CSIRO exotic options pricing software enables analysts to have a clear graphic overview of future options prices and risk parameters. This graph shows the local volatility of the foreign exchange Euro/USD as implied by the 'current' market vs exchange rate level and time to price exotic options.

Exotic maths making finance a less risky business

Reference: 09/116

CSIRO has extended its partnership and licensing agreement with GFI FENICS, the market standard for pricing and analysing Foreign-exchange (FX) options.

• 23 July 2009

The new agreement extends the provision of novel mathematical methods to FENICS customers worldwide via CSIRO’s exotic options pricing software.

Mathematicians from CSIRO have adapted software code from fluid modelling equations for heavy industry to the volatile environment of daily financial options trading.

“This is 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,” CSIRO General Manager for Business and Commercialisation, Andrew Dingjan, said.

“Financial systems are complex. Bringing in advanced science can provide more reliable pricing of exotic options giving banks, hedge fund, trading and fund portfolio managers the knowledge to buy and sell in a more timely manner and with much greater confidence.”

GFI FENICS’s pricing and risk management system for FX options, using CSIRO’s complex risk mathematics, gives analysts a clear and highly graphic overview of future options values and risk parameters. It is also used to rapidly develop new options products attuned to changing market demands.

FENICS FX is used by over 350 institutions globally including banks and hedge funds.

 “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, John Molloy.

“The FENICS customer base will benefit by being able to better price and risk-manage exotic options in real time, improving the risk pricing profile of these options and making risk practices more robust.”

An expert research team of CSIRO mathematicians will focus on developing the mathematical and quantitative techniques to enhance upgrade and customise FENICS software for its clients. Innovative and popular options instruments are expected to be developed and delivered to global clients more efficiently through this partnership. 

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