RS Group DeltabookRS Group Deltabook

forforCloud ComputingCloud Computing

Mission StatementMission Statement

RS Group, LLC is a limited liability corporation whose mission is to RS Group, LLC is a limited liability corporation whose mission is to develop cloud based financial applications for options and derivatives develop cloud based financial applications for options and derivatives traders.traders.

Our suite of tools allows trades to perform large scale analysis in a Our suite of tools allows trades to perform large scale analysis in a more efficient and cost effective manner using cloud based computing. more efficient and cost effective manner using cloud based computing. This allows for the analysis of extremely large portfolios leading to This allows for the analysis of extremely large portfolios leading to much more timely hedging strategies and the development of more much more timely hedging strategies and the development of more efficient tracking baskets.efficient tracking baskets.

RS Group LLC has designed software for risk management and RS Group LLC has designed software for risk management and analysis of equity options, Statistical Arbitrage and Statistical Mean analysis of equity options, Statistical Arbitrage and Statistical Mean Reversion Strategies. Our technology has been developed over a ten Reversion Strategies. Our technology has been developed over a ten year period at considerable cost.year period at considerable cost.

Benefits of Cloud Based AnalyticsBenefits of Cloud Based Analytics

Manage the risk of large derivative books and multi-asset portfolios.Manage the risk of large derivative books and multi-asset portfolios.

Instantaneously calculate hedges and conduct simulations over the Instantaneously calculate hedges and conduct simulations over the cloud varying multiple factors.cloud varying multiple factors.

Calculate large scale co-variance matrices and beta analysis Calculate large scale co-variance matrices and beta analysis across assets. Ideal for pairs/ statistical arbitrage desks.across assets. Ideal for pairs/ statistical arbitrage desks.

Statistical studies and monte carlo simulations are more tractable Statistical studies and monte carlo simulations are more tractable over the cloud allowing for more rigorous analysis of complex over the cloud allowing for more rigorous analysis of complex scenarios.scenarios.

Large scale basket arbitrage vs ETFs becomes more scalable.Large scale basket arbitrage vs ETFs becomes more scalable.

Screen ShotsScreen Shots

Portfolio represented as equivalent position for every hedge security. Portfolio represented as equivalent position for every hedge security. Positions are aggregated by net option dollarized delta, gamma, vega Positions are aggregated by net option dollarized delta, gamma, vega and theta. The daily P&L is reported per hedge along with the and theta. The daily P&L is reported per hedge along with the theoretical Fair P&L (Fair P&L is the difference between the market theoretical Fair P&L (Fair P&L is the difference between the market volatility and the price due to the users hedge volatility).volatility and the price due to the users hedge volatility).

Skew Analysis of Option BooksSkew Analysis of Option Books

Rolling Volatility StudyRolling Volatility Study

Screen Shot: Hedge Option DetailScreen Shot: Hedge Option Detail

Option Detailed Position for a single hedge. Detailed information for Option Detailed Position for a single hedge. Detailed information for each option in the portfolio is shown. Individual hedge volatilities each option in the portfolio is shown. Individual hedge volatilities can be changed from this window or option hedge volatilities can be can be changed from this window or option hedge volatilities can be assigned from implied volatilities. In this example, each TNA option assigned from implied volatilities. In this example, each TNA option is hedged at the same volality (49%), but it is possible to assign a is hedged at the same volality (49%), but it is possible to assign a different hedge volatility to each option.different hedge volatility to each option.

Correlation AnalysisCorrelation Analysis

The hedge securities in a portfolio are used to construct a Correlation The hedge securities in a portfolio are used to construct a Correlation Matrix over certain user defined time periods. The correlation matrix Matrix over certain user defined time periods. The correlation matrix can then be used to generate relative value trades.can then be used to generate relative value trades.Portfolios can be imported from text files and from certain other Portfolios can be imported from text files and from certain other formats.formats.

Beta AnalysisBeta Analysis

Market Betas are computed for all equities within a portfolio.Market Betas are computed for all equities within a portfolio.These betas are useful for simulating portfolios or for shock matrix These betas are useful for simulating portfolios or for shock matrix results. When simulating a portfolio, each hedge can be changed by results. When simulating a portfolio, each hedge can be changed by a certain percentage, or that percentage can be beta adjusted.a certain percentage, or that percentage can be beta adjusted.

Shock Matrix Price Shock Matrix Price AnalysisAnalysis

Portfolios of options can be analyzed for correlated changes in price Portfolios of options can be analyzed for correlated changes in price and volatility.and volatility.Typically individual option volatilities are correlated, and simulations Typically individual option volatilities are correlated, and simulations over a range of price and volatilities can expose situations of minimum over a range of price and volatilities can expose situations of minimum and maximum risk.and maximum risk.In this case, the entire portfolio is simulated over a range of hedge In this case, the entire portfolio is simulated over a range of hedge prices changes from -10% to +10% in increments of 2%. When prices prices changes from -10% to +10% in increments of 2%. When prices move lower, equity volatility moves higher while higher prices are move lower, equity volatility moves higher while higher prices are typically accompanied by decreased volatility.typically accompanied by decreased volatility.

