Out-of-the-box Strategies

The following table describes strategies that you can capture out-of-the-box using the Pricing Sheet window. All pre-configured strategy attribute and persistence can be modified using the Strategy Builder to suit business needs.

Refer to Calypso documentation Building Custom Strategies for details.

Strategy behavior upon saving can also be controlled with default settings.

 

Commodities and Commodity Option Trades

Strategies Description
Commodity Forward A contract to buy or sell a fixed quantity and quality of a particular commodity for delivery at a fixed date in the future at a fixed price.
Commodity Option A strip of Cash settled Asian or Average Rate Options. The payoff depends on an average of Reference Prices relative to a fixed Strike.
Commodity Swap An exchange of payments between two parties.
Commodity Swaption An option on an underlying commodity swap

 

Credit Derivatives

Strategies Description
CDS SNAC (single name)

Swap protection over credit events against premium.
CDS Index CDS on an index.
CDS Index Option Option that makes a payoff in the event a default occurs on the index.
CDS Index Option Tranche Option that makes a payoff in the event a default occurs on the index tranche.
Asset Swap Swap bond coupons against interest rate payments.

 

Equities and Equity Option Trades

Strategies

Description
Equity Trade equities.
Equity Forward An OTC trade between two parties to buy or sell an asset at a specified price on a forward date. The underlying can be an equity, an equity index, or a basket.
Equity Swap The Equity Swap strategy in the Pricing Sheet defines a performance leg with an equity or equity index and the funding leg with a floating rate index or a fixed rate.
Portfolio Swap

A Portfolio Swap helps standardize the handling of equity swaps. The underlying specifics of the agreement are defined by the Portfolio Swap Contract.
Equity Structured Options

An Option is an agreement between two parties to exchange one or more cash flows based on a Payout. The Payout formula typically refers to Underlyings. Equity Structured Options as a whole includes the individual strategies Equity Vanilla, Equity Barrier, Equity Digital, Equity Asian/Lookback, Equity Cliquet, Equity Chooser, Equity Compound, Equity FwdStart, Equity Variance Swap, and Equity Variance Option.
Correlation Swap An OTC transaction between two parties to exchange the difference between a “Strike Correlation” and the “Realized Correlation”.

 

Exchange Traded Fund (ETF)

Strategies Description
ETF

ETF trade.

 

Fixed Income

Strategies Description
Bond

G10 Government bonds.

Inflation bonds (excluding BRL).
Treasury Lock A Treasury Lock is a customized agreement that fixes the yield, clean price, or dirty price of a specific treasury bond on a specific date in the future.
Inflation Lock

An inflation lock is a customized agreement that fixes the yield or price on a specified inflation bond at a specific date in the future.

Inflation locks are only supported for the Israeli CPI market.

 

FX

Strategies Description

FX

FX spot and forwards.

Non deliverable FX forwards.
Simple Transfer Simple transfer.

 

FX Options

Strategies Description
Accrual

Accruals are products for which the holder will receive a fraction of forwards (physical), or a fraction of currency amount (cash).

Accruals also allow defining Fader options where the notional of the vanilla is determined on the expiry date rather than by a predefined value.
Asian

The payout is based on the average price of the underlying currency during the specified period.
Barrier

A Barrier Option is similar to Vanilla, but it has one or two barrier prices:

• Single Barrier - Greater than or less than the strike.
• Double Barrier - One price is greater than the strike; the other is less.

There are two types of barriers:

• Knock-In - The price of the underlying currency reaching the barrier activates this option.
• Knock-Out - Starts as a Vanilla option, but terminates at any time during the option period if the price of the underlying currency reaches the barrier. Payout is an FX Spot deal.

The option pays out if it is knocked-out.

Broker Butterfly

Broker Strangle

 "Broker" strategies are quoted with the same volatility on all legs, giving them different strikes for a given delta.
Butterfly

Simultaneous purchase or sale of an at-the-money Straddle against an opposite Strangle.
Compound

FX option on a vanilla FX option.
Condor

Simultaneous purchase or sale of one Strangle and the opposite of another Strangle.
Digital

The payout is pre-determined at the beginning of the contract, and is paid according to whether the spot rate touches (or does not touch) the trigger level.

Digital

• One Touch (OT) - If at any time before expiration spot trades at or beyond the trigger, then the payout is generated, else the option expires worthless.
• Double One Touch (DOT) - If at any time on or before expiration spot trades at or below the low trigger or if at any time on or before expiration spot trades at or above the high trigger, then the payout is generated, else the option expires worthless.
• No touch (NT) - If at any time on or before expiration spot trades at or beyond the trigger the option expires worthless else the payout is generated
• Double No Touch (DNT) - If at any time on or before expiration spot trades at or below the low trigger or if at any time on or before expiration spot trades at or above the high trigger, then the option expires worthless, else the payout is generated
• One Touch No Touch (OTNT) - If at any time on or before expiration spot trades at or through the knockout trigger the option expires worthless, else if at any time on or before expiration spot trades at or through the knock in trigger a Digital No Touch is generated.

