Reval.com Inc. has upgraded its Web-based derivatives hedging and risk management application to include several structured interest rate products, such as dual currency bonds and CMS spread formula bonds.
Reval's HedgeRx version 8.1 also provides clients with additional reporting tools to comply with increased scrutiny in these volatile markets. Global accounting standards--International Financial Reporting Standard (IFRS) 7 and Financial Accounting Standard (FAS) 161--now require more detailed reporting on financial instrument exposures and risk management.
The application can now run simultaneous stress and prospective effectiveness tests for hedges, both required under IFRS 7, says Justin Williams, head of Austock Corporate Finance, a Melbourne, Australia-based treasury consultancy that uses HedgeRX to help clients manage their hedging exposures. "This saves us time rather than running a separate scenario to see P&L/equity impacts, and the results are displayed in an easy-to-read report," he says.
In addition, version 8.1 can include counterparty credit risk in calculating fair market values, also required under IFRS 7, which was "previously considered to be somewhat immaterial," says Williams. However, "since the collapse of Lehman Brothers and the fundamental shift in the investment bank landscape, counterparty risk is very much in focus now," he adds.
Upgrades to HedgeRx are delivered twice a year over the Internet using the software-as-a-service (SaaS) model.