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FRONT ARENA. From Theory to Practice - PDE & Finance, 2007 Håkan Norekrans, Product Manager. Agenda: SunGard FRONT ARENA – The Company Instrument Coverage and Valuation Models The Finite Difference Solver in FRONT ARENA Pricing Quoting Risk Management. FRONT ARENA – The Company.

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from theory to practice pde finance 2007 h kan norekrans product manager
From Theory to Practice - PDE & Finance, 2007Håkan Norekrans, Product Manager

Agenda:

  • SunGard FRONT ARENA – The Company
  • Instrument Coverage and Valuation Models
  • The Finite Difference Solver in FRONT ARENA
    • Pricing
    • Quoting
    • Risk Management
founded 1987
Founded 1987
  • Asset Class: OM Stockholm equity options
  • Workflow: Risk management
  • Customers: Swedish banks and brokers
  • Employees:
front arena s business 2007
Asset Classes

Workflows

FRONT ARENA’s Business 2007
  • Equities
  • Fixed Income, Repos & Convertibles
  • Interest Rate Derivatives
  • Credit Derivatives
  • FX, Money Markets,
  • FX Options
  • Sales & Distribution
  • Market Making & Proprietary Trading
  • Risk Management
  • Back Office
  • Market & Price Connectivity
  • Hedge Fund Operational Integration
  • Equities
  • Fixed Income,
  • Repos & Convertibles
  • Interest Rate Derivatives
  • Credit Derivatives
  • FX, Money Markets,
  • FX Options
150 customers with 350 installed sites
150 Customers with 350 Installed Sites

China

Canada

Holland

Finland

UK

Japan

Norway

Sweden

Germany

Austria

Switzerland

Taiwan

Thailand

US

Singapore

Hong Kong

South Africa

Typical customers

  • Investment Banks
  • Private Banks
  • Hedge Funds

.

global coverage local focus
Global Coverage - Local Focus

378 Employees

198 Product operation

166 Global services

14 Shared services

Stockholm

London

Frankfurt

Zurich

New York

Tokyo

LosAngeles

HongKong

Singapore

Johannesburg

front arena vision
FRONT ARENA - Vision

Web Links :

http://www.sungard.com/frontarena

http://www.frontarena.com

“With FRONT ARENA’s integrated solutions, we use the same system across our Fixed Income, Interest Rate Derivatives and Equities desks. The openness and flexibility of FRONT ARENA enables us to react in a timely fashion to business requirements” Hans-Ulrich Hasse, Senior Vice President

Landesbank Rheinland-Pfalz

valuation methods in front arena
Valuation Methods in FRONT ARENA
  • Analytical models
    • Default choice
    • Fast and accurate greeks
    • Often not available
  • Tree models (Binomial – Trinomial)
    • Traditional choice in finance
    • Relatively fast
    • Limited robustness and flexibility
  • Finite Difference
    • Increasing usage
    • Relatively fast and stable greeks
    • More complex implementation
  • Monte Carlo
    • Needed for complex pricing
    • Flexible payoff functions (including user defined)
    • Slow and unstable greeks
finite difference solver in front arena

Finite Difference Solver in FRONT ARENA

Pricing

Quoting

Risk Management

pricing
Pricing
  • Barrier option priced using local volatility
quoting to electronic market
Quoting to Electronic Market
  • Calculate theoretical bid and ask prices and send to electronic exchanges
risk management portfolio sheet
Risk Management - Portfolio Sheet
  • Portfolio with positions and greeks
  • Hedge suggestions
risk management risk matrixes
Risk Management – Risk Matrixes
  • Vega Matrix showing volatility risk
  • Underlying price vs Volatility shifts