Many firms use a simple pricing profile setup in SimCorp®. A set of pricing profiles that point to pricing definitions using quoted values for a set of price types and with a maximum age. Possibly with a simple hierarchy. However, you can create some rather complex setups that can cover a lot of different scenarios depending on the business area and on the type of asset type. In this piece, we will take a closer look at some of the more advanced options in the pricing profile and definitions windows of SimCorp.
Let us start looking at the Pricing Definition window. Before we look at the settings, it is worth remembering that under the functions menu there is the item ‘Explain Instruments/Price Methods’. This provides a matrix overview giving a very useful overview of which of SimCorp's many price methods can be used for which instrument type.
The field ‘Instrument type’ in the Pricing Definition might seem obsolete given that you also define the instrument type on the Pricing Profile, however, you can leave that field blank on the Pricing Profile and define multiple instrument types on the Pricing definition, thereby simplifying the setup for marketable securities that use the exact pricing, for example, Equities and ADRs or ABS, Bonds and Index Bonds. In other words, have one pricing definition for multiple instruments attached to 1 line in the pricing profile.
Quoted price search is commonly used, and you can define multiple price types with different priorities directly in the Pricing Definition window. But it does not take many price types to make that a long list. If you use ‘Price Type List’ you can achieve the exact same thing; in this window, you define a list of price types required along with a priority and assign this as one line item in the Pricing Definition. Furthermore, you can build validation rules if you combine this setup with the ‘Pricing Definitions Validation Rule’ window/field. This allows you to create a conditional price search to define rules when searching for a price in the price type list.
In the Pricing Profile, you can use a formula, however, this can only be used in ‘Boolean’ form, meaning that it only returns a yes or a no (0 or 1). The good news is that more advanced formulas can in fact be used to fetch data, just not via the formula field. The trick is to instead use the ‘Key ratio mapping’ field. Create your formula with usage equal to ‘Key Ratio Mapping’ and attach it to the Key Ratio Mapping window and set it to replace for example clean price. Adding this to the pricing profile will overwrite any data fetched from the pricing definition and use the criteria from the formula. This is very useful to fetch any records that are not in the price table, for example, gold bars that are priced against USD (XAU). For more information on formulas, please see Tip #17.
We hope you found this piece useful in further understanding ways in which Pricing Profiles can be utilized. If you have any questions or comments please do not hesitate to let us know.
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