Al Banyan Tree offers specialized Fair Value (FV) estimation services for nonlinear derivatives, filling a critical need for clients who deal with complex financial instruments. “Nonlinear” derivatives – such as options, exotic contracts with optionality, commodity spread options, embedded derivatives in contracts, and other products whose payoff isn’t linear with the underlying price – often require sophisticated models to value correctly. Our quantitative research heritage means we have an arsenal of advanced pricing techniques at our disposal. For each derivative or portfolio, we first identify the appropriate valuation model: this could range from classic Black-Scholes-Merton models (for plainer vanilla options) to Monte Carlo simulation models for path-dependent or Asian options, or even lattice and finite-difference methods for highly complex structures. We calibrate these models using up-to-date market data – volatility surfaces, interest rate/yield curves, commodity forward curves, correlation matrices – ensuring that the model reflects current market conditions and prices. Once the model is set, we compute the fair value of the instrument, along with key risk metrics (the “Greeks”) that explain how that value would change with market movements. For instance, if we’re valuing a crude oil call option with an Asian payoff, our simulation might generate thousands of possible price paths to derive an expected payoff distribution, which we then discount to get today’s fair value. We’ll provide you with not just the number, but also the reasoning: the assumptions used, the model’s robustness under different scenarios, and sensitivity analysis (e.g., how the FV changes if volatility rises by 5% or if the contract’s time to maturity shifts).
Transparency is a hallmark of our service – we know that for audit and compliance purposes, you need to understand and defend these valuations. Therefore, we deliver a detailed valuation report that can be shared with your auditors or regulators, demonstrating that industry-standard (or better) methodologies were employed in arriving at the figures. By using Al Banyan Tree’s FV estimation service, you gain independent, expert valuations of your complex derivatives, which instills confidence that your financial reporting for these instruments is accurate. Moreover, understanding the fair value and risk profile of these products helps in decision-making – whether it’s adjusting a hedge, unwinding a position, or negotiating a new structured deal. Our advanced analytics capability in nonlinear valuation is yet another way we help clients navigate the complexities of modern markets with clarity and precision.
Transparency is a hallmark of our service – we know that for audit and compliance purposes, you need to understand and defend these valuations. Therefore, we deliver a detailed valuation report that can be shared with your auditors or regulators, demonstrating that industry-standard (or better) methodologies were employed in arriving at the figures. By using Al Banyan Tree’s FV estimation service, you gain independent, expert valuations of your complex derivatives, which instills confidence that your financial reporting for these instruments is accurate. Moreover, understanding the fair value and risk profile of these products helps in decision-making – whether it’s adjusting a hedge, unwinding a position, or negotiating a new structured deal. Our advanced analytics capability in nonlinear valuation is yet another way we help clients navigate the complexities of modern markets with clarity and precision.