I wanted to get some opinions about some derivative valuation/risk management software suites. In particular, I want to know if anyone has any experience with FINCAD. In addition, perhaps SuperDerivatives, MBRM, etc. I clear through Interactive Brokers, and I have some excel sheets/models that I have built. However, I am looking for something a little more robust, especially in the risk management department. I do primarily trade vanilla options on equities, indices, and futures. So perhaps paying for a third party analytic package is unnecessary. Any opinions are appreciated.
Option Analytics Software
- Thread starter Doobs789
- Start date
What exactly are you trying to achieve with this software? I think everyone has a very different definition of what risk-management entails.
I can't say that I've used any of the software you've listed, but just glancing at them they might be a bit overkill don't you think? I mean sure it's nice that you can calculate CVA with FINCAD, but it doesn't sound like you're trading OTC products to begin with. Though if you are looking at software this expensive, maybe OpenGamma would make more sense for you.
One less expensive option which I think is reasonable would be HedgeFacts. They actually properly price options such that you'll end up with consistent vols, they use zero-rate curve, blah blah.
I don't know how your programming skills are, but I mean if all you're looking to do is agg greeks across your portfolio and run some basic stress tests. That shouldn't be very difficult to code up.
I can't say that I've used any of the software you've listed, but just glancing at them they might be a bit overkill don't you think? I mean sure it's nice that you can calculate CVA with FINCAD, but it doesn't sound like you're trading OTC products to begin with. Though if you are looking at software this expensive, maybe OpenGamma would make more sense for you.
One less expensive option which I think is reasonable would be HedgeFacts. They actually properly price options such that you'll end up with consistent vols, they use zero-rate curve, blah blah.
I don't know how your programming skills are, but I mean if all you're looking to do is agg greeks across your portfolio and run some basic stress tests. That shouldn't be very difficult to code up.
You are probably correct that it is overkill for managing a vanilla options book. I have sheets that calculate position and portfolio greeks, as well as VaR and other risk metrics. I am fairly proficient with Excel and VBA, but that's about it. I am mainly just curious to see what's out there. Hell, only looking at your global thetas is probably sufficient. Thanks.
Doobs -
You mentioned Interactive Brokers. Are you using their Risk Navigator? Over the last half-year or so they've added greeks at every level so your portfolio can now be sliced and analyzed by:
- individual option contract, e.g. Dec corn 500P (at this level you also see IV)
- total by contract month, e.g. all Dec corn options
- total by underlying, e.g. all corn options
The various greeks are netted (added) and you can also get Delta dollars and Gamma dollars by underlying and by total portfolio. Note: the latter two metrics probably aren't that useful in a physical commodity portfolio, but I keep the keep those columns visible for my stock option portfolios.
Finally, they have end-of-day and real time VaR reports plus an end of day stress test report. There's also some kind of real time stress test - change in price, change in IV - but I don't use it because the graph and the increments are difficult to read.
I don't mean to sound like an advertisement for IB, only to give credit where due. A year ago the Risk Navigator wasn't very good but now it's an important tool that I use every day. It's still ugly, but we're talking IB design, not Apple.
You mentioned Interactive Brokers. Are you using their Risk Navigator? Over the last half-year or so they've added greeks at every level so your portfolio can now be sliced and analyzed by:
- individual option contract, e.g. Dec corn 500P (at this level you also see IV)
- total by contract month, e.g. all Dec corn options
- total by underlying, e.g. all corn options
The various greeks are netted (added) and you can also get Delta dollars and Gamma dollars by underlying and by total portfolio. Note: the latter two metrics probably aren't that useful in a physical commodity portfolio, but I keep the keep those columns visible for my stock option portfolios.
Finally, they have end-of-day and real time VaR reports plus an end of day stress test report. There's also some kind of real time stress test - change in price, change in IV - but I don't use it because the graph and the increments are difficult to read.
I don't mean to sound like an advertisement for IB, only to give credit where due. A year ago the Risk Navigator wasn't very good but now it's an important tool that I use every day. It's still ugly, but we're talking IB design, not Apple.
Yes, I use IB. I have played with the Risk Navigator a little bit (I just recently moved my account there). It seems somewhat improved from what it used to be. I like the VaR features. Do you know what prices/quotes they use for greek calculations? Are they real-time? Do they use mid prices? I ask because I sometimes get different greek values when I calc them myself versus what IB displays.
Based on my observations, I think the greek values are real time or very close to it, but I don't know if they are using a straight midpoint of the bid-ask or something more complicated.
Intra-day, I'm keeping a close eye on net delta by underlying and liquid products like corn, crude or natural gas match exactly or very closely with the values found in Option Chain or Option Trader. Where I notice occasional stickiness or some nonsense jumping around is in the more thinly-traded commodities. That's par for the course, though, esp. if I'm in distant strikes in those commodities.
Overall, I'm satisfied with the usefulness and accuracy of Risk Navigator. My biggest complaint is that the values jump like crazy at the moment of the close and sometimes it's a few hours before IB updates them with final settlements (I don't know if they use prelim settlements as an interim step). So, if you want to know your net greeks as your trading day is about to end, "suspend" the application and then export/screen shot/scribble them down before "resuming." Otherwise, you might be looking at meaningless numbers for the next couple of hours.
Intra-day, I'm keeping a close eye on net delta by underlying and liquid products like corn, crude or natural gas match exactly or very closely with the values found in Option Chain or Option Trader. Where I notice occasional stickiness or some nonsense jumping around is in the more thinly-traded commodities. That's par for the course, though, esp. if I'm in distant strikes in those commodities.
Overall, I'm satisfied with the usefulness and accuracy of Risk Navigator. My biggest complaint is that the values jump like crazy at the moment of the close and sometimes it's a few hours before IB updates them with final settlements (I don't know if they use prelim settlements as an interim step). So, if you want to know your net greeks as your trading day is about to end, "suspend" the application and then export/screen shot/scribble them down before "resuming." Otherwise, you might be looking at meaningless numbers for the next couple of hours.
VaR yes.... $100k in debits and $98k on your VaR!
I don't understand your proclivity for spending a bunch of cash on analytics. SD and the rest are going to run >couple K per month, and at that nut you may as well pop for a BBG sub and at least get some value. Their vol-pages are pretty good and you can feed excel and an MBRM add-in.
The value in SD, Fenics (whatever it's called now) is in valuation of OTCs; lookbacks, bespoke products.