Act Financial Systems Inc., a New York-based software and systems developer, has introduced Derivatives Pricing Tool, a PC-based product.
Derivatives Pricing Tool is a front-office application used to price swaps, forward-rate agreements, caps, and floors. It can also price a range of options including put/call stocks, European options, futures, and currency options. It comes with a calculator and a module for performing yield calculations.
The software was designed to run on top of Lotus 1-2-3 technology. Using zero-coupon methodology, it enables users to calculate net present value, break-even rates, break-even spreads, durations, and other parameters.
The product is aimed at entry-level players in the derivatives markets, including community banks and thrifts.
According to William Payne, chief executive officer of ACT, it's ideal for a bank that needs to evaluate 10 to 100 swaps. He said ACT also plans to sell the product to corporate treasurers who need to price their derivatives investments.
A Tool for Understanding
Mr. Payne said Derivatives Pricing Tool was created to give smaller operations a way to verify prices and better manage risk.
"Small banks are often faced with a situation when they are quoted a price on a currency swap from a larger player," Mr. Payne said. "This tool gives them the means to check the price and understand the underlying formula."
Derivatives Pricing Tool is one of many trading products and systems developed by ACT. Mr. Payne said that the algorithms used in Derivatives Pricing Tool are the same ones used in other ACT products.
ACT's more advanced derivative product is T-Mark, which not only prices derivative products but manages a trader's book, runs the book, and links it to the bank's back office.