ilsomr”>I am primarily concerned with pricing. Is MLFis operational model relevant?
Yes. MLFi’s operational model is a crucial feature for many valuation-related processes. MLFi guarantees that pricing code always mirrors the state of each contract. The combination of a formal operational model and pricing capabilities provides a unified framework for valuing complex products as they evolve in their life cycle, for simulating the value of a contract over a set of future dates, and for calculating value at risk and potential credit exposures on a portfolio of exotic products. The fact that MLFi correctly reflects the evolving structure of financial contracts has two additional benefits: • Optimal Pricing. MLFi updates pricing code as contracts transition from state to state. This provides an opportunity to use the most efficient pricing algorithm, including closed-form solutions when they exist, in each contract state. For example, MLFi generates pricing code that accurately reflects the decreasing dimension of exotic basket-based equity options in which underlying ass
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