CSIRO's financial models are driving GFI's FENICS Exotics software for pricing FX exotic options.

Global banks use CSIRO financial maths

CSIRO has worked with GFI Group to develop a powerful collection of mathematical models to assist banks and financial institutions in pricing all major exotic foreign exchange (FX) options.

9 November 2010 | Updated 14 October 2011

Partnership
From maths to market

Financial systems are complex. CSIRO's advanced financial mathematics can provide reliable pricing of exotic options. This gives banks, hedge funds, trading and fund portfolio managers the knowledge to buy and sell in a timely manner and with greater confidence.

Partnership

CSIRO financial mathematicians have been working with GFI Group, a major provider of wholesale derivatives brokerage, electronic execution, market data and trading software, to develop their FX options pricing software for over eight years.

CSIRO adapted software code originally designed for solving fluid modelling equations to the volatile environment of daily financial options trading.

In 2005, CSIRO delivered an exotic options pricing software package called Reditus™ as a plug-in to GFI's FENICS FX software. FENICS FX customers paid an additional licence fee for the Reditius software plug-in.

"This is just one example of how world class science can make a difference to the global financial market."

Mr Alan Dormer, Services Science Research Leader, CSIRO

In 2009, CSIRO signed a five-year agreement with GFI Group allowing it to release the FENICS Exotics software developed by CSIRO to all of its FENICS customers, which include 350 of the world's major financial institutions.

Mr Alan Dormer, Services Science Research Leader at CSIRO Mathematics, Informatics and Statistics says 'the relationship with GFI Group continues to grow from strength to strength reinforcing both our global partnerships strategy and the value of novel scientific approaches in delivering services innovation for clients.'

'This is just one example of how world class science can make a difference to the global financial market, offering better decision making tools to increase confidence and trading reliability,' Dormer said.

From maths to market

Fenics Exotics is GFI's latest addition to the FENICS Professional ™ [external link] product for pricing FX options. It is powered by two math methodologies, dVega and Monte Carlo.

The dVega model is GFI FENICS owned methodology that allows for the incorporation of current market practice to provide the most accurate pricing and spreading of first generation digital and barrier options.

The Monte Carlo embedded risk calculation engines, developed by CSIRO mathematicians, enable FENICS customers to better price and risk manage exotic options in real time, improving the risk profile of these options and making risk practices more robust.

The software pricing models are carefully tailored to work the way a market practitioner would expect to use them in the FX markets. The component provides accurate prices and tradable bid/ask spreads that can be immediately quoted, without requiring manual intervention.

'This partnership brings the financial market an independent and transparent model to price exotics, backed up with best practice in financial mathematics and a range of White Papers on the subject,' said GFI FENICS Global Head of Product Development, Mr John Molloy.