Finance

As I sit here on the train I release that my late night coding meant that I missed shocking the forcast. The following code corrects last nights mistake:

    let valueDate = new DateTime(2010,1,1)
    let trade  = createIRSTwoLegTrade 101
    let npv =
        trade.SwapStream |> Seq.sumBy (fun x -> generateCashflow(x,trade, valueDate, curve, forcast))
    printfn "IRS NPV %A" npv

    let bumpCurve = curve |> List.map (fun x -> (fst x + 0.0001, snd x))
    let bumpForcast = forcast |> List.map (fun x -> (fst x + 0.0001, snd x))
    let shockedNpv =
        trade.SwapStream |> Seq.sumBy (fun x -> generateCashflow(x,trade, valueDate, bumpCurve, bumpForcast))
    printfn "IRS Shocked NPV %A" shockedNpv

    printfn "Parallel PV01 %A" (npv - shockedNpv)

Moving on from the previous NPV calculations, I now need to shock the curve, recalculate NPV and thereby calculate Parallel delta or Parallel PV01. Shocking the curve means adding 100th of 1% to each point on the curve, which I can do fairly easily with List.map:

    let valueDate = new DateTime(2010,1,1)
    let trade  = createIRSTwoLegTrade 101
    let npv =
        trade.SwapStream |> Seq.sumBy (fun x -> generateCashflow(x,trade, valueDate, curve, forcast))
    printfn "IRS NPV %A" npv

    let bumpCurve = curve |> List.map (fun x -> (fst x + 0.0001, snd x))
    let shockedNpv =
        trade.SwapStream |> Seq.sumBy (fun x -> generateCashflow(x,trade, valueDate, bumpCurve, forcast))
    printfn "IRS Shocked NPV %A" shockedNpv

    printfn "Parallel PV01 %A" (npv - shockedNpv)

I’ve now got cashflow generation for both legs (see below). I think the Days360 function is slightly different to Excels hence the slight difference in number compared to the original XLS I previous posted. Next things to do are to parallel compute the cashflows.

I want to take the previous blogged Market Risk IRS trade to the next level, and move from Excel to a real calculation engine. To aid this I need to model a trade. I was going to start with auto-generating C# code from FpML, but I though it would be more interesting to build the Proof Of Concept (POC) types in F# – and XSD.EXE doesn’t support F#

FpML is probably the best scheme to model off since the ISDA initially create FpML for a purely IRS perspective, but has now moved to cover multiple products. For this example, I’m looking at section 5.1 Interest Rate Swap.  Read more...

Euromoney’s article on Morgan Stanley’s Matrix provides some insight into the feature set required to attain top 5 ranking in the FX world – currency options, precious metals, and streaming NDF’s. Morgan Stanley need to continue to push the feature set to achieve an appropriate yard increase to move back into the top 10, with I suspect the desire to be in the top 5.

One curious take away from the article; both FX Deutsche Bank and UBS have gone for more of a build than a buy as far as I am aware, and I believe (not confirmed) both use similar streaming technology.  Read more...

Recently with numerous comments on my blog from certain parties coupled I thought it worth blogging some thoughts on where we are in Single Dealer Platform (SDP) land:

• Firstly, I don’t really care if a SDP is build or buy. Even a buy consists of a build. You can’t buy an SDP off the shelf today without doing some work. “Caplin is the leader in rich applications in capital markets” – should I stop laughing now? Caplin is an integration layer as far as I can tell.
 Read more...

Modelling a trade and the events that occur on a trade is always an interesting exercise. It’s become clear over the years however that a Bi-Temporal model is the only real way to go. This model is the lifecycle of the trade based on events and actions. The reasoning behind the need for bi-temporal model is quite simple. If you imagine an IRS trade, it gets created (New Trade $100m), amended, followed after sometime by a partial unwind ($50m), and amendment, another partial unwind ($40m).  Read more...

So today everyone is talking Risk – Real-Time Risk (RTR) to be more precise. Hence lets clarify things a little and make it clear were about to discuss Real-Time Market Risk.

Essentially we need to calculate the Present Value (PV) or Net Present Value (NPV) of a trade. In the following example we’re assume we looking at a Interest Rate Swap (IRS) which has two legs: Fixed and Floating.  Read more...

So I managed to find some data on the Eurex site (here). Although the data is from 2007, its a least better than nothing. The PDF’s on the site provide details on the field formats, which means you can basically figure out the depth at a specific time from a buy/sell viewpoint.

TickData (thanks to a colleague for reminding me of this site) also offers futures data.

I’m looking for some historical market depth data that I can use to play though my Market Strategy Engine. Looking at the various web sites (CME, LIFFE, Eurex, eSpeed(BGC Partners), BrokerTec, HDAT and MTS) there doesn’t appear to be a free download of data. Anyone know of anywhere where I can get decent data for free?

So in a recent posting I provide four areas that need enhancing with regards my Market Strategy Engine Proof Of Concept (POC). The initial version of the engine was a console application driven by .CSV files. With the move to a WPF UI I now want to add a UX that allows me to visualise the Market, allow me to enter strategy orders, and a blotter to show there working status.

The original console POC used the TextFile adapters to load data. I’ve now moved to writing my own adapters for market depth and strategy orders – the market was original an Rx powered adapter

I wonder if Google Chart Tools will help in reducing the build cost of a Single Dealer Platform (SDP)?

Looks like Sybase is in the process of acquiring Aleri.

It’ll be interesting to see how Sybase manages Aleri and Coral8 products, in both development and deployment (licensing).

The Algoithmic Trading Working Group uploaded the v1.1 Release Candidate (internal build v2.7.0) for FIXatdl recently. You’ll need to register in order to download the files.

So start coding up those algo UIs already!

Here’s an earlier post that highlights some of the breaking changes with previous builds.

Last week was the first meeting of the HPC/Cloud Computing workshop, hosted by Lab49 and Liquidnet.

Changing from the typical NY Java SIG format, this new workshop was a bit of an experiment. We limited the attendance to foster a more discussion-oriented workshop. I’m sure everyone in attendance would agree it was a great formula and a welcomed change from large seminar-styled approach. I asked Kevin Kelly from Amazon Web Services come to town and give the membership an introduction to Cloud Computing.

Kevin Kelly on Cloud Computing

 Read more...

Interesting article from Euromoney, here.

In news last week, the CME Group finally announced the availability of their CDS clearing platform.