Adventures in financial and software engineering(falconair.github.io)
falconair.github.io
Adventures in financial and software engineering
https://falconair.github.io/2015/01/30/composingcontracts.html
9 comments
I started working in financial tech in 97, and I've seen a number of "one model to rule them all" efforts come and go since. Back in the late 90s I saw consultants touting Java coded UML models as the way for banks to build the definitive object model of their trading operations. In the early 2000s I worked on JP Morgan's Kapital, an early 90s Smalltalk risk management system using the Gemstone DB. That was supposed to be the last word in derivatives abstraction. And more recently I spent some time working on JP's Athena project, a Python NoSQL system with an implicitly functional graph programming system that enables Python code to behave like spreadsheets. I suspect the ability of traders to invent products, and more recently regulators to invent rules, will always outstrip the ability of coders to invent clean abstractions that will factor the financial domain neatly.
(exJPM here) This is one of the cleanest, simplest descriptions of Kapital and Athena I heard in a while :)
one thing to also keep in mind is no matter the sophistication of models, there is always gonna be some person in front/middle/back office somewhere, running a critical process on excel for 3 years.
one thing to also keep in mind is no matter the sophistication of models, there is always gonna be some person in front/middle/back office somewhere, running a critical process on excel for 3 years.
I'm an in house dev for a financial company - if you really want to "stress test" a financial institution turn off Excel for a week and you'll find all the things you never realised people were doing.
I've been bitten far too frequently to ever believe what the product owners says a process is, there's always a spreadsheet somewhere used to work around the existing system...
I'd like to affirm your view that work arounds are a fact of life in finance, and frankly, other white-collar enterprises as well.
While they're stashed relatively deep in my memory banks (mostly for the purpose of forgetting), I do have dozens of experiences 'touching up' PDFs, reverse engineering or cloning things from PDFs of PowerPoint presentations, or otherwise using whatever digital hammer and chisel would get the job done. Screenshot > Paint > Fix > PDF, boom!
While they're stashed relatively deep in my memory banks (mostly for the purpose of forgetting), I do have dozens of experiences 'touching up' PDFs, reverse engineering or cloning things from PDFs of PowerPoint presentations, or otherwise using whatever digital hammer and chisel would get the job done. Screenshot > Paint > Fix > PDF, boom!
Love that. I'm working in group benefits insurance now and spreadsheets are how everyone communicates. The software is just there to hold the data in between spreadsheet imports and exports.
Are the spreadsheets doing real number crunching? Do they use XLLs and VBA, or just worksheet functions?
Very often yes, to a scary degree. The amount of data normalization, adjustments, aggregation, analysis, etc that happens in some poorly documented and ill maintained macro is mind-boggling (there is a term for it - a model/process being "offline", i.e. not properly source-controlled or auditable).
The real reason is because Excel is still by far the simplest, quickest way to get something done fast when the deadlines are always "yesterday!".
The real reason is because Excel is still by far the simplest, quickest way to get something done fast when the deadlines are always "yesterday!".
I was in finance as well as trading risk management at one of the largest physical commodities trading houses in the world ($100+ billion revenue) and orders, positions, PNL, inventory, inventory movements, market research and analysis, and general business reports... yes, very expensive systems backing them... and they had to be done on Excel manually and synced daily to make sure if the main systems (absurdly complex) got out of sync, either one could be repaired as a failsafe.
There is one (at least) of these systems live based on the original paper by Simon Peyton Jones in a dialect of Haskell.
JPM/BAML/GS have fallen down due in large part to their choice of language in my view. A graph database written in a hurry in C++ then glued together with tens of millions of lines of hacked up python is not the way to build a bank wide platform in my book!
JPM/BAML/GS have fallen down due in large part to their choice of language in my view. A graph database written in a hurry in C++ then glued together with tens of millions of lines of hacked up python is not the way to build a bank wide platform in my book!
What is the paper's title? I'd like to understand the theory behind this approach.
Probably this one: http://research.microsoft.com/en-us/um/people/simonpj/Papers... ("Composing contracts: an adventure in financial engineering"). If you have the book called "The fun of programming" (abound functional programming), you have an updated version of that paper; the chapter is called "How to write a financial contract".
[EDITED to add: This is also the first link in the OP.]
[EDITED to add: This is also the first link in the OP.]
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One of these banks is definitively not like the others.
Same here, only I started some time earlier and have implemented the central trading system side of all these instruments. I agree, the basic contracts and simple combinations are the simplest part.
But are not the basic contracts where all the volume is - is the opportunity for new banks to come in and provide volume on a new cheap stack? Existing banks seen usually add enormous implementation costs trying to solve the last 20% (reasonably as that's where profit tends to be) but it makes implementing the first 80% almost impossible
I see this elsewhere too - solving business problems with software tools not with business tools.
I see this elsewhere too - solving business problems with software tools not with business tools.
Forgive me, but I will be stealing that last sentence ... It's great.
Declarative descriptions for financial contracts and markets having been actively used for a long time now.
Executable descriptions not so much. The issue really is that it's solving problems we don't have with a solution that gets in the way of solving the problems we do. That's not to say people haven't tried, far from it. But successes tend to be either very rare or very niche.
Executable descriptions not so much. The issue really is that it's solving problems we don't have with a solution that gets in the way of solving the problems we do. That's not to say people haven't tried, far from it. But successes tend to be either very rare or very niche.
FpML (Financial Products Markup Language) was conceived shortly before the paper referenced in the blog post.[1]
One of the paper's authors went on to create MLFi, a modelling language for finance[2]
This stuff is a bit esoteric but I think it will attract more attention because of its relevance to smart contracts.
1: http://www.fpml.org/
2: https://www.lexifi.com/product/technology/contract-descripti...
One of the paper's authors went on to create MLFi, a modelling language for finance[2]
This stuff is a bit esoteric but I think it will attract more attention because of its relevance to smart contracts.
1: http://www.fpml.org/
2: https://www.lexifi.com/product/technology/contract-descripti...
I put together a Haskell proof of concept Monte Carlo pricing tool loosely based on SPJ's work:
https://github.com/boundedvariation/quantfin
Still needs some love, but it was a pretty cool experience.
https://github.com/boundedvariation/quantfin
Still needs some love, but it was a pretty cool experience.
I did similar, but I did it Excel. It was cool, not an experiment, and it was done quickly, as Excel is the ultimate Agile tool in finance.
I'm digressing a bit, but what language is used here? A skim-over looks like Prolog, but recommendation links at the bottom say Scala. Are the functions (when, and) predefined and not part of the language itself?
Not a digression, one of the reasons for this post was to practice Scala a bit further.
It's Scala. They show the definitions of the "When" and "And" in the post:
case class And(contract1: Contract, contract2: Contract) extends Contract
case class When(date: LocalDate, contract: Contract) extends Contract
I'm a fan of the combinator way, but of course now you have to 'interpret' or 'evaluate' the structure to know what the contract means, so it might be hard to run a 'query' over a bazillion of them sitting in a database - you'd have to interpret each one (each one is a little black box).
This is assuming that running a query or search over all the contracts is something that is useful to do, which I have no idea if that is the case (though seems like a common task in applications programming).
This is assuming that running a query or search over all the contracts is something that is useful to do, which I have no idea if that is the case (though seems like a common task in applications programming).
I worked on aa commercial product called F3 which, among other things, implemented this type of contract specification as a subset of its functionality. Unfortunately, I'm not sure if they ever learned how to sell it well. One of the most memorable stints in my career so far.
Looks to be a really interesting article. Would really appreciate a font change and justified text though.