Simulation of underlying positions in price Simulation of underlying positions in price and volatilityand volatility

The top view shows the portfolio valued at the current price and user hedge volatilities. The bottom view has the portfolio valued with prices adjusted by 10% and with volatility increased by 5% (ie hedge volatility of 20% increases by 5% to 21%)

Simulation Detail for hedge SPX changing Simulation Detail for hedge SPX changing volatility and pricevolatility and price

The top view shows the detailed SPX option position valued at the current price and the hedge volatilities. The bottom view shows the option detail valued with prices adjusted by 10% and with volatility increased by 5% (ie hedge volatility of 20% increases by 5% to 21%).

This comparison allows the user to quickly see in detail how the value and risk, of each option would change as prices or volatility change.

Additionally the days to expiration can be adjusted, so that the position can be walked forward to see how the position changes with the passage of time.

Principal BiographiesPrincipal Biographies

Brian Crone is a co-founding principal of RS Group LLC and is responsible for co-Brian Crone is a co-founding principal of RS Group LLC and is responsible for co-developing trading systems and quantitative trading strategies of the group as well as developing trading systems and quantitative trading strategies of the group as well as engaging in capital raising activities. Brian is chief strategist for RS Group.engaging in capital raising activities. Brian is chief strategist for RS Group.

   Prior to RS Group, Brian worked as Senior Vice President of Business Development Prior to RS Group, Brian worked as Senior Vice President of Business Development

at Outercurve Technologies (a financial wireless service provider) where he was at Outercurve Technologies (a financial wireless service provider) where he was responsible for new business initiatives in the European market and managed key responsible for new business initiatives in the European market and managed key client projects with top-tier financial institutions. Additionally Brian was a Director of client projects with top-tier financial institutions. Additionally Brian was a Director of Derivative Trading at Nomura Securities including responsibility for the Eastern Derivative Trading at Nomura Securities including responsibility for the Eastern European trading book as well as positions in proprietary quantitative trading and European trading book as well as positions in proprietary quantitative trading and quantative research. Before joining Nomura Brian worked in fixed income trading and quantative research. Before joining Nomura Brian worked in fixed income trading and research and trading at Deutsche bank where he was responsible for developing research and trading at Deutsche bank where he was responsible for developing fixed income. Trading systems and quantitative strategies for the government bond fixed income. Trading systems and quantitative strategies for the government bond dealing operation.dealing operation.

   Brian holds a PhD and M.S. in Applied Mathematical Finance from Cornell. Brian holds a PhD and M.S. in Applied Mathematical Finance from Cornell.

Principal BiographiesPrincipal Biographies

Larry Rubin is a co-founding principal of RS Group LLC and is responsible for its Larry Rubin is a co-founding principal of RS Group LLC and is responsible for its technology and operational activities. technology and operational activities.

Larry spent a over decade on Wall Street as a proprietary trader for Solomon Smith Larry spent a over decade on Wall Street as a proprietary trader for Solomon Smith Barney, Lehman Brothers, Nomura Securities and Barclays Capital trading market Barney, Lehman Brothers, Nomura Securities and Barclays Capital trading market neutral strategies using equity and capital market derivatives. Mr. Rubin was also neutral strategies using equity and capital market derivatives. Mr. Rubin was also responsible for the Smith Barney Emerging Market Structured Products group and responsible for the Smith Barney Emerging Market Structured Products group and worked closely with the Risk Management Group to help analyze various one off worked closely with the Risk Management Group to help analyze various one off deals ranging from D&O insurance premiums to reload option valuation. Mr. Rubin deals ranging from D&O insurance premiums to reload option valuation. Mr. Rubin later founded a wireless technology company that employed over 80 full-time later founded a wireless technology company that employed over 80 full-time

people and servedpeople and served as its Chairman and Chief Executive Officer.as its Chairman and Chief Executive Officer.

Prior to working on Wall Street, Mr. Rubin was a consultant at IBM and Bell Prior to working on Wall Street, Mr. Rubin was a consultant at IBM and Bell Laboratories, where he co-patented a new technique in neural networks and object Laboratories, where he co-patented a new technique in neural networks and object

orientationorientation detection. He received his undergraduate degree from Brooklyn College detection. He received his undergraduate degree from Brooklyn College and later earned several advanced degrees from New York University.and later earned several advanced degrees from New York University.

Contact InformationContact Information

Brian Crone, Principal bcrone@rsgroupllc.comsales@rsgroupllc.com

 Larry Rubin, Principal

lrubin@rsgroupllc.com