DEVSTORY #14: Quantitative analysts rollout derivative pricing models globally to desktop pricers, ETRM, Accounting, and Risk systems in minutes not months
Roll out of enhanced pricing algorithms to price tail risk better, took three months to be deployed globally at a large trading firm. In the interim period, market makers, risk managers, and quants were using the new model. The mid-office was reporting off a nonvalidated model provided by the ETRM vendor. The back-office was generating Accounts Payable and Accounts Receivable records in the derivative accounting system using a homegrown system that was three model releases behind as a system upgrade was the only way to incorporate the new model when there was a change.
This led to recurring reconciliation efforts between traders, mid and back-office personnel at the end of every accounting period. It also led to delayed resolution of invoicing disputes with trading counterparties external to the firm due to the discrepancies in valuation internally.
The desired solution required the use of a single globally deployed pricing model, updated regularly, yet accessible seamlessly to the trader desktop, ETRM, Server-based pricing platform, accounting software, auditors, and any future system with minimal integration efforts and time to market.
These objectives were met using a low code, highly available, planet-scale, containerized, Kubernetes deployed, functions as a service approach, that allowed the quant and IT teams to roll out models using a Jenkins-based CI/CD process several times a day. Models were deployed as stateless functions called using simple HTTP get requests accessible from software clients such as spreadsheets, javascript, python, Java, C++, C#, and Golang programs. Several research quant groups could leverage these models from tools like R, SAS, and Matlab.
This enabled the quant team to continuously deploy updates. Due to the cohesive yet decoupled nature of HTTP request-based integration, standardized model rollout and trading compliance policy enforcement became a non-issue.
More information can be found in DevStory #14 : Rollout derivative pricing models globally to desktop pricers, ETRM, Accounting, and Risk systems in minutes not months