Get a defensible fair value for complex Financial Instruments and options. Al Banyan Tree provides Derivative Valuation services that help companies, finance teams assess Embedded Derivatives, challenge counterparty pricing, and apply transparent Valuation Models for reporting and risk management.
Value complex derivatives with independence and model transparency
Our Derivative Valuation service is for cases where pricing is not obvious, embedded features may be hidden inside contracts, or external quotes need to be independently tested. We assess standalone derivatives and embedded derivatives across commodities, foreign exchange, interest rates, leases, and structured agreements, using a transparent pricing process that can be explained to management and regulators.
An embedded derivative arises when a host contract contains terms that behave like a separate derivative. Common examples include lease agreements with options, pricing clauses linked to an underlying asset, conversion features, and contracts where settlement depends on market variables. Identifying these features matters because accounting standards may require them to be separately measured and recognized.
We use valuation models matched to the instrument. Depending on the payoff, that can include discounted cash flow methods, option pricing models, or lattice approaches. The goal is to produce an independent valuation supported by assumptions and sensitivities that show how the result reacts to volatility, curves, timing, and optionality.
Independent valuation is especially important when a company relies on bank or counterparty marks without a full view of model logic or structuring economics. We help clients answer auditor questions, test pricing fairness, and understand implications for profit and loss recognition.
Service Highlights
- Value financial instruments: estimate fair value for derivatives and linked exposures.
- Identify embedded derivatives: review host contracts for option-like terms.
- Hedge against price movements: connect valuation to financial risk management.
- Prepare custom valuation models: tailor logic to instrument structure and data.
- Separately measure and recognize assets: support accounting treatment where required.
- Answer auditor and regulator questions: provide model rationale and documentation.
- Ensure optimal pricing and structure: challenge quotes and embedded economics.
- Level the playing field with counterparties: improve independence.
Business Benefits
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Mitigate hidden financial risks - Protect against financial losses
- Achieve pricing transparency and trust
- Comply with accounting regulations
- Gain assurance for management and auditors
- Recognize profit and loss correctly
- Navigate financial complexity
- Avoid scrutiny from regulators