In F3, a Model comprises a centrally managed and self-consistent collection of modeling assumptions available for valuation and risk calculations for portfolios of multi-asset, multi-currency derivatives and fixed income securities. This consistency enforces meaningful aggregated risk measurement across the enterprise and enables optimal risk and regulatory capital management.
The Model in F3 centrally manages all market data and curves, and represents modeling assumptions. In traditional analytics libraries, many modeling assumptions are made implicitly – often hidden away in dark recesses of valuation code. F3’s Model concept provides a central location where these assumptions are listed explicitly and transparently.
The Model is self-consistent and prevents arbitrage opportunities. Its self-consistency allows for a coherent arbitrage-free view of the markets to be maintained in the presence of increasingly complex valuation and risk calculations for large, multi-currency, multi-asset-class portfolios across the enterprise. This subsequently provides greater valuation and risk accuracy.
The Model is computationally efficient by employing lazy evaluation and reusing curves across portfolios. Building curves and running calibration at the last possible moment means Models for large and complex markets can be set up with near-zero computational effort. The cost of calibration can be deferred until needed for valuation and then paid on an as-needed and incremental basis. Each curve is guaranteed to be defined once, built once, and reused across portfolios.
Scalable and flexible
Modeling functionality is straightforward for vanillas and scales to sophisticated functionality for complex and exotic models. Whether modifying pre-built Models to create simple bespoke solutions, using multiple Models to perform scenario analysis on a single product, or combining multiple Models into a single resultant Model while maintaining self-consistency, the Model in F3 provides you the flexibility to create solutions for every need.