i.e. in terms of nominal, PV, sensitivities, in amount or percentage). Once the parameters for the analysis are defined, results are displayed either in a list box or in a chart, with the possibility to define a report.
New exotic deal pricing by API
The API development allows to link Acumen to an external calculation model to provide present values, cashflows, sensitivities or greeks on any structured deal. This can be done through an external Excel spreadsheet, or by a DLL. Calculations can be developed either by Login or by the client. Through LOGIN’s API module, using various models (Monte Carlo, Hull and White, HJM) it is now possible to price the following new exotic deals in ACUMEN:
- Cliquet options, and several path dependent Libor and CMS interest rate products with caps and floors, callable or trigger;
- Index linked CMS spread notes, where the coupon payoff is based on the difference between two CMS rates and on the value of an index;
- Snowblade deals, which are similar to Target Redemption Notes (TARN) with an additional feature: the coupon of the period is linked to the previous one;
- Range Accrual Notes, for which the coupon is based on the number of days where the floating rate index is within a pre-defined range;
- Bullet snowball swaps: these are non callable snowballs (current coupon linked to the previous one);
- Trigger PRDC for which the coupon and the nominal are not in the same currency.
- Other deals priced are target redemption notes, power reverse dual currency swaps and notes, flip/flops, callable CMS swaps and notes, etc.
Three tools are available for the purpose of exotic deals pricing:
- To simplify the input of exotic deals, an automation function allows to default the specific details required in the input of an exotic deal (number of steps in the tree, calibration model, specific rate to use, etc).
- Specific functions have been incorporated in our API tool to ease the development of new models. These functions return for example a list of zero coupon rates, volatilities, holidays for a given set of locations, yield curve tenors, etc.
- Columns have been added in reports to show calculations which were not available before: average life, call probability, and call date.
In addition, a partnership with Numerix has been engaged to enlarge the pricing capacities of Acumen. Our APIs have been extended to communicate with Numerix pricing models, and a client currently runs the common solution.
Automatic close of position
We have included a deal capture function in modules where positions are reported to ease the closing or opening of positions. When Bond, Futures or Equity outstanding positions are reported, a click on the mouse allows to automatically create a new deal with almost all data automatically filled in. The amounts, side, portfolio, etc are defaulted but can be changed. So now, only one screen is necessary to view and report positions as well as to trade on the market.
Inflation linked bonds
Inflation linked bonds following the "UK valuation model" are now available in ACUMEN. The differences with the "Canadian" model (available since release 5.50) is that the market price takes the inflation into account, and that the future cash-flows are estimated based on a "Forward inflation assumption".
Bond price calculated from repo curve
For illiquid bond markets, LOGIN has developed a new feature in Acumen in order to calculate the bond price out of a repo curve: the bond yield can be derived from the repo curve and is used to compute the corresponding bond price. The way the yield is calculated from the repo curve is user defined: it can be interpolated (between the two repo rates with a maturity before and after the maturity of the bond), or Acumen can use the repo rate with a maturity just before or after the maturity of the bond. This allows to value bonds marked to market even when no price is available.
Enhanced Graphical Interface
We have updated our graphical interface tool, with a release which allows us to use the new look of the new environments. The change for the end user is therefore only an ergonomic change. Through this updated interface tool, ACUMEN will look like all other applications.
Filter function in modules
The "Filter" facility has been added in all front office and middle office modules of ACUMEN. It allows to visualise the results of a module according to a filter criterion, which can be any of the many portfolio levels, and also the trader and the counterparty.
This allows to run a calculation module for all deals, and then to see the details for any part of the set of deals, for example an analysis for a specific client or portfolio can be shown, and then the global analysis can be restored. This makes the detailed analysis of a selection easier, quick and more flexible.
SAP interface
Up to now, Acumen was not doing the actual booking entries. Acumen was only providing deal information and calculations, and the accounting system needed to adapt this financial information to an accounting perspective.
LOGIN has developed for one of our clients a General Ledger interface to the SAP system. It sends for all deals actual bookings from Acumen to SAP for accounting purposes. For each actual daily payment (interest, nominal, premium, etc) and for each end of month results (P&L and accruals), Acumen sends to SAP the amount to credit/debit, along with the date, the deal data and the G/L account number. It also sends a reversed line for accounting purposes.
Tickets and Confirmations by Email
Among the major items, LOGIN-ACUMEN V.5.60 includes the possibility to send a deal ticket or a confirmation from ACUMEN to a client, directly by email. This can be done manually, or automatically, upon any triggering action.
The same tickets and confirmations as the ones used for print purposes can be used to define mail templates. Four new fields have been added to define email related information: The address of the sender ("From"), the address of the person who will receive the email ("To"), any additional email address ("Copy") and the "Subject" text. These fields can contain variable values per counterparty or per deal.
The email including the ticket or confirmation can be sent on request. To automate the process, a simple set-up can be done in the "Default report" table to define the action which will trigger the automatic print out or mail, depending eventually on the counterparty (deal creation triggers ticket print-out, while validation triggers confirmations by mail). Using this information, when printing automatically, QPRINT will know if the format should be printed on paper or sent by mail.
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.
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.
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.
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.
Parametric VAR
The historical Value at Risk module is completed with the "Variance / Covariance" VaR. It is based on the J.P. Morgan approach, using volatilities and correlations imported in Acumen, with rebasing capabilities. The calculation can be done per portfolio and per currency, and offers a wide range of analysis. The different parts of the VaR are detailed, for forex and interest rate instruments, including the split between the diversified and the un-diversified VaR, vector and beta as well as the incremental VaR, with a mapping on the different risk factors.
Portfolio Limits
The objective of this new development is to be able to set-up limits at the portfolio level, and view them either with real time management at the deal entry level, or in a module accessible anytime. For each individual deal, Acumen will check all defined limits which apply to the deal.
A portfolio limit is composed of the following:
- Characteristics of the deals on which the limit should apply. It includes portfolio definition, currency, maturity, counterparty, rating,...
- Calculation of the limit
- Limit allowed and currency
Credit Derivatives
Credit Default Swaps are managed since our November 2002 release (5.10). The input of the credit protection is done through specific masks allowing to indicate the credit events, the obligor rating, etc. The Jarrow Turnbull model is used to find default probabilities based on discount factors and recovery rates. The deal is integrated in all Back Office modules to monitor the premium paid or received, the accrual amounts, etc, and in the Credit Risk analysis to increase or decrease line amounts.
Collateral
Collateral programs can be managed within Acumen, including all different aspects, from the set up of agreements, collateral types, automation rules to the capture of transactions, and the management of distributions.
The collateral program is a credit risk mitigation technique, that can be enforced within Acumen at the portfolio level, or on a trade by trade basis. The aim of the program is to find how much collateral is required, for each counterpart, group of counterparts, deal or portfolio. To achieve this, a specific module has been added to monitor margin calls, and the credit risk functionality has been enhanced accordingly.