The needs of market participants in the post-trade environment are rapidly evolving as trading becomes more complex, volumes increase, and transactions accelerate. Open-source technology plays a key role in enabling market participants not just to navigate this environment, but to thrive in it.
Post Trade Solutions’ Open-Source Risk Engine (ORE) – a free-to-access simulation engine for pricing, risk, and valuation – has become a vital resource for firms managing derivatives and other traded products. It enables scenario analysis, portfolio pricing, and model validation, offering transparency, flexibility, and control without the complexity of proprietary systems.
To keep pace with evolving market needs, Post Trade Solutions has rolled out the 16th release of ORE. Building on previous releases, the latest version introduces support for new instruments, alongside enhancements to valuation adjustment, pricing and market risk capabilities.
New instruments and features: Greater flexibility in dynamic markets
The latest version of ORE adds support for cross-currency flexi-swap trades and swaption straddle structures under a single trade. The former allows users greater flexibility for structures like balance-guaranteed swaps in a volatile market, while the latter provides a more convenient interface for a common product.
Additional updates include a new range accrual variation, as well as coverage for rate digital options, dual European binary options, and cross-currency support for commodity swaps.
XVA: Accounting for risks and costs in dynamic markets
Importantly, the latest version of ORE also includes value adjustment (XVA) enhancements, which includes local volatility support for FX in exposure simulations. This enables users to more accurately model FX surfaces, thereby providing more accurate exposure profiles.
ORE 16 also introduces a series of additional optimisations across its pricing, calculation, and generation capabilities. These include improvements to the Monte Carlo exposure simulation, scenario generation, fast FX forwards, and vanilla swap engines.
The engine’s cube reading and writing ability has also been optimised, reflecting an enhanced capacity to store and analyse large volumes of essential data.
Market risk enhancements:
Users can now benefit from ORE’s support for multi-threading and optional trade and risk factor breakdowns in HistSimVar analytics. This, together with ORE 16’s support for Theta within sensitivity calculations, illustrates the engine’s continued commitment to supporting users to conduct accurate and rapid market risk calculations.
Pricing enhancements:
The newest release also enables ORE users to now use the Heston model when pricing scripted trades, enabling them to capture and price volatility movements more realistically. Additionally, the latest version of ORE now extends Stochastic Volatility Inspired (SVI) modelling to equity, FX, commodity, and credit volatility surfaces.
Other pricing enhancements include convexity adjustments for both equity and bond total return swaps, the option to use effective volatilities in market cap surfaces, and the inclusion of a conditional fee paid on exercise for swaption pricing.
These upgrades bolster the engine’s ability to simulate pricing accurately and quickly while allowing firms to remain agile and readily responsive to changing market conditions.
Market data enhancements:
Improvements to key market data inputs include support for inflation index rebases, the ability to use market standard conventions for single name credit default swap options, support for quoted commodity calendar spread options, and the ability to process wildcards for zero curve spreads.
For ORE 16 users, these updates enable more efficient and seamless use of market data when simulating price, risk, and valuation scenarios.
Community at the heart of innovation:
Since its inception in 2016, ORE has evolved through continuous feedback from its global user base, in lockstep with market developments. Each release reflects direct collaboration with practitioners, academics, and developers committed to advancing open, high-quality risk analytics for all.
The latest updates to ORE reflect commitment to maintaining an open and continuous dialogue with our global community and user network. Firms today are operating in an increasingly complex and growing post-trade environment. This latest release of ORE is designed to directly support firms, helping them not only navigate this challenging environment, but succeed in it.
Scott Sobolewski
He continued: “By keeping ORE open and accessible, we’re ensuring that high-quality risk analytics remain within reach of every firm. This is how innovation in finance should work: transparent, collaborative, and designed to serve the entire market.”
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