Resources

FINCAD offers the most transparent solutions in the industry, providing extensive documentation with every product. This is complemented by an extensive library of white papers, articles and case studies.

Turkish Economy Bank Selects FINCAD Analytics for FX and Interest Rate (IR) Options Pricing and Risk

HIGHLIGHTS

Client

Turkish Economy Bank (TEB)

Business Objectives

  • Support a new ALM project
  • Calculate options prices and Greeks, and cash flows for inflation index bonds

Requirements

  • Pricing and risk coverage for exotic instruments
  • Flexible valuation and risk solution able to integrate with existing risk system

FINCAD Solution

FINCAD Analytics Suite for Developers 

[ DOWNLOAD CASE STUDY PDF ]


Situation

TEB is a partner of one of the world’s largest financial groups, BNP Paribas, and is active in commercial, private and retail banking. TEB’s clients consist of financial institutions, large corporations, small- to- medium-sized businesses and private customers.

TEB set forth on an asset-liability management (ALM) initiative. As part of this project, the bank required the ability to calculate options prices and Greeks, and cash flows on inflation index bonds.

At the onset of the project, TEB had planned to calculate pricing for their products using their existing risk management solution. However, the bank targeted several new types of instruments that they wanted to add to their portfolio, including options caps/floors, digital caps/floors, cross currency swaps and bond options. These instrument types could not be priced or risk managed with the existing system. Therefore, TEB began looking for a best-of-breed valuation and risk solution that provided coverage for these complex instruments. The bank also required that the new solution be based on flexible architecture, so it could be easily integrated with their existing risk management technology stack.

FINCAD’S Solution

Consultants working with TEB on their current risk management system recommended FINCAD Analytics Suite for help pricing complex instruments. Upon further research, TEB management found that the solution was an ideal fit for their business needs.

FINCAD Analytics Suite is a sophisticated, yet easy to use, valuation and risk analytics library for derivative and fixed-income instruments. FINCAD also provides a software development kit for integrating FINCAD Analytics Suite valuation and risk capabilities into new applications or for augmenting existing systems.

TEB uses FINCAD to generate prices and risk sensitiveness of all FX and interest rate (IR) options in their portfolio. “Using FINCAD, we can easily calculate expected inflation rates and cash flows of inflation indexed bonds, the fair value, Greeks, and probabilities of FX and IR options for differentiated and exotic products,” said Arzu Aksu, Project Manager at TEB, IT side.

TEB’s Asset Liability Management, Market Risk and Business Analytics departments all rely on FINCAD results to aid in decision-making.

The Results

TEB utilizes FINCAD Analytics Suite on a daily basis for pricing approximately 3,000 FX and IR instruments. The bank was pleased to find that the FINCAD solution was operational in a rapid timeframe. Using the developer toolkit, the bank was able to set up more than 25% of their products in just three months. “FINCAD Analytics Suite is one of the best solutions for pricing all aspects of derivative products traded in major financial markets around the world,” commented Aksu. 

Since implementing the solution, the bank has benefitted from the ability to price a wide range of derivatives products and to do so accurately. “FINCAD offers several differentiated functions and models for pricing FX and IR options. This valuable functionality has enabled us to customize as we need according to TEB’s portfolio,” stated Aksu.

TEB also relies on the FINCAD solution to meet the regulatory reporting requirements of both Basel III and the Banking Regulation and Supervision Agency of Turkey (BRSA). Prices and Greeks generated in FINCAD are used as inputs that feed regulatory reports.

Looking forward, TEB anticipates that the flexibility of FINCAD technology will enable them to easily adapt to inevitable market and regulatory change. “As regulations evolve and increase, we’re seeing the importance of risk management rise as well,” said Aksu.

Mustafa Ulak, Manager of Risk Management at TEB added, “FINCAD Analytics Suite has given us access to timely, accurate risk data, and the freedom to price a multitude of different instruments. Having these key abilities will be an important part of complying with current regulatory demands and will help us adapt to future changes in regulation and the overall marketplace.”  

Using FINCAD, TEB has been able to quickly and accurately price approximately 3,000 FX and IR instruments daily. 


“FINCAD Analytics Suite has given us access to timely, accurate risk data, and the freedom to price a multitude of different instruments. Having these key abilities will be an important part of complying with current regulatory demands and will help us adapt to future changes in regulation and the overall marketplace.”   

- Mustafa Ulak, Manager of Risk Management, TEB