Cats Software, a Palo Alto, Calif.-based company, has introduced financial analysis software that will help bankers better develop and manage complex financial instruments like derivatives.
Jerry Goldman, a Cats managing director, said the software can accurately price the most esoteric of financial instruments and privide a dynamic link to n the user's own pricing function.
In addition, it can value a portfolio by integrating the pricing of complex instruments with the profit and loss statement of the remainder of the portfolio.
Monitoring the Risk
"The attraction of trading esoteric products is that the margins are so high in the beginning, so bankers want to get in early," he explained. "But the back office usually doesn't have a way of monitoring risk of understanding exactly what is going on."
Because the Cats software can model esoteric products, bankers have a better way to manage risk, he said.
"The back office knows what's going on. The bank can still get into the markets early and do so in a controlled way," said Mr. Goldman.
Using simple, reusable building blocks, or objects, the technology allows users to visually create any financial instrument that can be logically defined. More importantly, these instruments can be modeled without using source code.
Applications that typically take a financial engineer six months to create can now be generated in days.
This is critical capability in the derivatives market, where pricing is a complex undertaking.
Cats has had this technology under development for the last three years.
The London and Tokyo offices of Mitsubishi Finance worked with Cats during the final stages of development.