The Alfred P. Sloan Foundation awarded Stevens a grant to work on the proposal entitled "Creating a standard language for financial contracts and a contract-centric analytical framework".
The goal of the project is to build a financial instrument reference database that represents virtually all financial contracts as algorithms that link changes in risk factors (market risk, credit risk, and behavior, etc.) to cash flow obligations of financial contracts. The term of art that describes the impact of changes in the risk factors on the cash flow obligations of a financial contract is called “state contingent cash flows,” which are the key input to virtually all financial analysis including models that assess financial risk. This reference database will be the technological core of a future open source community that will maintain and evolve standardized financial contract representations for the use of regulators, risk managers, and researchers.
The objective of the project is to develop a set of about 30 unique contract types (CT’s) that represent virtually all existing financial contracts and which generate state contingent cash flows at a high level of precision. The technology aims to develop the CT’s, write production level code for the cash flow generating algorithms, create an easily accessible website where researchers and practitioners can test the CT’s for coverage and accuracy, report results at conferences and in scholarly publications, and launch an Open Source Community to maintain and promote the use of this reference data-base. The result provides a high quality reference database for almost all outstanding financial contracts, a website for the public to access and test the algorithms, publications, an open source community to maintain and promote the CT’s.
We believe, the CTAL project, combined with the successful completion of the FSB LEI effort, will impact every activity related to financial risk assessment: it will significantly improve regulation of individual institutions, monitoring of systemic risk, and enterprise risk management. It will also make possible new avenues of research into systemic risk that will make financial markets safer and more efficient.
In the development of a complete set of algorithmic contract standards, the team intends to make the outputs of this project available with no intellectual property or commercial claims. The team makes no claims of ownership regarding the implementation and published knowledge whatsoever.
ACTUS Investigating Team
- Khaldoun Khashanah, PhD - Principle Investigator (PI)
Director, Financial Engineering
School of Systems and Enterprises
Stevens Institute of Technology
Hoboken, NJ 07030
- Willi Brammertz - Co-PI and Chief Technical Officer (CTO) of the project
Managing Director Brammertz Consulting GmbH
Schwerzistrasse 25, 8606 Naenikon Switzerland, +41 79 420 07 50
- Allan Mendelowitz, Deloitte Consulting, CE-NIF, Co-PI