SuperDerivatives, a two-year old software house set up by former derivatives dealers, has incorporated a new risk management tool into its product suite to improve the understanding and hedging of the risk of a users' option portfolio.
The risk matrix will enable users to analyse the impact of spot movements on various different parameters in their options portfolio. This includes the profit & loss of positions and the effect of spot price movements on theoretical and market Greeks, such as delta, gamma, and vega - terms used to describe the price of an option changes as some of the inputs change. The risk management tool also enables analysis of different market scenarios, as well as stress testing for risk managers.
According to David Gershon, chief executive, risk matrix allows SuperDerivatives’ clients to effectively manage their risk based on actual market prices, rather than just theoretical ones. “This is becoming a very important issue because of the introduction of new standards such as FAS 133, which any company accounting under US Gaap needs to take into consideration. Among other things, FAS 133 states that derivative positions have to be accurately marked-to-market. The ease which end users can obtain accurate market prices from SuperDerivatives clearly facilitates this process," he says.
The risk matrix can be downloaded onto an Excel spreadsheet, so that banks can send accurate risk assessments of a customer’s exposure to them, or a treasurer can send it to his risk manager.