Philosophy of the Project and Metaphors
Languages as Standards
Languages can be viewed as society-self-organized emerging and evolutionary set of standards. The taxonomy of languages comes from origination; see the figure below. Contract types can be viewed as the building blocks of making higher order contracts. Similarly we can view them as words in a language. So the metaphor could be that a contract type is a word in the contract language. A combination of contract types should make up a general contract. Thus, a contract is a sentence that is supposed to make financial sense in a given context. This project builds an open source, evolutionary, algorithmic, contract type language. The language as it evolves provides a standard.
Transportation Systems Standards
Roads, bicycles, motorcycles, cars, trucks, trains, airplanes and pedestrians are all mixed up in a transportation system. In order for each aspect of this complex adaptive system or system of systems to function with reasonable risk tolerance, a set of standards have to be placed in the system and in the component systems. The standards can also be viewed as customized higher-order languages developed through years of accumulated measurements, accidents, disasters, statistics, modeling, testing, validating, regulating and policy changing. Throughout this evolving technology drives the change in a major way as scientific interpretations shed light on observed patterns. This is not particular to this industry or societal functionality.
Automobile standards for example constitute a set of recognized language starting from a driver’s license.
Financial Systems Standards
There are many standards already in place throughout the financial system. Those standards vary by geography as languages do. For example, The Tax code is a basic standard that may be viewed as a specialized language although many view the Tax language as an example of “fuzzy” language. Another related example that shows geographic dependence comes from the basic financial reporting standards of GAAP and IFRS. Both provide a rich example of financial evolutionary standards.
International Swaps and Derivatives Association, Inc. (ISDA) has made great strides in setting standards in various financial asset classes . For example, an ISDA Protocol is an amendment to a contractual agreement that addresses changes to ISDA contract standards post 1998. Another example is ISDA’s standard model for Credit Default Swaps (CDS) for fee computations . The standard model may provide a benchmark for involved parties in a CDS transaction. Markit plays the administrative role to support and maintain the open source functionality and moderate the forum that discusses source codes and related topics.