A tailored valuations platform

A state-of-the-art valuations platform for all derivatives

Acadia's ORE (Open Risk Engine)-based platform provides valuations across all asset classes including Interest Rates, Foreign Exchange, Credit, Inflation and Commodities and supports all standard and non-standard derivatives.


Setup & Information

What is ORE?

In this video, we give an overview
of what is Open-source Risk Engine (ORE):

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- How it was created (i.e. its history and original purpose)

- What it is now and who is currently using it- How it can be extended through already existing modules as part of ORE+

- How Acadia can help you expend it in many ways possible for your own purposes and needs through our expert services

- A high-level view on how to install and use it

How to install ORE?

In this video, we explain how to
install and test Open source Risk Engine

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How to install and test Open source Risk Engine
(ORE) in Visual Studio 2022
using the package manager vcpkg and CMake as a way to build the library.

We will provide you with step-by-step instructions on:
00:00 Introduction
02:11 Chapter 1 - How to download, install & configure vcpkg
05:10 Chapter 2 - How to download & build ORE
with CMake in VS with the "Open/Folder" option
10:05 Chapter 3 - How to run one of ORE examples

Files Configuration

Trades XML Files

In this video, we walk you through
the ORE XML trade detail specification

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In the context of ORE, these XML capture
the individual trade economics for any type
of OTC derivatives instrument.In particular,
we show a few examples of trades and their most common structure:
- Interest Rate Swap
- Equity Swap
- Bond Total Return Swap (TRS)
- Credit Default Swap (CDS)
- FX Forward- Equity Forward
- European Equity Option
- Interest Rate European Swaption
- Index CDS Option
- Equity_Digitial Option
- Equity OneTouch Option
- Equity European Barrier Option
- Cross Currency Swap Amortising

How to change the reporting currency?

In this video we explain how to change
the reporting currency when pricing a trade

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To illustrate how this works, we use data from the video "TA001 - Equity Option with Implied Volatility Surface" which is in EUR, then we configure the inputs files and finally, we add the required market data for a USD collateralization. This involves adding the followings curves in curveconfig.xml and todaysmarket.xml and all the corresponding market data in the marketdata.txt file:
- 1 EUR-USD Cross-Currency Curve
- 1 USD Discounting Curve
- 1 USD Projecting Curve
- 2 new EUR Projecting Curves

General Configuration & Master File

In this video, we explain the general setup
of ORE , how the master file contains
all information regarding the other input files

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It is recommended to watch this video when starting to learn about ORE as it gives a good overview of all the files involved when performing any analysis, from simple NPV to more complex CVA (some additional files are needed in this situation though).
There are 3 parts talked about for the master file:
- Setup: This part contains general information about the date of the calculation, the location of the input/outputs files, the verbosity of the log file...

- Markets: This part is useful when a specific market configuration needs to be created

- Analysis: This part provides information about the type of analysis that needs to be performed

Trades & Analytics

Interest Rate Swap

In this video, we explain how to setup
ORE to price an interest rate swap.

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In particular, we describe the following inputs files:
- Master (or ore.xml)
- Todaysmarket
- Curveconfig
- PricingEngine
- MarketData

Equity Option with Implied Volatility Surface

In this video, we explain how to setup ORE
to price an equity option with implied volatility.

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How to set up ORE to calculate the NPV of an equity option with implied volatility surface.
This is a good video to watch for beginners as it goes into a bit more detail regarding the connection between all input files than the pricing videos that will be produced next.

Technical Finance

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Valuations Case Studies

Valuation Platform for Global Asset Manager

Engagement Goal:

We were tasked with implementing a pricing engine for structured investments as well as their entire derivatives portfolio.

Project Description:

Quaternion Quant Services implemented an engine for pricing highly structured investment products in the fixed income class. These products had hybrid features, such as inflation, FX and credit, which added to the complexity. In a later project phase, the team extended the Open Source Risk Engine (ORE) to cover the asset manager’s entire derivatives portfolio, which further reduced the cost of external pricing services.

CSA valuation for European Restructuring Bank

Engagement Goals:

Quaternion Quant Services were hired to quantify “in-the-money” features of existing CSAs as basis for upcoming CSA renegotiation.

Project Description:

Quaternion’s client was approached by a large group of dealer counterparties seeking to restructure old-style CSA agreements. The client had a large outstanding variation margin (double-digit billion EUR) and wanted to realize the value mainly contained in the collateral interest floors of its CSAs. Our Quant Services team was engaged to calculate the value of the “in-the-money” features of the client’s CSAs and hence verify independently that the compensation offered by counterparties was fair. The portfolios totaled several thousand Swaps, FX Swaps, Bermudan Swaptions, Inflation Swaps, BMA Swaps, CDS, and other types of structured products. Based on Quaternion’s valuations, the client was able to realize a triple digit million Euro amount in compensation across all portfolios.

CSA valuation for German Mortgage Bank

Engagement Goals:

Quaternion Quant Services implemented a CSA valuation platform and variation margin forecasting tool.

Project Description:

In the context of its CSA renegotiation, the client engaged Quaternion for the implementation of a CSA valuation tool that priced the value of its CSA’s features under renegotiation, mainly the collateral interest rate floors. Quaternion implemented its Open Source Risk Engine (ORE) into the client's IT infrastructure, building the trade and market data interfaces from the front office systems. Based on the ORE calculations, the client successfully renegotiated the affected CSAs. The client subsequently introduced ORE+ as a forecasting tool for variation margin to support its daily liquidity management process.

Introduction to the Open Source Risk Project

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