Limited
Hedge fund convertible arbitrage desk
A US hedge fund set up a convertible arbitrage desk in Asia, and wanted to get it up and running as quickly as possible. MQS helped the fund set up an initial simple trade entry, position keeping, valuation and risk management spreadsheet using third-party valuation models, including developing trade downloads and uploads to the back-office and from the prime brokers. We developed and enhanced this spreadsheet as the desk's positions grew, and then, when the desk had expanded sufficiently, helped the fund decide on which derivatives system to purchase to provide a more robust infrastructure. MQS is still retained by the firm to help with analysing and valuing some of the more exotic convertible structures in the market and to provide other quantitative assistance.
Monte-Carlo simulation model for investment bank
The New York equity derivatives trading desk of a large North American bank was having trouble getting in-house quantitative resource to help with valuing complex structures. The desk retained MQS to provide a C++ Monte-Carlo simulation model, provided via an Excel interface, which would value these structures. The model handles multiple equities in multiple currencies, equity volatility surfaces, discrete dividends and equity and fx correlations. The structure payoff is specified by the user using a simple payoff language. MQS delivered the model, the C++ code, user documentation, mathematical documentation, example spreadsheets, test spreadsheets and test documentation, so that the in-house quantitative resource could take over the support of the model.
Credit derivatives valuation analysis for a hedge fund
A large UK-based hedge fund, specialising in credit, uses MQS to help value and analyse CDS's. This involves writing software (in C#) to model CDS's and to intelligently validate parsed prices being supplied by more than one third party supplier. Spread curves are generated from the disparate and often spotty data, and then those curves are monitored for trading opportunities by identifying breaks in trend, momentum changes, etc.
Support for investment bank's convertible desk
MQS provides quantitative support to the convertible desk of a Japanese bank. This involves assistance in use and implementation of a third party model; helping in the valuation and construction of hedging techniques for non-vanilla structures; writing a calibration program for interest rate modelling; and advising on market-standard practices in the quantitative sphere.
Analysis of a structured product's performance
A Swiss private bank had a client who had purchased a relatively exotic structured product from a major investment bank. The structure had a five year tenor and was based on an underlying index. The client decided to sell the structure back after three years; having paid par for the structure, and with the underlying index having increased by 11% over the period, they needed to know whether receiving par back for the structure was unfair. MQS analysed the structure, focusing especially on the fee structure and the impact of interest rate moves over the period.
Assistance in model maintenance for a financial software company
A financial software company has a library of C++ option models which it offers to sell to clients in conjunction with it's mainstream product. The original author of the models has left the company; they need help on an ad-hoc basis for support of the library and for any client-requested enhancements. The library covers basic equity and interest-rate structures plus some index-linked structures.
Valuation report for an investment bank
The Equity Capital Markets department of an Asian investment bank asked MQS to produce a valuation report for a new instrument which it was helping a corporate issue. The instrument had non-standard features which were not easily modelled, so MQS produced valuations and sensitivities for a range of parameters, a justification of the valuation methodology, and some thoughts on hedging the instrument.
Valuation report for a hedge fund
A US-based hedge fund had been offered an exotic convertible bond structure and requested MQS to write a valuation report on the structure. The structure's complexity was far beyond the capabilities of standard convertible models, and writing a full model for all the features of the structure would have required a major investment. MQS made some sensible real-world assumptions which allowed the structure to be modelled more easily and wrote a custom model to value it. MQS then produced a valuation report with valuations and sensitivities for a range of parameters, an explanation and justification of the valuation methodology and a description of the assumptions made in the modelling.
Valuation services for a hedge fund
A US-based hedge fund required an independent report for its auditor that its end-of-year valuations for a number of randomly-selected non-liquid investments were "reasonable" based on information provided by the hedge fund. The investments varied from complex leverage structures to investments in real-estates via SPVs to privately-issued convertibles.