LexiFi’s innovative approach addresses the financial industry’s longstanding challenges in managing bespoke, often complex, derivatives or fixed income financial contracts. By leveraging its Domain-Specific Language with a unified technology stack, LexiFi provides flexibility, scalability, and efficiency unmatched by traditional approaches.
Discover LexiFi’s Founder and CEO, Jean-Marc Eber, as he explores LexiFi’s innovative approach to financial contract description and beyond ⤵️
Watch this interview in French
The need for a rigorous standard in financial contracts’ description
In the financial industry, managing contracts - especially their payoffs - is an ever recurring challenge. Financial products are inherently complex and dynamic, requiring tools that can adapt to new market innovations.
Existing systems, often based on hard-coded solutions or scripts, lack flexibility, are prone to errors, and are costly to maintain. Over time, this results in fragmented practices and inconsistent interpretations. Especially for institutions managing portfolios with tens or hundreds of thousands of contracts, this results typically in a dramatic increase of organizational inefficiencies and operational risk. This complexity is amplified by the long lifespans of many contracts - often three to ten years - making effective lifecycle management essential.
Structured products add another layer of complexity, as their variety across global markets is nearly limitless. Financial institutions frequently resort to developing custom software, tailored to their needs, but such solutions demand substantial maintenance and frequent updates to keep pace with evolving market conditions and ever increasing regulatory requirements.
LexiFi tackles this challenge by offering a distinctive approach that strikes a balance between adaptability and long-term sustainability: a domain-specific language (DSL) designed to describe the payoff of structured products comprehensively and consistently.
LexiFi’s generic approach to financial contract description
At the heart of LexiFi’s DSL is a foundation inspired by algebra. This structured approach leverages a theoretically well founded concise set of combinators, or building blocks (around a dozen) which can be used to model all possible payoffs.
The algebraic nature of this system ensures a clean, logical framework for combining and describing financial contract components. By using a compact and universal language, LexiFi achieves a field proven balance between flexibility and simplicity.
How LexiFi’s DSL powers comprehensive payoff description
LexiFi’s DSL serves as the foundation of its approach, offering a dual-readable format that is understandable by both humans and software.
This description not only defines precisely all the rights and obligations associated with a contract but also powers a range of applications, including pricing, risk analysis, document generation, and automated lifecycle management.
The goal is to ensure that contracts can be processed accurately and consistently throughout their lifespans, without the need for implicit or external domain knowledge.
Balancing flexibility and constraints
Creating a DSL that balances flexibility with simplicity is no small feat. LexiFi’s language had to be rich enough to describe all possible financial pay-offs while avoiding unnecessary complexity.
Making this language as simple as possible allows the implementation of highly efficient generic treatments of these payoff descriptions.
At its beginnings, LexiFi implemented a first set of functionalities based on its DSL. Years of iteration and testing were required to refine the technology stack based on this DSL into a tool that meets all needs. By leveraging this technology, LexiFi has built a system capable of automatically - and correctly, by design - managing contracts lifecycle. Actions and updates are derived directly from the precise contract descriptions, which can then be seamlessly integrated with external systems like booking systems, event calendars or market data providers.
Standardization and scalability
LexiFi uses therefore a unified framework for describing and processing all financial contracts. This standardization ensures that features and integrations, such as regulatory reporting or external system connections, are implemented once and benefit all products, independently of addressed markets or geographic particularities. The result is a significant reduction in development costs, faster delivery, and enhanced scalability.
“Speaking the same language” also eases collaboration between market participants or even inside an institution, where valuable expertise may be shared by different departments or for different needs.
Practical applications of LexiFi’s approach
A precise and rigorous description of financial contracts allows lifecycle management to become nearly automatic. Future events, such as fixings, are directly derived from the contract’s specification. As uncertainty resolves, the contract description evolves step-by-step, resulting in simplified versions that can be used for operations like pricing or document generation.
Additionally, LexiFi’s system integrates seamlessly with external software, enabling the synchronization of lifecycle events and management actions across platforms. This approach, both generic and precise, ensures reliable and efficient contract handling throughout their entire lifespan.
A Forward-Looking solution for financial contract management
By offering a single platform for all cash flow processing and a robust algebraic foundation to describe payoffs, LexiFi has redefined the way financial contracts are managed. This unified approach allows for unparalleled efficiency at reasonable costs, making it easier to adapt to market changes, meet regulatory requirements, and scale operations. LexiFi’s innovative system is not only a response to the challenges of today’s financial markets but also a forward-looking solution that anticipates the needs of tomorrow.