OVME<GO>

USERGUIDE
15 July 2010
Version: 1.00
 OVME User Guide

Table of Contents:

1. OVME<GO> Wake Up Menu …………………………………….. p.3

o STRATEGIES
o STYLES
o STRUCTURED NOTES

2. PRICING A SINGLE LEG VANILLA OPTION ………………….. p.5

3. TOOL BAR NAVIGATION …………………………………………… p.6

o ACTIONS
o STRATEGIES
o STRUCTURED NOTES
o DATA & SETTINGS
ƒ user settings
ƒ market data
o HELP
o SOLVE FOR
o REFRESH
o ADD TO PORTFOLIO
o MATRIX PRICING
o ADD FIXED INCOME LEG
o TRADE

4. SCENARIO GRAPH ………………………………………………….. p.16

5. SCENARIO TABLE …………………………………………………… p.17

6. VOLATILITY DATA ……………………………………………….…. p.17

7. MULTI-LEG OPTIONS ………………………………………………. p.18

8. EXOTIC STYLES & STRUCTURES ……………………………….. p.19

9. REFERENCES …………………………………………………………. p.20

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 OVME User Guide

OVME<GO> USERGUDE
Use OVME to price and structure equity options and strategies for single name stocks,
equity indices, and funds. You can use OVME to price listed or OTC plain vanilla
options, listed or OTC warrants, and/or exotic option types such as variance swaps.

OVME uses interpolated market implied volatilities when an underlying has an active
market of listed options.

To price an option with OVME, follow the steps below:

1. OVME<GO>.
1.1. Strategies View

• Choose 1) Load Deal

to bring up a
previously saved deal.

• Create a New Deal by

choosing one of the
pre-defined strategies.

• Alternatively choose
up to ten legs from the
‘Custom Strategies’
menu at the bottom of
the page.

• Use the option 3) Skip menu permanently to go straight to a single leg

vanilla structure from now on.

NOTE: All strategies are still accessible directly from the pricing screen if this is
selected.

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 OVME User Guide

1.2. Styles View

• Choose ‘Styles’ to bring up the Styles Menu.

• Create a New Deal by

choosing one of the
pre-defined styles or
customise your own.

• Options include,
Digitals, Asians,
Barriers, Accruals and
Variance Swaps.

• Use the option 2) Style

Info, to go to a .pfd
that explains the
payoffs for the most
common Styles.

NOTE: All styles are still accessible directly from the pricing screen.

1.3. Structured Notes View

• Choose ‘Structured Notes’ to bring up the Styles Menu.

• Create a New Deal by

choosing one of the
pre-defined structures
or customise your own.

• Options include,
Capital Protected,
Discount Certificates,
Reverse Convertibles,
Auto-Callables,
Best/Worst Of and
Warrants.

• Use the option 4) All Notes, to go to a menu of all available notes.

NOTE: All Structures are still accessible directly from the pricing screen.

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 OVME User Guide

2. PRICING A SINGLE LEG VANILLA

• Once a strategy is chosen the pricer will load with current market data:

• Underlying price is
taken from the
exchange.

• Volatility Source is
interpolated from the
market volatility
surface.

• If there is no surface
then a historical
volatility is used.

• Interest Rates are

taken from the relevant swap curve as defined by the user.

NOTE: Interest Rate source will default to the default curve for the
underlying currency set on SWDF<GO>.

• The option price is

shown at the top; Total
is for the entire
contract size; Share is
the total price divided
by the contract size; %
is the Share price
divided by the
underlying price.

• Aggregate Greeks are

shown at the top next
to the price.

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 OVME User Guide

3. TOOL BAR NAVIGATION

OVME now has two tool bars for easier navigation and pricing.

• The RED toolbar

contains the main
actions of
Saving/Sending, as
well as Default
Settings and links to
templates structures.

• The GREY toolbar

give quick access to
pricing tools such as:
Solve For, Refresh
market data, Book
directly to portfolio
and Matrix Pricing.

3.1. ACTIONS MENU

The Actions Menu allows you to Save, Load and Send your deals as well as
Booking to a portfolio and Importing/Exporting deals to excel.

• Save/Load/Send;

• Add to Portfolio & link

directly to OSA<GO>.

• Add/Delete a leg.

• Import/Export to
Excel.

• ‘Listed Mode’ for

standardised strikes
and expirations.

• ‘Lite Mode’ for quick pricing.

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 OVME User Guide

3.2. STRATEGIES MENU

The Strategies Menu allows you to quickly load templates for the most common
strategies, or build your own template for bespoke structures.

• Add Multiple Legs

• Load templates for

structures such as
Straddles, Strangles,
Butterflies, and
Condors etc…

• Create your own

bespoke templates to
quickly set up
structures you
regularly trade.

