WIT Press


Applying Design Patterns For Web-based Derivatives Pricing

Price

Free (open access)

Paper DOI

10.2495/CF060191

Volume

43

Pages

10

Published

2006

Size

342 kb

Author(s)

V. Papakostas, P. Xidonas, D. Askounis & J. Psarras

Abstract

Derivatives pricing models have been widely applied in the financial industry for building software systems for pricing derivative instruments. However, most of the research work on financial derivatives is concentrated on computational models and formulas. There is little guidance for quantitative developers on how to apply these models successfully in order to build robust, efficient and extensible software applications. The present paper proposes an innovative design of a web-based application for real-time financial derivatives pricing, which is entirely based on design patterns, both generic and web-based application specific. Presentation tier, business tier and integration tier patterns are applied. Financial derivatives, underlying instruments and portfolios are modelled. Some of the principal models for evaluating derivatives (BlackÔÇôScholes, binomial trees, Monte Carlo simulation) are incorporated. Arbitrage opportunities and portfolio rebalancing requirements are detected in real time with the help of a notification mechanism. The novelty in this paper is that the latest trends in software engineering, such as the development of webbased applications, the adoption of multi-tiered architectures and the use of design patterns, are combined with financial engineering concepts to produce design elements for software applications for derivatives pricing. Although our design best applies to the popular J2EE technology, its flexibility allows many of the principles presented to be adopted by web-based applications implemented with alternative technologies. Keywords: financial applications, financial derivatives, pricing models, design patterns, J2EE patterns, web-based applications, multi-tiered architectures.

Keywords

financial applications, financial derivatives, pricing models, design patterns, J2EE patterns, web-based applications, multi-tiered architectures.