Using the Look for Strategy Tool

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Using the Look for Strategy Tool

The Looking for Strategy tool lets you quickly and easily find an optimal IR strategy for you or your customers’ investment or hedging outlook. This lets you take advantage of the wide variety of instruments available in SDX Interest Rates, and see how best to use them to meet your individual needs.

The Looking for Strategy tool is accessed through the Sales Tools menu and offers different strategies for both hedgers and investors divided up into a number of categories.

The different strategies available are listed in Table 1.

For each strategy you will see a short summary of the strategy, an example and value characteristics (advantages) and a graph. For hedging strategies this is a graph of the debt service cost; for investor strategies this is a graph of the performance profile.

The tool lets you access all available strategies. Once you have displayed the strategies, for each strategy you can then:

Create a term sheet for it in a separate window (using the Trade Idea button). The term sheet lists the possible outcomes at expiry, as well as the advantages and disadvantages of this strategy. See Generating a Term Sheet for an IR Strategy.

Open the strategy in the pricer. See Opening a Strategy in a Pricing Page.

To access the Look for Strategy tool and view a strategy description:

In the Sales tab click the Find Strategy button. The Look for Strategy page opens in a new window.

Click either the Investor or Hedger tabs, depending on the type of client for whom you are looking for a strategy.

Select the currency to be used in the strategy description from the Currency dropdown list.

Click the Suggest Strategies button next to the relevant investor sub-type. A new window opens. It lists the appropriate strategies on the left.

Click any of the strategies listed on the left of the window. A description of the selected strategy is shown on the right.

Table 1: Different Strategies Available for Different Types of Investors
Investor Type	Strategy Category	Strategies Described
Hedger	Fixed Rate Borrowers	Swap from Fixed to Floating Swap from Fixed to Floating with Collar Swap from Fixed to Floating with Knock-In Cap and Vanilla Floor Swap from Fixed to Floating with Knock-In Cap and Knock-In Floor Swap from Fixed to Floating with Knock-Out Cap and Vanilla Floor. Swap from Fixed to Floating with Knock-out Cap and Knock-in Floor Swap from Fixed to Floating with Knock-out Cap and Knock-out Floor
Hedger	Floating Rate Borrowers	Swap from Floating to Fixed Purchase Zero Cost Interest Rate Collar Participating Swap Digital/Subsidy Swap Buy Cap and Sell Knock-in Floor Enter into Cross Currency Swap Buy Knock-in Cap and Sell Vanilla Floor Swap from Floating to Fixed and sell KO Cap Buy Knock-in Cap and Sell Knock-in Floor Buy Knock-in Cap and Sell Knock-out Floor Buy Knock-in Cap and Sell Floor Buy Knock-out Cap and Sell Knock-in Floor Buy Knock-out Cap and Sell Knock-out Floor Enter into a payer swaption
Investor	Yield Curve Trades	Steepener: Buy CMS Spread Cap Steepener: Receive CMS and Pay Libor Flattener: Buy CMS Spread Floor Flattener: Pay CMS and Receive Libor
	Structured Swap Investors	Buy Callable Swap Buy Range Accrual Swap Buy Inverse Floater Swap Buy CMS Spread Swap Buy Callable Range Accrual Swap Buy Callable Capped Floater Swap Buy Callable Inverse Floater Swap
	Structured Bond Investors	Buy Callable Bond Buy Range Accrual Note Buy Inverse Floater Buy CMS Spread Note Buy Callable Range Accrual Note Buy Callable Capped Floater Buy Callable Inverse Floater

Generating a Term Sheet for an IR Strategy

A term sheet document is a high quality single or two paged document that is intended to be sent to clients.

Each document typically includes the following sections:

Title

This provides the name of the strategy being explained.

Outline

This provides a general description of the strategy.

Typical Structure

This describes how the strategy is constructed. The information provided here is sufficient to allow one to price the strategy in SDX Interest Rates.

Possible Scenarios

This describes the various interest-rate related scenarios that could occur in the future, and how they would effect the holder of the specified strategy.

Advantages

This lists the advantages of the strategy.

Disadvantages

This lists the disadvantages of the strategy.

Chart

This provides a chart that outlines how the strategy functions.

Summary

This provides short summary of the structure and advantages of the strategy.

To generate a term sheet document for an IR strategy:

After opening a strategy as explained in Using the Look for Strategy Tool , click the Trade Idea button.

The File Download window is displayed.

Click Open the file in your default word processor or Save to save it. The file can then be printed or emailed to a client, using your standard email program.

Opening a Strategy in a Pricing Page

Once you have selected a strategy from the Look for Strategy tool (see Using the Look for Strategy Tool ) you may want to open such a strategy in the pricing page.

SDX Interest Rates lets you construct the selected strategy in a pricing page with the click of one button.

The strategy will be opened in the Single Option page where possible. However, if the strategy consists of multiple instruments, the strategy will be opened in the Portfolio page.

You can then use all the functionality available in the pricing page.

To construct a strategy in a pricing page:

After opening a strategy, click the Open Pricer button. A new pricing page is opened containing the selected strategy.