New Inflation Market Models Unveiled in the New Release of Numerix CrossAsset

Numerix CrossAsset, Version 9.2.1 provides additional innovation for inflation derivatives

NEW YORK--(BUSINESS WIRE)-- Numerix (www.numerix.com), the leading provider of cross-asset analytics for derivatives valuations and risk management, today announced a new version of Numerix CrossAsset, which includes three new Inflation Market Models (IMM): the Standard IMM (Forward CPI rates modeled as lognormal processes), Heston IMM (with Heston/CIR stochastic volatility processes), and SABR IMM (with SABR stochastic volatility processes).

In the post-credit crisis environment, the newly introduced inflation models will help capture the volatility that standard approaches didn’t address in the past. The last few years have seen a deepening of liquidity in the inflation derivative markets both in terms of longer maturities being traded and non-ATM strikes becoming far more liquid. A wider range of cap/floor strikes, including those struck at non-zero strikes, are now available with maturity ranging up to 10 years and sometimes even longer. As a result, modeling the smile and capturing the stochastic nature of volatility has become critically important for inflation derivatives trading.

In order to address the growing market appetite for inflation derivatives globally—whether for hedging or investment opportunity—Numerix CrossAsset’s implementation of the Inflation Market Modelsenables investors to accurately price a wider range of inflation derivatives, including: Inflation Swaps (Zero Coupon and Year-on-Year Swaps), Inflation-linked Bonds and Inflation Caps & Floors. The new models enable calibration to Zero Coupon Inflation Swaps and Inflation Caps & Floors, as well as capturing the Volatility Smile.

“We are pleased to add three new Inflation Market Models: the Standard IMM, which operates with quantities directly observable in the market, thus making calibration procedure intuitive and also its extensions, Heston IMM and SABR IMM, which capture the volatility smile of the inflation processes, ” said Dr. Serguei Issakov, Senior Vice President of Quantitative Research & Development at Numerix.

Other newly added models include FX Basket Models with Dupire, Bates, or Local Stochastic Volatility Models for individual equities, enabling greater flexibility for users when choosing pricing models?whether for hedging multi-currency exposures or for diversifying risk by purchasing Basket options.

“Our latest version of Numerix CrossAsset, while rich with new pricing models to effectively capture market dynamics, also introduces new capabilities and instrument support as Numerix continues to expand its footprint beyond exotic OTC derivatives and structured products,” said Numerix President and COO Steven R. O’Hanlon. “Given Numerix breadth of our asset class coverage, new features and instrument support are continually being requested by our clients for better precision in their hedging programs and for their risk management functions.”

All Numerix functions are available via Microsoft ® Excel® as an add-in, or can be integrated into proprietary or third-party systems using Numerix CrossAsset SDK in C#, C++, or Java. For complete detail of all new functionality, please contact your nearest Numerix sales office. Numerix CrossAsset is available immediately. More product details can be found online at numerix.com.

About Numerix

Numerix is the award winning, leading independent analytics institution providing cross-asset solutions for structuring, pre-trade price discovery, trade capture, valuation and portfolio management of derivatives and structured products. Numerix offers clients a highly flexible and fully transparent framework for the pricing and risk analysis of any type of OTC derivative financial instrument. From vanillas and "semi-exotics" to bespoke derivatives, structured products and variable annuities, Numerix allows users to calculate prices and manage risk using any data set.

Since its inception in 1996, over 700 clients and 50 partners across more than 25 countries have come to rely on Numerix analytics for speed and accuracy in valuing and managing the most sophisticated financial instruments. With offices in New York, Chicago, San Francisco, Vancouver, London, Paris, Tokyo, Hong Kong, Beijing, Singapore, Seoul, Sydney, Mumbai and Dubai, Numerix brings together unparalleled expertise across all asset classes and engineering disciplines. For more information, please visit www.numerix.com.

NumerixJim Jockle, 646-898-1263
[email protected]

Source: Numerix