3.3. STRUCTURED NOTES MENU

The Structured Notes Menu allows you to link directly to Certificates and add
bond legs to your structures using OVSN<GO>.

• Templates are broken

down by Capital
Protected Products,
Yield Enhancers &
Participation
Products.

• Create your own

bespoke templates to
quickly set up
structures you
regularly trade.

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 OVME User Guide

3.4. DATA & SETTINGS MENU

The Data & Settings menu allows us to edit default User Settings and Market
Data, refresh the Market Data and link to defaults pages.

• User Settings

• Refresh Volatility,
Interest Rates,
Dividends.

• Change Market Data.

• Direct link to Dividend

and Swap Curve
Defaults.

3.4.1. USER SETTINGS

The User Settings menu controls the ‘wake-up’ settings for OVME allowing quick
and easy setup of your most common settings.

¾ MARKET DATA AND PRICING

• Recall Initial Volatility

for saved options or
use Current data.

• Buy and Sell options

using Bid/Ask rates or
Mid prices.

• Set default day counts

and settlement for
Interest Rates.

• Set defaults for

Greeks.

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 OVME User Guide

¾ FIELD SETTINGS

The Field Settings menu can be used to assign default values to the drop-downs
on the main pricing screen.

• Choose to start
OVME<GO> in the
Strategies View Menu
or directly in the Pricer.

• Choose default
exercise styles:
American / European.

• Choose default “Solve

for” settings.

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 OVME User Guide

¾ DISPLAY

The Display menu can be used to steam line the OVME<GO> screen to add or
remove details from the main pricing screen.

• Add or remove a
Rebate for Barriers.

• View the option Style.

• View Two Line

Quotes.

• View leg Notional

Share size.

• View Break-Even level.

¾ MODEL

The Model tab allows the user to set default pricing models to be loaded when
pricing specific option styles on Equities or Indicies.

For Equities depending upon the style we can choose from:

™ Black-Scholes Discrete
™ Black-Scholes Continuous
™ Local Volatility
™ Trinomial
™ Square Root CEV
™ Roll-Geske
™ Enhanced Discrete
Dividends

For Indicies depending upon

the style we can choose from:
™ Black-Scholes Discrete
™ Black-Scholes
Continuous
™ Trinomial
™ Square Root CEV
™ Local Volatility.

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 OVME User Guide

3.4.2. OVERRIDING MARKET DATA

• Change Rate Source

will allow you to
choose which interest
rate curve to use, as
well as manually
overriding specific
levels.

• Links directly to the

defaults page
SWDF<GO>

• Change Dividends
shows the projected
dividend stream for the
underlying security.

• Change the source:

use Bloomberg
Estimates; Consensus
Analyst Estimates or
Customise your own.

• Link directly to the

Option Default screen
OPDF<GO>.

• View a leg-by-leg breakdown of dividends for multi-leg deals.

• Link directly to Bloomberg’s forecasted dividends on BDVD<GO>.

NOTE: When changing dividends from Dividend Settings menu in OVME,

user defined dividends will be used only for current pricing session.
To permanently change dividends settings use BDVD<GO>.

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 OVME User Guide

• If pricing a Quanto
option then we have
the ability to customise
quanto settings.

• Customise the FX Spot

used. Defaults to the
spot rate as seen on
FRD<GO>

• Customise the
Correlation data used.
Default is the historical
correlation between the
underlying price and the exchange rate, as can be calculated in
CORR<GO>

• Customise the Volatility, that defaults to the current At-The-Money mid

market volatility of the FX rate as shown in OVDV<GO>.

• Customise the Rate used. Defaults to match SWDF<GO> settings.

3.5. HELP MENU

The ‘Help’ Menu can be used for further references and material on OVME<GO>
and derivatives in Bloomberg.

• HELP will direct you to

the Help pages for
Screen Descriptions
and Calculations/
Methodologies.

• USER GUIDE will direct

you to this “How To”
guide.

• WHAT’S NEW will link

to the Bloomberg
News Wire dedicated
to updates in our OTC
Derivatives functionality.

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 OVME User Guide

• Save the news wire to receive alerts of updates and new releases directly
to your inbox.

3.6. SOLVE FOR

The ‘Solve For’ Menu can be used to define what variable to calculate based on
user input data:

• Turn the solver on or

off.

• Solve for Implied

Volatility based on
defined option price.

• Solve for the Strike or

Number of Shares
needed for Multi-Leg
deals to get a specified
Deal Price. (e.g. Zero
Cost Collar)

3.7. REFRESH

The ‘Refresh’ button can be used to quickly refresh all market data.

3.8. ADD TO PORTFOLIO

The ‘Add To Portfolio’ tab allows you to book a deal directly to a portfolio in
PRTU<GO> and calculate a hedge.

