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Reditus
is a
dynamic design, pricing and trading tool for new financial
instruments. It can be used
for derivatives in equity, interest-rate, commodity, energy, or any
hybrid markets. Reditus is not a conventional
options-pricing tool. It is a tool for exploring, manufacturing and
trading new instruments efficiently. In addition, you can use Reditus
as a library add-on/plug-in to a client trading system.
For the Reditus finite-element
module, users can freely set up any new payoff functions of their own.
Users can also alter the local volatility to account for gamma hedging cost
and frequency. Users can change interpolation methods for yields or
forward volatility. Basically users have the freedom to design any models/payoffs
for new instruments that can be expressed through
PDEs.
The Reditus
Monte-Carlo module
covers a comprehensive list of exotic options that bank front-offices can
use to quickly respond to clients' requests, or to verify their own
pricing.
Options prices, all risk sensitivities (Greeks) and their confidence
intervals are calculated in the same simulation. The Monte-Carlo engine
incorporates special error-reduction techniques that reduce the
computational time by a factor of 100.
Reditus
is
also an extremely good tool for studying different barrier options, and
various interest-rate models to gain intuitive understanding of
the impact these models can have on pricing results. It
provides a convenient platform for easily experimenting with various
parameters of these models. It allows users to develop and prototype
models across different markets, e.g. the energy market, equity and
interest rate markets. It can be a useful tool for setting up something
quickly to test bright ideas that may or may not work.
Reditus
can be used as a stand-alone trading tool for these new products
in the back-office and front-office. It links dealing desks tightly and
directly with quantitative analysts to make a highly productive
team.
Reditus
can also be used
to evaluate a firm's value or to price a risky bond issued by a firm by
modelling its earnings and cash reserves. For credit risk, you can
easily set up a bond pricing model with interest rate and default
probability as the two stochastic variables with certain correlation.
A sample of some of the models offered:
- Stochastic volatility models in FEM & Monte-Carlo (with barrier structures for both the
asset and the volatility)
- Complex Parisian options (users can set three different
beyond-barrier days)
- Two-factor barrier options for a commodity and a currency (barrier
structure for both assets)
- Asian average options (barrier structure for both asset and its
averages)
- One-factor model with multiple irregular barrier structures
(equity or FX).
- One-asset model when transaction cost is considered.
- FX with multiple barriers.
- Caplet/Floorlet with barriers on the spot rate for different
interest rate models (e.g. BDT, Hull-White, CIR, Ho-Lee)
Risk Management
Reditus
finite-element engine is
a robust pricing tool for risk management. Because the
finite-element approach uses an unstructured mesh, higher accuracy can
be achieved by concentrating mesh points around the spot area and where
options prices change rapidly, such as knock-out barriers and binary
pay-off regions. The finite-element engine also provide the greeks
as a distribution across different spots and maturities. The information
gives traders valuable insight to future movement of risk parameters
within a consistent pricing framework (local volatility surface).
For more information, please contact us by e-mail at:
reditus@csiro.au
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Reditus
- The rewards:
- Efficient development of new products, tailored to your
customer needs
- New exotic options products not available from your
competitors
- Rapid product development
- Accurate options prices
- Prices for complex options that can be priced by other
means
- Information for better risk management
- A versatility and interactivity that no other
design/pricing/trading package can match.
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