The Worst Kind of Pricer

What is the use of a financial instrument pricer that calculates significant wrong prices? Randomly over- or underprice? If we knew how much it fails, it was not so bad, but ....

If you use no pricing software, you go searching the right price, but a wrong pricer?
(better no clock than a randomly imprecise one ..)

If you used a pricer that instantly values Vanilla interest rate linked products with the, say, Black 76 model (lognormally distributed) you might run into a problem, when interest rates, like currently, can become negative.

Stefan Fink, treasury, Raiffeisen Upper Austria, selected UnRisk in Nov-2001. As THE financial engineer of his bank he enjoys the UnRisk benefit of valuing structured products across various models with advanced methods and numerical schemes. He often influenced the coverage of the most sophisticated interest rate based deal types in UnRisk.

Raiffeisen UA runs an UnRisk FACTORY to perform risk management tasks for portfolios that contain complex deal types. And the team of Stefan Fink runs a network of the UnRisk PRICING ENGINE additionally to validate the right models for the instruments related to the market regime individually.

Vanilla instruments were valued in another system (Black 76 based). And they found the trap. Beware, interest rates can become negative!
Better migrate the valuation of the Vanilla instruments to a multi-model system - UnRisk.

He will present the background and consequences at our 11 Years of UnRisk Event.