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OTC Derivatives Valuation Services

ACCOUNTING | PRODUCT PROFILE

Independent, transparent valuations for reduced risk

If your firm trades in over-the-counter (OTC) derivatives, you understand State Street’s valuation services cover a
wide array of OTC derivative instruments.
the complexity involved in servicing these transactions, as well as the
lack of transparency in derivatives valuations. Obtaining complete product Interest Rate Products

coverage from any service provider is challenging, and most providers do • Interest Rate Swaps
not offer insight into how these valuations are calculated, making it difficult • Swaptions
to fully understand and manage your portfolio’s risks. With the advent • Caps and Floors
of increased market volatility and the increased potential for regulatory • Cross-Currency Swaps
scrutiny, the lack of pricing transparency for your OTC derivatives positions
is a risk you can no longer afford. Credit Derivatives

• Credit Default Swaps


To help you achieve greater pricing accuracy and clarity, State Street
now provides asset owners and managers with a uniquely independent, • Credit Index Trades

transparent service for valuing OTC derivatives. We offer comprehensive • CDS Swaptions

instrument coverage, industry-standard valuation methodologies, best


Options
practice operational processes and flexibility for market data sources
• Currency Options
and timing, providing you with a trusted source for pricing all your
OTC derivatives. The result? You can reduce your reliance on counterparty • Bond Options

prices and significantly reduce your risk as you continue to grow your • Commodity Options

OTC derivatives business.


Other Types

A Comprehensive and Integrated Service • Commodity Swaps

State Street calculates OTC derivative prices for a wide array of OTC derivative • Inflation-Linked Swaps
instruments. We can also develop valuation models for new instruments, allowing • Total Return Swaps
you to expand into cutting-edge products and emerging markets. In addition we
• Spread-Basis Swaps
offer a pricing validation service, which compares our valuations to those from
other sources including counterparties, brokers and investment managers. We • Brazilian Swaps
then apply our expertise to research any pricing differences, and work within the • Variance/Volatility Swaps
parameters and tolerances you specify to provide an accurate, comprehensive
answer to valuing or validating your OTC derivative positions.
OTC DERIVATIVES VALUATION SERVICES

Fully integrated with our industry-leading multicurrency custody and accounting THE STATE STREET ADVANTAGE

systems, our valuations service ensures a streamlined, seamless process from With $18.8 trillion in assets under custody
automated trade capture to timely inclusion of prices in the net asset value of a and administration and $1.9 trillion in
fund. Best-practice processes reduce operational risk and provide you with greater assets under management,* State Street
confidence in the accuracy of your pricing. And, because our valuations service is one of the world’s leading providers of
is also integrated with our OTC derivatives and collateral management services, financial services to institutional investors.
you can use it in either a stand-alone capacity or as part of a one-stop solution for Our broad and integrated range of services
managing your OTC derivatives portfolio to streamline and reduce your operational spans the entire investment spectrum,
risk even further. including research, investment manage-
ment, trading services and investment
Transparent Valuation Methodologies servicing. By using any combination of these

With tightening regulations, volatile markets, and a greater scrutiny of OTC derivatives services, our customers can deliver more
value to their clients, control costs, launch
contributing to a new focus on transparency, you need a provider who will work
new products and expand globally.
with you every step of the way. We make use of proven industry pricing models to
calculate your valuations, including Black-Scholes, Garman-Kohlhagen (for spots With operations in 25 countries serving
and forwards), Binomial, Black 76, Cox-Ross-Rubinstein (CRR), Hull-White and customers in more than 100 markets,
standard risk measures (Greeks and DV01). We also utilize a wide range of data feeds State Street delivers the tools and services
including interest rate, credit and inflation curves, volatility skews and foreign that global institutional investors need

exchange rates. By providing this kind of visibility into our methodology, we can to be successful.
*As of December 31, 2009
deliver the transparency you require while simultaneously reducing your risk.

We also use a parallel testing process to help you better assess the market data
inputs and techniques used in our calculations. You are involved throughout
For more information about our
the process — approving the valuation models, the market data feeds and the OTC Derivatives Valuation Services,
assumptions embedded in the pricing methodology. We can accommodate your please contact:
data preferences and establish tolerance levels aligned with your investment and Lisa Pae
risk objectives. Our validation service allows you to compare our valuations with Senior Vice President
those from other sources, and most importantly, we can help you understand any +1 916 319 6923
differences, so you can make better management decisions about your lisa.pae@statestreet.com

OTC derivatives portfolio.

Industry Experience You Can Trust

State Street’s independent service provides you with unmatched transparency


in valuing OTC derivatives. Backed by state-of-the-art technology, proven pricing
models and operational best practices, our team of quantitative experts provides
insight and explanation into how prices are derived and any discrepancies between
sources. By providing greater visibility, accuracy and less risk in managing your
portfolio, we ensure you’ll be perfectly positioned to grow your OTC business
with confidence.

State Street Global Services is the investment servicing business


of State Street Corporation (NYSE: STT), one of the world’s leading
providers of financial services to institutional investors. www.statestreetglobalservices.com

©2010 STATE STREET CORPORATION 09-INS0468H0110