Partial Digital

• One Touch (OT) - If at any time during the observation period spot trades at or beyond the trigger, then the payout is generated, else the option expires worthless.
• Double One Touch (DOT) - If at any time during the observation period spot trades at or below the low trigger or if at any time during the observation period spot trades at or above the high trigger, then the payout is generated, else the option expires worthless.
• No touch (NT) - If at any time during the observation period spot trades at or beyond the trigger the option expires worthless else the payout is generated.
• Double No Touch (DNT) - If at any time during the observation period spot trades at or below the low trigger or if at any time during the observation period spot trades at or above the high trigger, then the option expires worthless, else the payout is generated

Digital (at Expiry)

Trigger is active only on the day of Expiry. Payout is generated based on the Spot on Expiry date and Trigger Type:

• ABOVE – If spot trades above the trigger level
• BELOW – If spot trades below the trigger level
• IN – If the spot trades within the two trigger levels
• OUT – If the spot trades outside the two trigger levels
Digital with Barrier

A digital with barrier is a digital at expiry (or European binary) with barrier. NOTE: Underlying Digital at expiry only supports ABOVE and BELOW as trigger type.
Forward Starting

The strike is determined at a later date. Like a standard option, a Forward Start option is paid for in the present; however the strike price is not fully determined until an intermediate date before expiration. This date is called the fixing date.

The fixing process is done using the scheduled task FXOPTION_RATE_RESET.
Lookback

The payout is based on either a fixed or floating strike:

• Fixed Strike — Call pays the maximum of the rate during the option life, minus the strike; put pays the strike minus the minimum rate during the option life.
• Floating Strike — Call pays the rate at expiry minus the minimum of the rate during the option life; put pays the maximum rate during the option life, minus the rate at expiry.
Reversal

Simultaneous purchase of a call and sale of a put (or the opposite), both of which are out-of-the-money.
Spread

Simultaneous purchase of one call and sale of another with the same expiration and different strikes (the same strategy applies to puts).
Straddle

Simultaneous purchase or sale of both a call and a put, with the same expiration date and strike.
Strangle

Simultaneous purchase or sale of both a call and a put with the same expiration date but different strikes, both of which will be out-of-the-money.
Vanilla

A Vanilla option is a usual option with no special features. The option can be either European or American.
Volatility Forward

Forward contract in which the buyer agrees to pay an ATM straddle at a pre-specified date in the future at the current forward price, which is the price at which the market believes would prevail at maturity.
FX  Averaging Forward Forward contract for currencies. The amount is based on the difference between the strike price and the calculated average price of the underlying FX spot rate within an agreed time period and multiplied by an agreed amount. Reset dates are generated in regular intervals, or can be customized, and different weights can be assigned to the prices on each reset date.
FX Swap FX swap.

FX Variance Swap

 Agreement between counterparties to swap a fixed rate of FX variance and a realized rate of FX variance over a set period of time
FX Variance Option Capture options on swaps that reference realized FX variance. Captured the same way as FX Variance Swaps with the addition of the Put/Call property.

 

IRD Trades

Strategies Description

Cap

Borrower and lender agree that the borrower will pay no more than a specified maximum interest rate to the lender with respect to floating interest rate funds.
Collar A simultaneous purchase of a cap with the sale of a floor, or a simultaneous purchase of a floor with the sale of a cap.
Corridor Combination of two caps, one purchased by a borrower at a set strike and the other sold by the borrower at a higher strike to, in effect, offset part of the premium of the first cap.

Fixed Rate

Floating Rate

Structured flow, can be fixed or floating.
Islamic MM Islamic Money Market.

FRA

Interest rate Forward Rate Agreements.
SpreadCap A Cap having a floating rate index which is the difference (spread) between two floating indices.
SpreadCollar A Collar having a floating rate index which is the difference (spread) between two floating indices.

Swap

Vanilla Interest Rate swap and Inflation swap.

Non-deliverable swaps - An agreement between two parties to exchange a stream of interest payments and the notional principal in one major currency for another non-deliverable currency.

Cancelable swaps - Contains an underlying interest rate swap with the option to cancel it on one or more cancellation dates.

Quanto swaps - The Quanto swap is an interest rate swap where the currency of the notional on the floating leg differs from the currency of the reference index.

Brazilian swaps - Swap trade with Brazilian conventions.

Brazilian Inflation swaps - Inflation swaps are based on inflation indices with Brazilian conventions.

Capped swaps.

Islamic swaps.

Swap Butterfly.

Swap Steepener.

Exotic Swap.

Fixed Payment Swap - Provides a property for entering a fixed amount on the fixed leg to be paid at the end of the period, rather than using a rate and notional to calculate payments.

Performance Swap - A set of future cash flows are exchanged between two counterparties. The primary leg can be a single asset only, with a bond or market index underlying. The secondary leg is currently limited to swaps.

Swaption

Vanilla interest rate swaption.
Listed FRA A Forward Rate Agreement with a standardized contract that allows it to be listed on and cleared by an exchange.

 

Listed Derivatives

Strategies

Description

Future Bond

 Listed futures based on Future contracts.
FRC Brazilian Structured Flows.
Future FX Simultaneous exchange of a spot for futures at an agreed upon price.
Future MM Future Money Market trade.
Future Equity Listed futures based on Future contracts.
Future Equity Index Listed futures based on Future contracts.
Future Commodity Listed futures based on Future contracts.
Future Swap A listed future that uses a swap for its underlying.
Future Option Bond Option on a Future Bond.
Future Option FX Listed futures based on Future contracts.
Future Option MM Option on a Future Money Market.
Future Option Equity Option on Future Equity.
Future Option Equity Index Option on an Future Equity Index.
Future Option Commodity Option on a Future Commodity.
ETO Equity Option on cash Equity
ETO Equity Index Option on a cash Equity Index.
ETO FX Option on FX.
Listed FRA A Forward Rate Agreement with a standardized contract that allows it to be listed on and cleared by an exchange.
Future Forward Start FX Involves the trading of the first available maturity date of US Dollar Contract (basis month) and adding or subtracting a number of points from the FX spot rate, represented by the Central Bank of Brazil's PTAX rate.

 

See also

• Using the Pricing Sheet
• Capturing Trades
• Solving Functions