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Make Complex Financial Products Easier to Integrate into Existing Applications

The Challenge

Complex financial products remain a considerable challenge for developers of trading and risk management software. After fifteen years of efforts, the best houses are still confronted with two issues:
  • The representation of complex products depends on the valuation methodology.   Investment banks and many software vendors have developed payoff languages to drive Monte Carlo engines. Products that cannot be priced with Monte Carlo methods are often represented by templates that produce custom PDE code.
  • Product definitions are not portable across applications.   For example, scripts or templates used by structurers rarely propagate into downstream applications. The coexistence of multiple representations makes it difficult to reconcile the meaning of contracts, especially as they progress in their life cycle.
These challenges create a need for a conformed financial contract representation standard that can be deployed across applications in order to create an integrated transaction processing and decision support environment.

The LexiFi Solution

LexiFi provides an elegant solution to the financial contract representation challenge: MLFi (the Modeling Language for Finance) is a market-proven formalism for creating pricing-independent, portable definitions of financial contracts. MLFi enables users to
  • precisely and exhaustively describe the terms and conditions of complex products independently from the valuation methodology and
  • embed such product definitions into existing applications and manipulate them to various ends, including product valuation and the management of life cycle events.
MLFi results from a long-term research and development program that received both industry and academic awards.

Partner Program Goals and Contents

The LexiFi Partner Program was established to enable financial developers to provide consistent pricing, risk management and processing capabilities for structured products in existing applications. Companies joining the program receive a toolkit, training, and support.

LexiFi's integration toolkit comprises the following elements:

  • MLFi, the only formal language for creating pricing-independent, portable definitions of financial contracts
  • extensive library of contract assembly components and sample instrument definitions
  • schema-independent relational database storage
  • contract management API (C#, MLFi)
  • calibration, valuation, and analytical services
  • several methods for linking MLFi contract definitions with in-house pricing algorithms
  • automatic generation of graphical trade entry screen components (Microsoft .NET / Windows Forms)
  • MLFi development environment (editor, debugger, profiler, browser, dependency analyzer)

Integration Scenarios

MLFi may serve as a pivot format from which software engineers derive multiple representations, each adapted to a specific process. The integration toolkit enables multiple integration scenarios that preserve existing software and hardware investments:
  • In-house script / template to MLFi conversion.   In-house scripts or templates may be converted into MLFi definitions to provide functionality that is either difficult or impossible to derive from pricing-orientated contract representations, including life cycle event monitoring and processing, the simulation of a contract's execution through time, and static analysis.
  • MLFi to in-house script / template conversion.   MLFi definitions may also be (i) used to provide missing functionality (e.g., life cycle event processing) and (ii) converted into an equivalent in-house representation (script or template) to reuse existing pricing and analytical services.
  • Pricing code generation.   Another standard approach for linking MLFi definitions with in-house pricing libraries is to derive pricing code that sequences calls to proprietary pricing primitives.
  • Graphical trade entry screens.   The integration toolkit provides more than valuation and event processing services. Software engineers may derive graphical trade entry screen components on the fly from MLFi instrument definitions and integrate such components into existing applications.
  • Communication.   Information extracted from MLFi contracts (e.g., contract parameters, life cycle events, cash flows) may be exported in a variety of formats, including XML, to communicate among applications.
  • LexiFi as a complete solution for covering structured products in existing applications.   Applications that do not support structured products may rely entirely on LexiFi to provide pricing, risk management, and processing capabilities.

Systems Integrators

LexiFi helps systems integrators to deliver complete and flexible solutions for complex products to their customers:
  • combine your domain and technical expertise with enhanced knowledge about structured products to develop a valued-added practice
  • respond to customer requests with the help of a rigorous framework for delivering stand-alone or integrated solutions
  • give a new life to legacy applications
  • develop loosely-coupled applications to satisfy the combined goal of providing optimal trading tools for each group, and supporting a consistent set of pricing, risk management, and processing capabilities across systems

Software Vendors

LexiFi helps software vendors to differentiate their offerings and to capitalize on the structured products opportunity:
  • rapidly develop and sell add-on modules for structured products
  • combine your system's strengths with LexiFi's award-winning capabilities to deliver integrated solutions
  • build knowledge about structured products
  • develop innovative service offerings that enable customers to rapidly integrate new products into their application
  • control your branding strategy: market LexiFi-based solutions under your own brand (white label) or use the LexiFi name

For More Information

To learn more about the LexiFi Partner Program, please contact:

Philippe Lecocq
+33 1 47 95 20 40 (Paris)
philippe.lecocq@lexifi.com