Pricing Interest Rate Derivatives

SciComp offers two solutions for pricing interest rate derivatives, SciFinance® and Custom Fit Pricing Models.

SciFinance

SciFinance is an automated coding technology for rapidly developing derivatives pricing and risk models. Simply select from one of hundreds of model specifications and modify as appropriate to capture the unique features of the interest rate derivative or to implement a preferred pricing approach. interest rate derivative pricing model specifications are comprised of arbitrary partial differential equations (PDEs) or stochastic differential equations (SDEs), numerical algorithms, keywords, and may include the calling of external functions. SciFinance does the rest by automating the programming task via the SciPDE and SciMC modules to produce fully documented C/C++/CUDA pricing model source code or Excel spreadsheets and add-ins.

Custom Fit Pricing Models

SciComp Custom Fit Pricing Models meet the needs of users looking for a customized interest rate derivatives pricing model that has been tailored to their particular modeling needs and requirements. Custom Fit Pricing Models are state-of-the-art interest rate derivative pricing and risk models comparable to those found on the desks of traders and risk managers within Tier-1 financial organizations. Like SciFinance, Custom Fit Pricing Models support the modeling of any interest rate derivative that can be valued using PDEs or SDEs and are available as a C/C++/CUDA pricing executable, C/C++/CUDA pricing model source code or a ready-to-use Excel spreadsheet and add-in.

Interest rate derivative features available with SciFinance
and Custom Fit Pricing Models

Pricing models for interest rate derivatives

SciComp solutions support any interest rate model that can be expressed as a PDE or SDE, so no list can be complete (partial list below).

• Short rate models
• CIR / Vasicek / Ho Lee / Hull White / BK
• Cheyette model
• Libor Market models
• HJM / BGM
• LIBOR swap models
• Features
• Stochastic volatility extensions
• Jump extensions
• Arbitrary user defined

Pricing model calibration

SciCalibrator is an automated coding technology for translating a pricing model calibration specification into the corresponding C/C++ source code for the calibration routine or a ready-to-use Excel spreadsheet and add-in. SciCalibrator comes with over a dozen analytical pricers for valuing the underlying calibration instruments or, if you prefer, you may use your own pricer. If no analytical pricer is available, you can generate a SciFinance PDE or SDE pricing model for use in the calibration routine.

Interest rate derivative calibration routines include:

• Generic Short Rate Calibration:
• Single and multi-factor Gaussian models
• Generic single factor models (e.g. G1,HW,EEV,BK,CIR)
• Interest rates and hazard rates correlated
• LMM Calibration:
• Exact fit to caps and least square fit of parameterized correlation matrix of swaptions
• Stochastic volatility
• User defined calibration routine

Example interest rate derivatives structures

Given that SciComp solutions support the modeling of any interest rate derivative that can be priced with a PDE or SDE, no list can be complete (partial list below).

Examples of interest rate derivatives:

• Vanilla exotics
• Basis structures
• Cross currency
• Inverse floating
• Quanto
• Chooser
• Diff structures
• Zero coupon
• CMS/CMT
• CMS spread structures
• Auto caps
• Digital payouts
• Range accrual
• FX linked
• Knock in/out
• Power reverse dual
• Snowballs
• Multi-option
• Risky bonds
• Ratchet structures
• Snowbear
• Snowblade

Option types include:

• European
• Bermudan
• American
• Path dependent
• Barrier