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How to Efficiently Manage Curve Data Throughout the Pricing Process

Curves and their associated data points are an integral part of the pricing and valuation process. These curves – interest rate, forward, volatility, swap, etc. – are often used as standalone prices, but they also act as a required input to price complex securities and a source of useful information for multiple systems like risk, performance and front-office applications. However, the creation of curves and management of curve data can be difficult and manually intensive for funds due to the extra bandwidth required from both technical and pricing teams.

Fortunately, analysis suggests there are many areas throughout the process that can be streamlined and automated. In fact, a recently published IVP case study found that implementing a Pricing and Valuation Automation Solution can enable asset managers to fully automate curve data storage and pricing as well as reduce their staffing costs.

The entire pricing process can be streamlined effectively by managing the following activities:

  • Defining a Curve: Dealing with curves makes it important to have a clear workflow around their mapping, maintenance and sourcing. A curve definition is generally comprised of the constituents that form the curve, which is sometimes common across many. This calls for intuitive visualization of how various curves are formed along with their audit.
  • Defining Curve Data Points and Their Mapping: Each curve point comes with a unique identity. This mapping, if maintained in an Excel file or database, requires extra bandwidth to make any necessary changes and perform audit checks, creating a difficult process to manage for the pricing and valuation team. Through a smart UI-based interface, this process can be simplified by allowing the pricing and valuation team to efficiently manage curve data and easily create, update and map curve points with different curves.
  • Pricing Curve Data Points: Market data vendors, including Bloomberg, provide prices on a daily basis via FTP and API. At times, pricing and valuation teams may decide to override some of the curve data points, but dealing with such a multitude of sources and overrides can become a manually intensive exercise that requires an additional amount of dedicated effort. Automating pricing consumption allows the team to focus primarily on pricing overrides and exceptions rather than reaching out to different sources for curve prices.
  • Time Series and Exception Management: Funds and pricing teams typically struggle with visualizing these data points on a time series – both for a curve and its underlying curve data points. However, this can be automated with a tool designed to store the data and provide a clear visualization of time series along with the capability to manage exceptions and take corrective actions.
  • Input Variables and Sensitivity Analysis: While there are many specialized sources to price complex securities, funds also run internal valuation models that require the input of pricing curves. If an integrated system is available, pricing and valuation teams can also run scenario analysis by adjusting the curve data points to various test scenarios.
  • Cross-Platform Integration: Oftentimes, the final prices of curve data points need to be shared with other systems to serve various purposes like valuations, sensitivity analysis, risk analysis, etc., making it crucial to establish seamless and real-time connectivity with the pricing system (both upstream and downstream). This can be achieved through an automated pricing application that connects with other in-house and vendor systems.

Due to these factors, an increasing number of funds are looking for ways to streamline the management of curves and their data points with better data and more efficient tools.

Discover how IVP’s Pricing and Valuation Automation Solution can assist asset managers in automating their pricing process and mastering curve data points by visiting or contacting

Pricing and Valuation Automation Solution

This solution provides pricing and valuation automation, connecting funds to leading pricing data vendors and brokers. It also provides a flexible, configurable pricing engine that caters to any pricing process. IVP’s solution is designed to automate and streamline the pricing and valuation process, which traditionally involves time-consuming tasks like data collection, rules application, and pricing tests, efficiently retrieving data from vendors and brokers, applying waterfall pricing rules, and ensuring that prices meet threshold checks. This includes handling highly illiquid securities and those from exotic asset classes.

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