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Derivatives Services

Delivering valuations for a range of derivatives and alternative investments


Interactive Data’s OTC Derivatives Valuation Service delivers valuations of interest rate swaps (IRS), single-name credit default swaps (CDS), CDS index trades, and syndicated bank loan positions. Through an 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 independent valuations via FTP (bulk file) or from a Web-based application.

Coverage

Interest rates

Fixed-for-fixed cross currency swaps on any combination of offered currency pairs, fixed-for-floating single currency and cross currency swaps on any combination of offered currency pairs, select floating-for-floating cross currency basis swaps vs. U.S. dollars and European euro, floating-for-floating single currency U.S. dollar LIBOR basis swaps, irregular schedule amortizing / accreting and step-up / step-down single currency swaps, including rollercoaster single currency swaps, forward swaps, compounding swaps (where the payment frequency and reference rate tenor differ), and 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.)
  • Hong Kong dollars (HKD)
  • Korean won (KRW)
  • Malaysian ringgit (MYR)
  • Singapore dollars (SGD)
  • Taiwan dollars (TWD)
  • Thai baht (THB)
    (Historical valuations for the above currencies are available from December 2009.)
  • Turkish lira (TRY)
    (Historical valuations for the above currency are available from March 2010.)

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)
  • Valuation convention—clients can choose either Same Day (T0) or Buy Out (traditional settlement practice of the underlying currency) settlement valuation convention for each swap
  • 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 complex OTC derivatives and structured products through an 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

Current coverage includes:

  • Baskets
  • Accruals
  • Callables
  • Hybrids
  • Cliquets
  • TALF Loans
  • Caps/Floors
  • Structured Notes
  • Swaptions
  • Forwards
  • Linked-Notes
  • Variance/Volatility

on underlyings such as Interest Rates, Inflation, Funds, FX, Credit, Equity, and Commodities.

Credit Default Swaps

Interactive Data’s Credit Default Swap Evaluation Service is the industry’s first widely-available independent CDS evaluation service for single name corporate and sovereign CDS, as well as select CDS indices. Designed to help meet increased demand for independent evaluations and transparency in the derivatives markets, our CDS Evaluation Service leverages our position as an award-winning provider of fixed income evaluated pricing. Our unique, proprietary methodology for producing CDS evaluations is based upon a deep CDS price discovery process in which dealer CDS quotes and composite valuations are augmented by information from related markets including Interactive Data’s corporate bond evaluations.

Our coverage encompasses a wide range of global single-name corporate, sovereign and U.S. municipal entities with denominations in USD, EUR, GBP and JPY. In addition to evaluations for single-name CDS, our coverage includes valuations for a broad array of indices including the CDX™ and iTraxx®. Our CDS evaluations are delivered at approximately 16:30ET each trading day for use in financial reporting and other related activities while our credit curves can be utilized for a range of trading and risk management functions. The promise of greater market and transaction-level transparency will further elevate the importance of sound valuation practices – for margin purposes as well as for accounting and other applications.

Interactive Data’s service offers:

  • Search and Trade Validation Flexibility – Multiple ways to search our coverage universe and map trades (RED™, ticker or underlying bond CUSIP®).
  • Timeliness and Quality – Delivered at approximately 16:30ET each trading day for use in financial reporting and other related applications. In contrast to a pure model-based approach, Interactive Data’s market-based evaluation approach is designed to promote credibility among auditors, stakeholders and regulators. In addition, our approach to producing CDS evaluations is underpinned by our robust quality-control processes, broad experience and sophisticated market data infrastructure, all of which enabled us to become the gold standard in producing independent fixed income evaluations.
  • Unique, Proprietary Methodology – Our new CDS Evaluation Service for single name, corporate and sovereign CDS leverages our position as an award-winning provider of fixed income evaluated pricing. Our CDS evaluation methodology incorporates dealer CDS quotes and composite valuations augmented by information from related markets including Interactive Data’s corporate bond evaluations. Our evaluators review critical information, including underlying credit and interest rate curves, to form opinions of value.
  • World-Class Service & Support – Access to a range of responsive support services … In addition to timely information resources and other web-based tools, clients are able to interact with our CDS evaluators as well as utilize our Evaluated Pricing Challenge Portal, an online platform for reporting and monitoring evaluation challenges. Additional transparency into CDS and CDS Index evaluations will be supported by VantageSM, Interactive Data’s Web application that provides clients with extensive data and transparency into the fixed income market and the Company’s evaluations.