TP ICAP’s Parameta launches Interest Rate Swap Volatility (IRSV) indices in EUR and GBP

Rick Steves

“Predictive power of model-free implied volatility estimates have been shown to have superior predictive power over other commonly used volatility forecasting measures.”

Parameta Solutions has launched a new family of Interest Rate Swap Volatility (IRSV) indices that aim to offer transparent daily indices in the interest rate swap markets.

The provider of over-the-counter (OTC) market and transactional data operating as the Data & Analytics division of TP ICAP Group is focused on offering unbiased OTC content and proprietary data, in-depth insights across price discovery, risk management, benchmark and indices, and pre and post-trade analytics.

These indices offer forward-looking implied volatility measures for liquid option expiry and swap tenor combinations in the EUR and GBP markets. IRSV indices provide model-free measures of spot implied volatility, giving market participants valuable tools for making investment decisions and assessing investment risks in the major interest rate swap markets.

Some of the most liquid option expiry, swap tenor combinations in EUR and GBP

The new offering, Interest Rate Swap Volatility (IRSV) indices, provides market participants with a forward-looking implied volatility measure for some of the most liquid option expiry, swap tenor combinations in the EUR and GBP interest rate swap markets.

The indices will be powered by input data and analytics from ICAP, a leading interdealer broker (IDB) across the entire range of interest rate products, ranging from exotic options to short and long-term interest rate swaps.

IRSV indices will be administered, calculated and disseminated by Parameta Solutions, a UK benchmark administrator authorised by FCA that was recently recognised by ESMA as an EU benchmark administrator.

A model-free measure of spot implied volatility in major swap markets

Anand Venkataraman, Head of Benchmark and Indices Product Management, Parameta Solutions, commented: “IRSV indices are built on a theoretical foundation for measuring interest rate swap volatility, providing market participants with a model-free measure of spot implied volatility in the world’s major interest rate swap markets. Predictive power of model-free implied volatility estimates have been shown to have superior predictive power over other commonly used volatility forecasting measures. Such an approach to create IRSV indices will be able to assist market participants with accurate interest rate volatility measures, both when making investment decisions and when measuring investment risks.”

Will Ferguson, Senior Managing Director, ICAP G10 Rates, said: “TP ICAP’s Global Broking business has a market leading position in Interest Rate Options markets for Euro (EUR) and Sterling (GBP). Central Banks hiking policy rates rapidly from near zero levels to combat rising inflation, and uncertainty driven by other regional events has created opportunity and volume in our interest rates business. A partnership with Parameta Solutions to develop innovative solutions like the IRSV indices will facilitate new liquidity opportunities and help us enhance our leadership position.”

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