Design of high performance financial modelling environment (Q1978675)

The aim of our system is to generate solution code from a high level specification of a financial instrument. Solution code calculates prices and hedge ratios which are partial derivatives of the price with respect to various parameters. The user manipulates a representation of the problem at the domain level, with the complexities of the computer implementation hidden. As many of the problems have no analytical solution, symbolic transformations manipulate the equations specifying the stochastic model and instrument into forms that can be solved numerically. Techniques such as finite differences, spectral methods and Monte Carlo simulation are provided in sequential and parallel versions. The mathematical correctness of the transformation steps is examinable as is the degree of error introduced by approximating transformations. We include examples for the Black--Scholes model and for the Hull White stochastic volatility model. A Linux cluster is used to price an Asian option using the Hull White SV model.