• Book Directly into an

existing portfolio.

• Portfolio lists are fully

integrated with other
Bloomberg functions
such as OSA<GO> for
real-time Option
Scenario Analysis.

• Add either a Naked or

Hedged position.

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 OVME User Guide

3.9. MARTIX PRICING

The ‘Matrix Pricing’ tab takes you directly to OVM<GO> for simultaneous
multiple pricing.

• Display a Matrix of
Prices, Implied
Volatilities and Greeks.

• Choose options such

as Strikes, Expiries,
and Moneyness to
customise the matrix.

• Calculate Implied
Volatility for specific
prices of Listed or OTC
deals.

3.10. ADD FIXED INCOME LEG

The ‘Add FI Leg’ allows you to structure equity linked notes and equity linked
swaps by adding a fixed income leg to your option. Fixed Income legs can be:
Zero Coupon, Fixed Coupon, or Floating Coupon.

• Choose from:
Zero Coupon,
Floating Rate Coupon,
Fixed Rate Coupon.

• Define the pay/reset

frequencies, fixings,
floating index and
spread.

• Calculate the price of

the option part and the
fixed income part in
both currency and in
percentage of nominal.

• See DOCS 2058865<GO> for more details.

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 OVME User Guide

3.11. SEND REQUEST FOR QUOTES - TRADE

OVME<GO> contains a centralised RFQ system that allows for price discovery
and execution of OTC options and strategies, integrated with trade confirmation
blotters and reporting and compliance tools. Click ‘89) TRADE’ > ‘REQUEST FOR
QUOTE’ to send an IB request for the option directly to a counterparty.

From the IB the trade can be affirmed and stored in an RFQ Monitor RFQM<GO>
and a Voice Confirmation Blotter VCON<GO>.

• Direct price discovery

for OTC trades.

• Compare quotes from

different counterparties.

• Full integration with

position and risk
management systems.

• Full integration with

Bloomberg’s core
analytics.

• See DOCS 2056338<GO> for more details.

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 OVME User Guide

4. SCENARIO GRAPH

Once we have the setup correct we can then proceed to the Scenario Graph tab
that will show our payoff at multiple expiration dates.

• Choose to chart either

Price, Delta, Gamma,
Theta ,Vega or
Effective Spot against
either Price or Volatility
Shifts.

• Plot for multiple

evaluation dates to see
how the strategy varies
with time.

• Send the graph directly

to another Bloomberg
User.

• Show Break-Even
Price and Probabilities
for each date

• Export the data directly

to excel for customised
charting and analysis.

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 OVME User Guide

5. SCENARIO TABLE

• Select the Scenario

Table tab to see the
data table for the
graphs.

• Export this data

directly to excel for
customised charting
and analysis.

6. VOLATILITY DATA

• Select the Volatility

Data tab to see the
volatility surface for
the underlying asset.

• Choose from one of

THREE surfaces:
Bloomberg
(Extrapolated Market
Surface); Heston +
Residuals (Heston
with residuals added);
Local Vol (Local
Volatility Surface).

• Export this data directly to excel for customised charting and analysis.

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 OVME User Guide

7. MULTI – LEG OPTIONS

• Select deesired Strategy

in Strategy dropdown
menu
•
• See a breakdown of
Market Data and Greeks
on a ‘per-leg’ basis

• Identify your exposure on

each leg to see how your
overall risk is comprised.

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 OVME User Guide

8. EXOTIC STYLES & STRUCTURES

If the User Settings have been specified to load OVME directly to a single leg
pricing screen then the ‘Style’ drop down allows quick and easy loading of 23 of
the most common Styles.

• A full over view of

these is given in
OVME<HELP> ,
section 4) Calculations
/ Methodologies.

• Click the box “…” next

to European Vanilla to
get a full list of all
Strategies and Styles
available within OVME.

• Includes a full
description of each one
via the menu.

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 OVME User Guide

9. REFERENCES

• DOCS 2045678<GO> for an illustration of how Quanto options and

forwards are calculated in OVME.

• DOCS 2051900<GO> for an illustration of how to price warrants with

OVME.

• DOCS 2052011 <GO> for an illustration of how to price certificate with

OVME.

• DOCS 2053163 <GO> for an illustration of how to price callable bull/bear

contracts with OVME.

• DOCS HOW TO OVME <GO> for an illustration of how to price equity

linked structured notes with OVME.

• DOCS 2045908<GO> for a primer on Local Volatilty.

• DOCS 2053213<GO> Description of OVME Pricing Models.

• DOCS 2043712<GO> How do calculations in OVME<GO> and

OVX<GO> Differ?

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 OVME User Guide

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