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Savvysoft Releases STARS Accounting, A New Hedge Accounting System

Automatically handles FAS 133, IAS 39 and CICA 3638 reporting requirements

New York -- October 18, 2007 -- Savvysoft, the award-winning derivatives analytics provider, announced today the release of a new system, STARS Accounting, to deal with hedge accounting for FAS 133, IAS 39 and CICA 3638. The system allows users to automatically test the effectiveness of their derivatives hedges, saving many hours of tedious and error-prone manual labor every reporting period.

As soon as a trade is done, STARS Accounting lets users run a regression or a dollar offset to prospectively or retrospectively test the hedge. And then every accounting period (weekly, monthly, quarterly, or any other frequency) users can automatically load data, test hedges, and report on them.

In addition, STARS Accounting lets users:

  • see which hedges passed and which ones failed, instantly
  • view all relevant statistics such as slope, R-squared, and F-stat automatically
  • select a hedge group and see how well the hedge performed week after week or over any historical period
  • punch up reports that automatically flash warnings if there's a problem with the data feed (for example, get an alert if one of the yield curve points didn’t change over the past week)

Full-featured hedge designation

STARS Accounting also allows users to designate and de-designate hedge relationships easily. Hedges may be set up:

  • one-to-one
  • one-to-many
  • many-to-many

In addition, each trade in the hedge can be the whole trade, or just a fraction of the trade, so half of one derivative can hedge one item, and the other half can be allocated to a different item. Hedges can easily include bifurcation too, allowing users to easily split a trade into multiple components, some of which are hedged, and some of which may not be. So for example one can hedge just the optionality, or just the LIBOR risk. STARS Accounting also makes it simple to change hedge relationships, de-designating and re-designating hedges on the fly.

Hedge effectiveness testing

Generating the hedge effectiveness for all hedge relationships can be performed by simply pushing just one button, and viewing the results together, even if the hedge relationships use different methods or have different thresholds. The report can optionally contain the values of any of the statistics being used in the test, such as slope, F-stat and R-squared. An additional report allows users to see the results of tests as a time series over many periods.

STARS Accounting also gives users the ability to experiment with different rules for hedge effectiveness testing, on a what-if basis, to see how each might perform under different rules or different market conditions. The STARS Accounting database is set up with an “Official Area” and “What-If Areas” which allows for unlimited testing without any risk of compromising reported data. And when it comes time to perform the hedge effectiveness, users can opt to have STARS Accounting do the basic calculation, or override the defaults with their own custom criteria.

Fully flexible

STARS Accounting is exceptionally open. Prices for performing the hedge effectiveness and generating journal entries can come from any number of data sources, or the user’s own preferred data vendor. For analytics, STARS Accounting also provides a great deal of flexibility: Savvysoft OTC valuation models, or the client’s in-house models, or even models from competing vendors can all be accepted into STARS Accounting. So hedge effectiveness can be calculated with the same prices used to mark to market. It can even handle Day 1 gains on trades.

STARS Accounting was conceived from the ground up to handle the full range of OTC and plain vanilla instruments from every market including: Interest Rates, Equities, FX, Commodities, Energy, Electricity, MBS, Credit, and Convertibles. Instrument coverage includes plain vanilla types (bonds, interest rate swaps, caps and floors, swaptions) and exotic types (range floaters, capped callable floaters, CDOs, CLOs, CDXs, TARNS).

Savvysoft designed STARS Accounting to be exceptionally expandable, so when users enter new markets and need the ability to handle brand new instruments, STARS Accounting can easily accommodate them. Users simply specify the characteristics of the new instrument and it’s done

STARS Accounting is a secure and full-featured system backed by cutting-edge technology. There’s full security, with complex passwords, and the ability to set which users have access to which modules. It also includes a complete set of audit trails, to track who changed what, and when, a full suite of reconciliation reports to track trade data, market data and even hedge data, and the STARS Open API, which lets anyone perform model integration without writing a single line of programming code.

STARS Accounting is already being used to account for hundreds of billions worth of derivatives instruments. It can be run in-house, or over the Internet (as an ASP) on Savvysoft’s servers or the client’s servers.

About Savvysoft

Savvysoft, a New York City-based provider of high-caliber OTC derivatives analytics, and portfolio and risk management systems, has been named the #1 ranked Derivatives Analytics vendor three years in a row by Risk Magazine. Savvysoft’s products handle OTC derivatives in every traded market, and are used by thousands of institutions in 15 countries worldwide. These institutions include top-tier banks, dealers, brokers, money managers, energy suppliers, corporate treasurers, auditors and consultants. Savvysoft was founded by Rich Tanenbaum, the head of Derivatives Research at Bankers Trust (now Deutsche Bank). Rich was a founding member of the first OTC derivatives desk on Wall Street at Bankers Trust.

All product names referenced herein are trademarks of their respective companies.

Contact: LeeAnn Chen (212) 742-8677 leeann@savvysoft.com

 

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