Mike Binns FX Markets Specialist at GFI Group Inc.
Mike Binns FX Markets Specialist at GFI Group Inc.

Revaluation and eTrading – assisting the control of derivatives risk exposure

Collecting accurate data, particularly derivatives data, for the purposes of risk management, has always been a challenge. Mike Binns shows how the continued growth of electronic trading platforms offers risk managers enhanced access to improved data

First Published: e-Forex Magazine 11 / FOCUS / July, 2003

Collecting accurate data, particularly derivatives data, for the purposes of risk management, has always been a challenge. Information on derivatives is hard to come by because, by definition, they are more opaque and illiquid than their underlying assets. However, recent concerns about the possible contribution that derivatives have made to financial catastrophes (and may continue to do in the future) have made it even more important that this challenge is met. Fortunately, as this article aims to illustrate by reference to the FX derivatives market, the continued growth of electronic trading platforms for derivative assets offers risk managers enhanced access to improved data. As a result old methods used to collect and calibrate risk parameters may become obsolete.The problem with derivatives dataValuing a derivatives portfolio creates issues that would not have to be faced when considering simple asset classes. For example, revaluing a FX options portfolio requires the creation of a volatility surface...continued

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