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Financial Modelling Agency 19 First Avenue East, Parktown North, 2193, South Africa |
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Phone & Fax: +27-11-447-2901 E-mail: lydia at finmod dot co dot za |
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Financial Modelling Agency was formed in March 2003. We do NOT work with business strategy, or models that inform strategy and the budgeting process (these models are often called financial models). Please do not waste your time (and ours) asking us to work on (in particular, present courses on) cash flow forecasts, financial ratios, business planning, etc. We DO work on mathematically orientated financial problems. We deliver solutions to the banking, assurance and corporate derivatives business in South Africa and abroad.
Our niche areas of expertise are
· Valuation of BEE schemes. We specialise in valuation of black economic empowerment (BEE) share purchases schemes for audit, mark to market, and hedging purposes. More often than not there is complexity in these schemes that requires some financial engineering - this applies in either the vendor, institutional or mixed financing cases. See here for a general discussion of our approach.
· Valuation of employee stock options. We have a solution for pricing employee stock options that is compliant with latest IFRS2 regulations. Our model has been applied with audit success to several portfolios of ESOs in South Africa. As a small business, we are able to offer you a competitively priced and tailor made solution. Our reports will provide all the relevant MtMs of the options and we provide spreadsheets of the cost amortisation schedules that you will need to use. See here for a summary of our approach.
· Teaching. We have over fourteen years experience in teaching (eight of these in the finance industry). From 2001 to 2005 Graeme West taught in the Mathematics of Finance Honours program at Wits and since 2001 in the Mathematics of Finance Masters program at UCT. He has given courses on the following topics: ¨ South African Financial Markets: the peculiarities of the SA market (university course). ¨ Exotic equity options (university course). ¨ Modern Portfolio Theory: Markowitz, CAP-M, APT and Black-Litterman (university course) ¨ Risk Measurement (university course). Quantitative VaR for effective market and credit risk analysis (basic commercial course). Advanced issues with VaR, Stress Testing, and Extreme Value Theory (advanced commercial course). ¨ Introduction to Interest Rate Derivatives (university course). Various short introductory courses. ¨ Discrete time arbitrage (university course). ¨ Training for PRMIA exams II and III. We are available to teach these or similar tailor made course to an in house audience.
· Derivatives pricing, in particular, robust Mark to Market algorithms for illiquid or thinly traded instruments. In particular this interest has lead us to develop a fairly broad use of the SABR model for volatility skews. We have clients that use our SABR solutions in front office, middle office, and price risk management areas in South Africa and in other emerging markets such as in Eastern Europe. See our SABR paper. We have a general interest in pricing under local and stochastic volatility models, and under Lévy models.
· Curve building, such as the bootstrap of `difficult' yield curves. We have solutions for building swap and bond curves in the South African market, real (CPI linked) curves, and forward Prime curves. Interestingly, most published solutions for yield curve bootstrap, and those implemented in typical trading systems, allow for pathology or arbitrage. See our interpolation papers written with Pat Hagan. There we introduce a new method of interpolation which we call 'monotone convex'. A summary of the key issues involved, and how the monotone convex method succeeds in resolving the key problems of positivity and continuity of forwards, is here. Some ideas on including OISs in the bootstrap (work in progress) is here.
A company profile is here.
To find us use Google maps.
Please email Lydia. |
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Financial Modelling Agency |
