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Derivatives Services

Delivering valuations for a range of derivatives and alternative investments

Interactive Data’s Alternative Investments Valuation Service delivers independent valuations of interest rate swaps (IRS), single-name credit default swaps (CDS), CDS index trades, and syndicated bank loan positions. Through an exclusive agreement between Interactive Data and Prism Valuation, Interactive Data can also provide valuations of complex OTC derivatives and structured products.

Interactive Data has leveraged its experience in producing fixed income evaluations to offer services that utilize a number of market inputs, including benchmark curves from leading interdealer brokers, reference rates, trade details from clients, along with third party valuations to provide our clients with valuation coverage for a broad range of derivatives and alternative instruments.

Interest Rate Swaps

Interactive Data provides a service that can enable clients to upload interest rate swap trades and download valuations via FTP (bulk file) or from a Web-based application.

Coverage

The service is capable of providing valuations for most types of interest rate swaps and new varieties are continually being added.

Interest rates

Fixed-for-Floating (“plain vanilla”), Fixed-for-Floating Single Currency and Cross Currency swaps on any combination of offered currency pairs, Floating-for-Floating Cross Currency Basis swaps vs. U.S. dollars, Floating-for-Floating Single Currency U.S. dollar Basis swaps, Amortizing swaps and Accreting swaps with regular schedules, Step-up swaps and Step-down swaps with regular schedules, forward swaps, and compounding swaps (where the payment frequency and reference rate tenor differ), Forward Rate Agreements (FRAs).

Interest rate swap valuations are provided in:

  • U.S. dollars (USD)
  • British pounds (GBP)
  • Euros (EUR)
  • Swiss francs (CHF)
    (Historical valuations for the above currencies are available from June 2007.)
  • Japanese yen (JPY)
  • Australian dollars (AUD)
    (Historical valuations for the above currencies are available from December 2007.)
  • Czech koruna (CZK)
  • Danish krone (DKK)
  • Hungarian forint (HUF)
  • Norwegian krone (NOK)
  • Polish zloty (PLN)
  • Swedish krona (SEK)
  • South African rand (ZAR)
    (Historical valuations for the above currencies are available from April 2009.)
  • Canadian dollar (CAD)
  • New Zealand dollar (NZD)
    (Historical valuations for the above currencies are available from June 2009.)

Interactive Data’s service offers:

  • Ease of validation – input validation tools are built into the service, which can help clients match trades more effectively and facilitate independent valuations
  • Timely valuations – valuations are based on curve data available at 16:30 (GMT) and 15:00 and/or 16:00 (ET), and are available for download at approximately 17:00 (GMT) and 15:30 and/or 16:30 (ET) respectively, every business day. Request files can be uploaded to Interactive Data at any time before 15:00 (GMT)/15:00 (ET)
  • Internal identifiers – clients can use their unique internal identifiers to map trades, so data will be delivered with identifiers their system can recognize
  • Access to underlying data and evaluators – clients can have access to the underlying benchmark curves used, and if necessary, to the evaluators responsible for creating the curves
  • Bulk or online upload and download – clients can upload trades and download interest rate swap valuations via FTP (bulk file) or online via a Web-based facility

Valuations of Complex OTC Derivatives and Structured Products

Interactive Data provides valuations of highly complex OTC derivatives and structured products through an exclusive agreement with Prism Valuation. Prism Valuation – whose philosophy to valuation is built on three pillars – "people-data-models" – provides services that replicate the pricing and risk analysis capabilities of a structured products dealer, with an emphasis on hard-to-value assets.

The structured products valuation service can provide valuations on a daily, weekly, monthly or quarterly basis. In each case, a full service is provided that enables clients to submit deal confirms or other source documents directly, rather than having to input the structure and select and calibrate models.

Valuation Transparency Report

A key feature of the service is an innovative Valuation Transparency Report, in which the valuation process for even the most complex structures is illuminated in plain language. This includes the choice of underlying market data, appropriate model selection and calibration strategies culminating in a valuation. The transparency report provides clients with a deeper understanding of the specific methodology employed to value each deal, which facilitates the auditing process.

