A mistyped data point doesn't contradict itself
Cash in another currency is converted with an exchange rate, floating-rate debt is settled with an index and a derivative is valued with a curve. When that data is copied by hand from a portal or arrives in a file nobody checks, a scale or column error flows into the forecast and looks like any other figure. It can go unnoticed for months.
FLIQO pulls market data from whoever publishes it, keeps track of where each data point came from and warns you when something being loaded doesn't look like what was there before.
Official exchange rates, every day
Every night FLIQO pulls official exchange rates directly from the authorities that publish them. Cross rates that no authority publishes directly are calculated from the ones that are published, and each one records which rates and which dates it came from.
Each source is honored the way its issuer publishes it. If an official rate is valid from a Thursday through the following Monday because of a holiday, it's used on all those days. If an issuer doesn't publish on weekends, the latest data point covers the days without publication, up to a limit and never beyond today.
A rate is only replaced by one of higher rank: an official rate prevails over a market reference, and that over a rate loaded by hand. That way manual data doesn't cover up what an authority published, and what an authority published isn't overwritten by an assumption.
Future rates, calculated
Converting a flow two years out requires a rate nobody has published yet. Instead of keying it in, FLIQO calculates it from the difference between the two currencies' interest rates, starting from today's spot rate. It isn't an exchange-rate forecast: it's the forward price consistent with the rates at which each currency is funded today.
When the company has loaded curves for both currencies, the calculation uses the exact tenor for each date. Otherwise it uses each currency's published benchmark rate, and the rates screen tells the two methods apart.
Benchmark indices, as published
FLIQO pulls from their issuers the indices that floating-rate debt and derivatives settle against, exactly as published:
- In every published tenor, from overnight to several months.
- In every published convention. If an index is published as both a nominal and an effective rate, both are stored, because a contract agreed in one must settle with that one, not with a conversion of the other.
- With their averages and compounded indices, when the issuer publishes them.
A correction from the issuer supersedes the previous data point without deleting it. With a compounded index, FLIQO calculates the compounded rate for any exact period, between two dates set by the contract, and shows which observations it used. When the issuer requires attribution, it's shown under the series.
How old a fixing can be is set by the contract
No issuer publishes on a Saturday, and some indices come out the next business day. Each floating-rate contract declares how many days old the fixing it settles with may be. If it doesn't, FLIQO doesn't invent a tolerance: it says what's missing. A daily check flags the contracts that don't have one yet.
Curves loaded with checks
Yield curves are loaded from the file the company exports from its market terminal. A file can contain several stacked tables, for example this month's curve and last month's. FLIQO doesn't pick silently: it shows the tables it found, proposes one and explains why, and a person confirms.
What the file doesn't say is declared on the curve: the scale of the values, the rate convention, the day-count basis and how to interpolate between tenors. The load warns you if the values don't match the declared scale and if a tenor jumped sharply against the previous load.
Each load is kept as a snapshot with its date. Reloading on the same day adds a version instead of replacing the previous one, so a closing valuation can be reproduced later. No curve is extended beyond its last tenor, and the maximum age at which a curve is accepted is set by the company.
Volatility for valuing options
The volatility surface for each currency pair is loaded by tenor and strike, and follows the same rules as curves: each load is a snapshot that isn't overwritten, the scale is declared, and jumps against the previous load are flagged.
Frequently asked questions
Do we need to hire a data provider?
Not for official exchange rates or published indices: FLIQO pulls them from their issuers. Curves and volatilities are loaded from the file the company already gets from its market terminal.
Can a data point be corrected by hand?
Yes. An exchange rate loaded by hand is marked with its origin, and when the official rate for that day arrives it replaces it. An index can also be corrected for the organization on a specific date.
What happens if a source doesn't publish or doesn't respond?
If the issuer doesn't publish on a given day, its latest published rate applies, within the limit of days without publication. If a source doesn't respond, the others keep loading and the run log says which one failed. FLIQO doesn't fill in a made-up value.
Does each company have its own curves?
Yes. Each company issues its own debt and the market prices it on its own terms, so curves belong to each company. Exchange rates, by contrast, are shared by all the companies in the organization.