Whilst many of us have been spending quality time at the beach and in the surf over recent weeks (in NZ anyway) the Hedgebook development team has been kept busy and out of the sunlight. We pride ourselves on being nimble and able to develop quickly in response to feedback from our users. As such we have completed three significant additions to the HedgebookPro app:
- Real-time FX spot rates and forward points onto the landing page of the app
- Email alerts
- Interest Accrual Report
Real-time fx spot rates and forward points onto the landing page of the app
Naturally, a company that is using HedgebookPro to manage its fx derivatives requires visibility over key exchange rates to aid the decision making process when entering hedges. To date, the only underlying fx data exposed within the HedgebookPro app is the spot and forward rate used in the valuation of the derivative. We have added the ability for HedgebookPro users to subscribe to a live fx rates module which are displayed on the landing page when the user first logs into the app. The rates are real-time and refresh every five seconds. Currently we display key cross rates and forward points for NZ and Australia. The image below shows the NZD version. The rates can be “popped out” into a new browser window and will update even if the HedgebookPro app is closed. With the current high volatility in exchange rates, this new HedgebookPro feature will help decision makers keep abreast of their key fx rates. Contact us at email@example.com if you wish to enable this feature.
Email alert for maturing instruments
We have added email alerts functionality to HedgebookPro to help users administer their derivatives. Now a user can receive a daily email that summarises all their fx and interest rate products that are maturing, including drawn debt. The alert will help to ensure appropriate actions are made on a timely basis such as Cashflows at the maturity of fx forwards/options or refinancing of debt. An email into your inbox will clearly tell you what is imminent, in fact the user can decide how far in advance of maturity they want to be notified.
Interest Accrual Report
Many of our HedgebookPro users spend hours at month-end using spreadsheets to calculate the interest accrual on interest rate swaps for accounting purposes. HedgebookPro now does this at the click of a button. As one of our clients said, “That is great. Will save our Accountant from some time consuming calcs each month.” Steve Paterson, Strategy Manager – Finance, Palmerston North City Council.
HedgebookPro will continue to evolve and offer the best value for money of any treasury management system on the market today and we look forward to sharing the developments in future newsletters. If you have any suggestions please share them with us as we are committed to delivering useful, practical features to the Hedgebook app to help make the treasury function run smoothly.
We have been busy developing a Credit Value Adjustment (CVA) module over the last couple of months which will be released prior to 30 June 2014. The timing allows users with 30 June balance dates to inexpensively include CVA/DVA as part of the fair value of their financial instruments as prescribed by IFRS 13.
In line with the Hedgebook “demographic” we have deliberately kept the CVA module towards the simpler end of the CVA calculation spectrum. We use the current exposure method which we feel is appropriate for vanilla instruments such as fx forwards, fx options and interest rate swaps for an entity using these instruments for hedging purposes.
The module is broken into the following steps:
- Creating new credit curves (both for the counterparty to the transaction and the company’s own credit).
- Managing previously created credit curves
- Assigning credit curves to instruments
- Running the CVA/DVA report
Creating credit curves
The user needs to include at least one data point for Hedgebook to create a credit curve. Hedgebook linearly interpolates/extrapolates as appropriate. The more data points that can be included the better and sources such as treasury advisors, banks, corporate bonds and bank funding costs are all useful sources for determining credit spreads. The user will need to add at least two curves – one to reflect the counterparty to the transaction and one to represent the company’s own credit standing. Hedgebook adds the credit curve to the risk-free curve so that future cashflows can be discounted to present value and compared against the risk-free valuation.
Once the credit curves have been added they are saved and can be amended/deleted as necessary:
The final step before running the report is applying the counterparty credit curves to individual deals as appropriate. All of the curves created by the user are available.
Once the user is satisfied the deals have been correctly assigned with a credit curve, the CVA report can be run. The output of the report is split by instrument type and includes the risk-free valuation as well as the fair value and CVA/DVA amount.
We have focused on providing a relatively simple solution to a new and complex area of financial reporting. For many companies 30 June will be the first time CVA/DVA has been included in the fair value of financial instruments. If CVA is causing you an expensive headache then get in touch because we can help.
At Hedgebook we are constantly working on changes and improvements to our valuation and reporting software to give users either access to new instruments and features, or making existing ones more intuitive and easier to use. Many changes are subtle, or even unseen, however, some are more material. We are also working “behind the scenes” to improve efficiencies in the application, often from an administration point of view. Such changes are technical in nature and do not impact the look and feel of the application. Over the weekend we released the latest updates to the software. Any questions in regards to the Hedgebook app can be addressed to firstname.lastname@example.org.