Capital markets & valuation

Your challenges

In Luxembourg, the strengthening of the legal control environment is materialised by the issue of CSSF Circular 11/512 on risk management for UCITs and CSSF Circular 08/380 on eligible assets for UCITs.

These circulars call for implementation of a “process for accurate and independent assessment of the value of OTC derivatives” and indicate that UCITS must be able to determine, with reasonable accuracy, the “appropriate, transparent and fair valuation of OTC value” for their entire life span.

Additionally, the UCITS IV regulatory framework requires adequate valuation arrangements proportionate to the complexity of the instrument.

Besides, the Alternative Investment Fund Managers Directive (“AIFMD”) also requires non UCITs structures to have proper and independent asset valuation processes in place.

This could be done either internally (subject to safeguards and possible external review) or by external parties. In both areas, we can provide you with services to support you with these new requirements, by means of cross-valuation services, valuation models review, external party due diligence.
 

Our valuation services

Independant valuation

• Compliance with CSSF Circular 11/512 and CSSF Circular 08/380
• Independent cross-valuation of financial derivative instruments and structured products
• Review of pricing procedures and valuation models
• Assistance in implementing valuation models
• Assistance in the selection of pricing providers

Trainings

We provide a full capital markets training service offering including:

• Trainings on financial instruments
• Trainings on specific valuation issues

Valuation process

Each new product will be implemented in our system after the completion of a process which will identify all key characteristics and risk factors that will drive the valuation of the product throughout its entire life span.

At the required frequency (daily, weekly or monthly), we will issue a valuation report including:

• Payoff description
• The main parameters used for the valuation
• Greeks
• The calculation of relevant sensitivities

The world of OTC instruments and structured products is extremely diverse and there is no unique solution. For each product, we propose a reporting service in line with its nature and complexity but we also remain available to discuss any changes or additional information you wish to include in the reporting process.

Valuation - models, parameters and market data

Robust and tested models and pricing methodology

Observable and derived market data

• Implied market data stored daily
• Historical analysis of correlation, volatilities and spread
• Corporate actions monitoring
• Forecasted dividends