Layer Eight Systems, Inc.

Interest Rate Derivatives Real-Time Pricing System

Overview

What It Does

Layer Eight prices interest rate derivative transactions including Caps and Floors, Interest Rate Swaps, Swaptions, Interest Rate Guarantees, Forward Rate Agreements and Constant Maturity Swaps and Options. It solves the problem of keeping prices current by dynamically re-pricing as the underlying market changes. The system is a versatile tool for finance professionals who need to perform comparative price analyses. It is valuable to guide pricing during the critical moments of transaction closure when time and basis points count and the cost of mis-pricing can be expensive. It is currently in use by important inter-bank brokers who price these transactions for traders, portfolio managers, asset-liability managers, and investment officials at major banks, corporate treasuries, investment banks and funds management companies.

How it Works

The system is composed of Yield Curve modules, which can be shared on a network of multiple users and Calculators, which are usually controlled by an individual user.

Yield Curves

The foundation of the system is the yield curve module. From here, all calculators derive the value of the instrument's underlying forward rate components. Curves are constructed from a set of user-defined input rates, usually a combination of cash deposit rates, deposit futures prices, relevant bond yields and interest rate swap spreads or rates.  The system is modular and flexible, allowing the user to price from various standard or customized curves for U.S. Dollars or other currencies.

Calculators

Many calculators may be placed on the screen enabling the user to monitor a wealth of financial data. Some calculators evaluate a single instrument or transaction while others contain matrices of instruments; for instance to monitor and compare a range of cap prices or alternative strike swaptions. Calculators are provided for each type of instrument, and to keep pace with market developments, newly "engineered" instruments can be rapidly added.

Features

General Features

• Accurately matches the market

• Easy to use intuitive interface

• Calculators for each type of instrument priced

• Single PC or network

• Ability to customize and save preferred screen configurations

• Multiple instrument capability

• New applications can be rapidly prototyped

• Custom calculators can be constructed to user specifications.

• Accepts real-time on-line data feeds: futures contracts, government bond prices, cash market rates

• Networkable: allows for multiple copies of calculators for use of independent simultaneous users

• Central pricing core assures multiple users are pricing from the same input data

• Windows XP, 2000, NT

Yield Curve Features

• Real-time yield curves

• Multi-currency

• Custom yield curve construction: user controllable choice of inputs

• Create and manage multiple curves

• Selectable yield curves

Calculator Features

• Logical deal entry sequence

• Spot date or IMM date defaults

• Custom dates

• Forward structures

• Different day count and payment frequencies

• Built in major country holiday calendars

• Cap/Floor/Swaption calculators imply volatility/imply price

• Volatility term structure

Available Calculators

        Caps & Floors

• Caps and Floors

• Cap/Floor components: caplets/floorlets

• Collars/Corridors/Strangles/Straddles

• Step up caps

• Digital cap

• Multiple Cap/Floor (10 and 20 cap multi-line calculators)

        Swap Options

• Swaptions: European, American and Bermudan

• Multiple Swaption calculator (10 and 20 Swaption multi-line calculators)

        FRA

• Forward Rate Agreement (FRA)

• Multiple FRA price matrix

• Interest Rate Guarantee (IRG) - Option on FRA

        Interest Rate Swap

• Interest Rate Swap - coupon swap

• Spot date swaps

• IMM date swaps

• Multiple swap price matrices

• Basis Swaps: floating/floating structures

        Constant Maturity Structures

• Constant Maturity Swap (CMS) and Cap/Floor on CMS

• Constant Maturity Treasury (CMT) Swap and Cap/Floor on CMT

        Other

• Many other structures and specialized calculators are available to our customers.

System Design

Real-Time Data Feeds

The system connects to various real-time data feeds, which enables it to dynamically re-price as the markets change.

Platform

PCs running Windows XP, 2000, or NT

Networking

Layer Eight runs on individual PCs and on networks of PCs.  In networked environments, the components of the pricing environment are distributed for optimal reliability and performance.       

• Users can share data.

• Critical functions can be placed on PCs in data centers.

• Data management operations can be located where they can best be monitored.

• Intranet and Internet operations are supported