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GoldenSource Corporation: GoldenSource offers an integrated Enterprise Data Management (EDM) product suite for the securities and investment management industry.

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Independent Price Verification (IPV) Solution Print this Page
The GoldenSource IPV "Independent Price Verification" solution offers a unique market data, pricing preference and vendor hierarchy framework that allows capital market organizations to report internal versus independent pricing differences.

Independent Price Verification is the process of comparing internal price/parameters - used to mark positions to obtain position valuations - to a corresponding set of independently verifiable external prices/parameters. IPV substantiates the valuation of trading assets and liabilities on the BS.

External regulatory bodies and internal management are increasingly aware of the need for greater transparency in a capital market organization's approach to valuing the assets and liabilities on its balance sheet. The valuation of positions directly affects the daily reporting of unrealised profit and losses. The sometimes conflicting requirements of the bonus driven Front Office and the reality driven Product Control function – who are responsible for reporting daily profit and loss to Front Office – necessitates  strict adherence to a policy of marking positions using independently verifiable prices sources wherever possible.

FAS 157 and upcoming IFRS reporting requirements will require bank's to order their mark-to-market and mark-to-model positions in terms of the independence and verifiability of their price sources. The sorting of positions into those that are marked using directly observable, observable model inputs, and unobservable prices and parameters is now key within capital market's organizations in terms of both satisfaction of regulatory requirements and transparency of internal management profit and loss reporting.

Benefits

The GoldenSource IPV solution can automatically calculate the profit and loss effects of price variances where they fall outside of user definable tolerances and allows the organization to easily and quickly build up process and workflow around that adhere IPV to agreed IPV controls.

The GoldenSource IPV solution will allow an capital markets organization to quickly and easily build up data, calculation, workflow and reporting solutions around each of the following IPV processes

  1. Direct marking with independent observable market prices
  2. Comparison of internal prices with independent observable market prices where
    • the profit and loss effect of price differences is calculated using position notional values OR
    • the profit and loss effect of parameter differences is calculated using risk sensitivities
  1. Comparison of prices calculated using internal models where the input parameters to those models are
    • internal parameters
    • independently observable and verifiable external parameters

Golden copy logic is not just for static data - it is the cornerstone for a scalable and auditable pricing / IPV process.


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