FinancialCloud: Open Cloud Framework of Derivative Pricing

Abstract

Predicting prices and risk measures of assets and derivatives and rating of financial products have been studied and widely used by financial institutions and individual investors. In contrast to the centralized and oligopoly nature of the existing financial information services, in this paper, we advocate the notion of a Financial Cloud, i.e., an open distributed framework based cloud computing architecture to host modularize financial services such that these modularized financial services may easily be integrated flexibly and dynamically to meet users' needs on demand. This new cloud based architecture of modularized financial services provides several advantages. We may have different types of service providers in the ecosystem on top of the framework. For example, market data resellers may collect and sell long-term historical market data. Statistical analyses of macroeconomic indices, interest rates, and correlation of a set of assets may also be purchased online. Some agencies might be interested in providing services based on rating or pricing values of financial products. Traders may use the statistically estimated parameters to fine-tune their trading algorithm to maximize the profit of their clients. Providers of each service module may focus on effectiveness, performance, robustness, and security of their innovative products. On the other hand, a user pays for exactly what one uses to optimally manage their assets. A user may also acquire services through an online agent who is an expert in assessing the structural model and quality of existing products and thus assembles service modules matching users risk taking behavior. In this paper, we will also present a survey of related existing technologies and a prototype we developed so far.