Symphony Software Foundation Knowledge Decision Services

Knowledge Decision Services, LLProspective Member Presentation

May 17th 2016, New York

Glenn Schultz, COO

Your Role, KDS Global, LLC

@Bond_Lab [email protected]

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About Us:We are leading provider of mortgage data and analytics to MBS investors, originators, servicers, and trading desks. Our expertise covers both the agency and non-agency mortgage backed securities markets.

Mission Statement:We are committed to developing and open standard analytics platform for the analysis of mortgage and asset backed securities. We believe the investor should trust the analysis and by extension the software that produced the analysis; we have a strong responsibility to produce software and results that are trustworthy and shown as such.

Current Capabilities:Over the past two decades we have developed a Network of Systems Architecture (NSA) to deliver the best in class BIG data analytics across our massively parallel computing environment. At the heart of our NSA is the proprietary and patented virtual sorter and UBiquitous indeX algorithms (UBX™), an enabling technology allowing us to sort and index every field of every and all sorted data elements within our NSA. Our cloud computing and thread farms consist of 3,000 CPUs and and over 500 terabytes of data.

Knowledge Decision Services, LLC Moving @ the Speed of Thought


• UBX mathematical and physics modeling and monte carlo simulation libraries.

• UBX middleware.

• UBR™ an implementation of the R language to analyze BIG data sets on our NSA production environment ubiquitously.

• Bond Lab®, (BLX™) analytical software for the analysis of mortgage-backed and asset-backed securities written in the R language.

Our Network of Systems Architecture Includes:


Goal #1: Create a widely accepted open standard mortgage-backed and asset-backed securities analytic platform to be used by investors, issuers, and investment banks.

Goal #2: Develop our enabling technologies to facilitate peer-to-peer trading of mortgage-backed and asset-backed securities across a secure platform based on widely accepted open standard analytics.

Our Goals:


Goal #1: Create a widely accepted open standard mortgage-backed and asset-backed securities analytic platform to be used by investors, issuers, and investment banks.

Bond Lab®

• Is Open Source Analytic software for the analysis for mortgage- and asset-backed securities.

• The inspiration for Bond Lab arose from the recommendation on the part of the Structured Finance Industry Group to provide humanly readable mortgage and consumer asset-backed bond payment rules, commonly referred to as the waterfall, in an open source programming language.

• A human readable waterfall requires commonly agreed upon cash flow engines for mortgage- and asset-backed securities.

• A single agreed upon source for financial object input.


Bond Lab® was used to write Investing in Mortgage-Backed and Asset-Backed Securities Financial Modeling with R and Open Source Analytics, Wiley 2016

Bond Lab® defines the classes, sub classes, super classes, methods, and functions needed to analyze mortgage- and asset-backed securities. Current capabilities include:

• Mortgage loan cash flow• Yield-to-maturity• Weighted Avg. Life• Macaulay Duration• Modified Duration• Effective Duration• Convexity• Effective Convexity• Key rate duration

• Nelson Siegel• Nelson Siegel Svensson• McCulloch cubic spline• Cox, Ingersoll, Ross • HJM via restful API• Agency 30- and 15-year Prepayment model

• Price/yield analysis

• Scenario based total return analysis

• Option Adjusted Spread analysis

• REMIC structuring tool

Proof of Concept: Open Source Mortgage Analytics


Bond Lab®

• Open source the core analytic engines common to all fixed income valuation.• Functions,• Methods,• Classes

• Agency MBS and structuring classes are functional

• Consumer ABS and Non-Agency MBS• Define classes• Extend cash flow engine• Extend structuring classes

Symphony • Integrate with Symphony allowing secure

messaging of analytics dealer to dealer, dealer to investor.

• Secondary trading real time analytics between counter parties.

• New issue analytics and deal waterfall files.

• Secure documentation of purchase rational.


Bond Lab®Financial Object Input

Single provider of Financial

Object Input

CustomPrepayment, Default, Loss

Models

CustomPrepayment, Default, Loss

Models

Open source Bond Lab source code cash flow engines, standardize calcs

Proprietary Prepayment, Interest Rate models, and

valuation algorithms

Decision OutputFinancial Object

Output

Based on standardized Input, cash flow engines, pmt. waterfalls,proprietary models decision output is created


Symphony Messaging Bond Lab®

Transmission of the financial object Metadata of the financial object


• Bond Lab • A collaborative open source project within the Symphony Software Foundation

• UBX Sorting and Indexing algorithms• Financial data• Financial objects• Hyper ledger – providing documentation of pre-purchase analytics

• Active participation in the development of the Symphony platform• Financial objects working group• Development of enabling technologies (R to Symphony – Symphony to R)


Long Term Goal: Peer-to-Peer Trading

Source: TABB Group

The structured products market is the least sophisticated in terms of electronic trading followed by:

• HY Corp.• IG Corp.• OTR UST.

However, the structured products markets is the most sophisticated in terms of structuring and cash flow analytics.


Long Term Goal: Peer-to-Peer Trading

Source: TABB Group

• Peer-to-peer trading can only be accomplished once a commonly accepted and agreed upon cash flow engines have been developed.

• Buy side investors must become comfortable with the notion of market maker. Requires, increased price transparency.

• Machine learning algorithms can be used to impute prices given the meta data of a cusip.

Enabling Technologies

Electronic RFQ

Thanks!Glenn Schultz, COO

Your Role, KDS Global, LLC

@Bond_Lab [email protected]

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