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Formal reasoning about financial derivatives- introduction -
Dragisa Zunic
Project Meta-CLF2 - reading group
Carnegie Mellon University QatarIT University of Copenhagen
February 13, 2017. �� ��1 / 29
General context including (known) commercial aspects
I in the year 2000 : Peyton Jones, Eber and Seward, publishedan article “Composing contracts : an adventure in financialengineering” (at ICFP)
I related research, eg. in 2009 : “Commercial uses : goingfunctional on exotic trades”, by Frankau, Spinellis et al. (inJFP)
I recent research from 2015 : “Certified symbolic managementof financial multi-party contracts”, by Bahr, Berthold andElsman” (at ICFP)
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General context including (known) commercial aspects
I LexiFi, by Jean Marc Eber (Paris, since 2000.) ; relies onPeyton Jones, Seward and Eber’s research
Provides a software for pricing and management of derivativesand structured products
“Instrument box”, as a core product, can be embedded into3rd party applications ; LexiFi’s “instrument box” used byBloomberg platform, since 2016.
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General context including commercial aspects
I Aesthetic Integration (London, since 2015), by G. Passmoreand D. Ignatovich ; won a finance technology competitionamong 600 projects worldwide
Given a model and a property to reason about, Imandra worksto generate a proof that the property will always hold, or topresent a concrete counterexample identifying how theproperty may be violated.
Fomal verification on ethereum. “Imandra” as a core product
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I paper presented at the International Conference on FunctionalProgramming, ICFP, 2000 in Montreal
I won the best-paper award, I think
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Composing contracts : an adventure in financialengineering
I introduce a combinator library
I that allows to describe financial contracts
I and a compositional denotational semantics
I that says what such contracts are worth
I Using Haskell for implementation
�� ��6 / 29
Composing contracts : an adventure in financialengineering
I introduce a combinator library
I that allows to describe financial contracts
I and a compositional denotational semantics
I that says what such contracts are worth
I Using Haskell for implementation
�� ��6 / 29
Composing contracts : an adventure in financialengineering
I introduce a combinator library
I that allows to describe financial contracts
I and a compositional denotational semantics
I that says what such contracts are worth
I Using Haskell for implementation
�� ��6 / 29
Composing contracts : an adventure in financialengineering
I introduce a combinator library
I that allows to describe financial contracts
I and a compositional denotational semantics
I that says what such contracts are worth
I Using Haskell for implementation
�� ��6 / 29
Composing contracts : an adventure in financialengineering
I introduce a combinator library
I that allows to describe financial contracts
I and a compositional denotational semantics
I that says what such contracts are worth
I Using Haskell for implementation
�� ��6 / 29
I companies have these in a catalogue - as prefabricated components
I often people need a contract that is not in the catalogue
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Question : can all these be defined using a set of preciselyspecified set of primitives or combinators ?
If yes, then we
I can describe new, unforseen, contracts
I can systematically analyze and perform computation over the newcontracts
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Getting started - a contract illustration
Zero-coupon bond (zcb) : “ Receive GBP 100 on 1st January2010”
We can specify this contract as :
c1 :: Contract
c1 = zcb t1 100 GBP
Where zcb is of type:
zcb :: Date -> Double -> Currency -> Contract �� ��9 / 29
Sources
I Composing contracts : an adventure in financial engineering→ http://dl.acm.org/citation.cfm?id=351267
I Certified symbolic management of financial multi-partycontracts → http://dl.acm.org/citation.cfm?id=2784747
Thanks!
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