Barclays launches new analytical tool for FX options trading
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Foreign Exchange

Barclays launches new analytical tool for FX options trading

Barclays, the second-biggest options market maker by volume, has launched a new FX volatility analytics tool to help traders and risk managers improve their ability to assess the historical value of option volatility as well as compare prices across multiple asset classes.

Oasis, which began life as a research tool that provided historical volatility data, has been revamped to include a new charting functionality, and an analysis and back-testing application called Atlas. This can be used by FX traders to more accurately assess the historical value of derivatives products, such as currency options, that are often difficult to value relative to their historical performance, says Gugesh Guganeswaran, head of flow options at Barclays in London.

Traders often use various tools to determine where value exists to the position or to advise clients. The new product was designed by the derivatives research and trading teams, so traders built the tools they wanted on the trading desk and while simultaneously improving the research offering to clients.

“Atlas is probably one of the most unique charting tools out there, and you can describe it as a time-series generator,” says Guganeswaran. “You can perform a lot of complex functions on thousands of sets of time series.”

Using Oasis, traders and hedgers can do complex things, such as charting or a back-test of a portfolio of options over time, or just simply chart low delta options to measure how much it would have cost during the past five years.

“If a corporate wanted to hedge a EURUSD downside risk, with a three-month 5% out-of-the-money EUR put you can use Oasis to chart how much that would have cost you over the last three years and very easily see if it's cheap relative to any other EUR cross over that time," says Guganeswaran. “That is not very easy to do with other existing systems.”

 

Reliability of data

The main selling point of Oasis, though, is reliability of the data, which is taken from Barclays’ proprietary volatility data bases, adds Guganeswaran.

“With the independent systems I’ve used before, there’s always holes in terms of how reliable the data can be,” he says. “I find myself having to verify the data between two or three different systems before I’m comfortable I’m looking at the right thing.”

Oasis uses only Barclays in-house data, where the G10 and emerging market (EM) spot, vol surface, forward points and NDF points are all “100% accurate, and something that an EM trader can rely on just as much as a G10 trader”, adds Guganeswaran.

Coupled with Atlas – which will operate as a page within Oasis – the tool can be used to measure value in any market, says Barclays.

“It doesn’t have to be options – Oasis provides a way of looking at value across markets in general,’’ says Guganeswaran. “Risk managers need to have some idea of changing correlations in the market right now.”

Within Oasis, there are overview screens, summary pages and reports that are pre-setup of ready-made analysis, where Barclays has identified potential value.

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