Valuation Discrepancy Report

With increased market volatility, clients need to better understand the factors that can cause a difference in valuation. A further value-added analysis that can be provided, on an ad-hoc request basis, is a detailed Valuation Discrepancy Report. This analysis compares differences between a customer’s valuation (counterparty and/or internal valuations) and the Prism Valuation service. The analysis provides customers with a detailed report that breaks down what, in Prism Valuation’s opinion, the maximum variances are that can be caused by different market data inputs, model selection, calibration choices, parameter sensitivities, and numerical methods. The Valuation Discrepancy Report concludes with what is believed to be the maximum valuation deviation for that product.

Coverage

While new structures are continually being added, the service is capable of providing valuations for most flavors of OTC derivatives and complex securities, including the following examples:

Interest rates
Bermudan swaptions, Callable Zeroes Callable Range Accruals (single index, CMS spread…)
Callable CMS Spread Options, Callable Basis Swaps
Digital Caps/Digital Swaptions/Target Redemption Notes (TARNs)
Snowball/Snowbear/Snowblade (callable path dependents)
Quantos, including callable quantoed structures, Hybrids

Inflation
Swaps, Hybrids
Caps/Floors/Swaptions

FX
Power Reverse Dual Callable, Power Reverse Dual Triggerable
Digitals/Barriers/Knock-outs, FX Range Accruals
FX Baskets, Rainbow Options

Equity
Basket Options, Index and single stock Digitals/Barriers/Knock-outs
Autocallables, Cliquet, Mountain Range Options (Himalaya, Altiplano, Everest)
Variance swaps, Variance options, Dispersion swaps

Commodity
Baskets
Hybrids

Hedge Fund/Managed Fund/Mutual Fund
Baskets
CPPI Structures

Credit
Asset Swaps
Bespoke and index CDOs, CPDOs, CDO–Squared
Basket default swaps, X–to–Y to default baskets, Hybrids

Credit Default Swaps

Interactive Data offers a service that is designed to allow clients to upload single-name credit default swap (CDS) or CDS index trades through bulk file transmission (FTP) or a Web-based application. The service returns valuations from the Markit Portfolio Valuations service, which clients can download through bulk file transmission (FTP) or a Web-based facility. Historical valuations are available for the last three month ends, as well as the most recent five business days.

For single name CDS valuations, Markit leverages the contributions of over 85 major CDS dealers. Data includes composite and contributor level CDS data for more than 3,000 individual entities. Reference Entity Database (RED) data is available for more than 3,800 scrubbed reference entity/obligation pairs. RED is the emerging industry standard identifier for CDS. Interactive Data’s CDS valuation service also covers Markit CDX index trades and Markit iTraxx index trades.

Interactive Data’s service offers:

  • Validation – for ease of use, input validation tools are built into the service to help match trades more effectively and facilitate CDS valuations.
  • Timely valuations – single name CDS valuations are based on data available at 16:00 (ET), and are available for download at approximately 16:30 (ET) every business day. Request files can be uploaded to Interactive Data at any time before 15:30 (ET). CDX index trade valuations are available after 19:00 (ET) for five year on-the-run CDX index trades, after 2:00 (ET) for off-the-run CDX index trades, and after market close (depending on the index) for iTraxx index trades. In addition, intra-day levels are available after 16:00 (ET).
  • Detailed methodology and quality controls – Single name CDS valuations are based, by default, on composite curves assembled from contributed data that has passed several quality control tests. Subscribers can also specify the use of alternate curves (e.g., interpolated or flat CDS curves). The associated default probabilities are then used in conjunction with user-supplied trade information to obtain a valuation.
  • Markit RED codes or internal identifiers – clients can utilize either Markit’s RED codes or their own internal identifiers.

Bank Loans

Interactive Data’s service allows clients to upload bank loans through a Web-based application or bulk file transmission (FTP). The service returns composite and modeled bank loan valuations from Markit Group Limited, which clients can download through a Web-based facility or bulk file transmission (FTP). The service greatly reduces the need for manual monitoring of certain corporate actions and manual reassignment of identifiers. It includes a user-friendly Web tool that automates the delivery of updates on refinancing, termination, and substantial amendments to loans, including effective dates for changes. Markit collects marks (bid and ask prices) from more than 60 trading desks, yielding more than 6,500 bank loan prices daily.

Interactive Data’s service offers:

  • Ease of use – tools built into the service help clients search the bank loan universe and then select and view price data on specific loans.
  • Timely valuations – prices are available for download at approximately 16:30 (ET) every business day. Request files can be uploaded to Interactive Data at any time before 15:30 (ET).