Swap Consulting :: Swap Pricing

CDR uses a comprehensive in-house trading platform to calculate breakeven swap rates that covers virtually all interest rate products, fixed-income and exotic derivatives, including swaptions and caps. This model was designed and is maintained by Ferential Systems, Inc. The system receives live feeds from Thomson Reuters based on data from Tullett Financial via their SwapMarker and SwapMarker Plus service (for LIBOR cash and swap rates, futures, swap spreads, and swaption and cap volatility grids), which ensures fair and adequate pricing from a swap provider.

During the pricing of a swap, CDR has the mobile technology to price the transaction at a client’s offices. Our platform can utilize a wireless network or any other internet connection at the specific location. The receipt of real-time mid-market rates enables us to instantly react to market moves during the pricing process should it move in an issuer’s favor, or we can challenge “implied” adverse moves very efficiently with providers.

In the case of a negotiated execution, CDR, in conjunction with the issuer and the swap counterparty, negotiates the lowest possible counterparty spread over base mid-market swap levels. Ultimately, pricing has to be at a level where we are comfortable providing a fairness opinion as to the pricing of the transaction.

Even with competitive bid procurement, CDR still feels that it is necessary to have the system capabilities to price and monitor any type of swap transaction. Bid submittals are typically “subject to market” and are not held open. As such, even though the goal is to limit the timing differential between the bid submittal and award, the ability to confirm immediate market movements in pricing and capture such differences can have a substantial economic impact.