AlgoPole - Derivatives

OPTION ON ADJUDICATION

Options on adjudication are innovative financial instruments offered by auction houses for sellers of artworks, whose low estimate goes beyond $1 million, allowing them to guarantee a sale price by transferring risk on investors in call warrants obtained by securitisation of options.
The art auction options have been designed to bring more liquidity to the art market, and allow the public to bet on the hammer prices of the star works of the sales.
Algopole designed a very innovative pricing methodology for this new kind of option. Algopole's objective is to integrate these new warrants, resulting from the securitisation of options, into bank trading platforms, and offer all functionalities for trading, market making, position tracking, and risk management on these products.

In 2018, Hong-Kong and asian South-East banks issued new warrants, called Inline Warrant. These products offer to investors new opportunities to trade derivative products which combine features from double barrier, asian and digital options.
Following the request from a hong-kong bank, Algopole designed and implemented pricing and risk analysis models on these new optional products. In addition, the company developed outperforming and innovative strategies in order to take advantage of the new opportunities delivered by these new products on derivative markets. Inline Warrant were also tested and deployed in the frame of algorithmic trading and intraday high frequency trading.

The last years, the Unit of Fonds Market have seen a hard drop of collecting and strong gaps between asset classes. It seems that investissors are now very volatil and asset managers are having a harder and harder time of anticipating redemption in liability management.
As available cash are not enough to fulfill the complete redemption, asset managers have to sell liquid and also illiquid assets to comply with hedge funds investment constraints, in adverse market conditions.
That's the reason why Algopole has started designing a very innovative project to forecast redemption and shortfall cash for an investment funds in Paris. The proposed solution is based on Machine Learning algorithms and Big Data architecture.

In 2004, the Chicago Board of Exchange (CBOE) issued listed VIX Futures, then listed VIX Options two years later. At the begining, these instruments aimed to hedge volatility of vanilla options on S&P 500. In the past few years, VIX options became very speculative products able to provide great margins.
So, Algopole designed and implemented a innovative pricing model to valuate VIX options for an american client.The target was to develop a state of art algorithm under closed formula format, very accurate and highly convex to allow a fast convergence to model parameters.

It's very usual that traders have to buy or sell very large orders on market at the VWAP Price (Volume Weighted Average Price) during the trading day. That means that traders have to trade orders at the average market price weighted by traded volume on market.
This target is not an easy job because trading large orders hits the limit order book in adverse way for the trader. In addition, moves are dramatically amplified by the others market participants who trade in the same way not to be hurt by adverse prices. Now, VWAP orders are 50% of the total orders on regulated markets.
That's the reason why Algopole achieved a very efficient VWAP strategy for a client in London. This "SMART VWAP" strategy balances between limit and market orders throughout the trading period in order to finish very close to the market VWAP.

At the begining of the 90's, the great growth and modernization of the chinese economy causes a huge rise of Future Commodity markets. Nowadays, China is leading commodity markets and the biggest producer for Coal, Steel, Iron, Zinc, Glas, Rice, Cotton, Methanol and Wood.
In 2016, chinese market authorities issued listed Commodity Options on real markets. The first ones were Sugar on ZCE (Zhengzhou Commodity Exchange) and Soymeal on DCE (Dalian Commodity Market), and further ones are planned to be launch shortly. So, Algopole achieved algorithms to price Commodity Derivatives in China and built up a tool to modelize volatility maps for Commodity Options trading.