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© Copyright ACTUS 20131Date: 07.05.2015 Financial Data and the Challenges for the Analytic Use Case Willi Brammertz, CTO ACTUS.

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Presentation on theme: "© Copyright ACTUS 20131Date: 07.05.2015 Financial Data and the Challenges for the Analytic Use Case Willi Brammertz, CTO ACTUS."— Presentation transcript:

1 © Copyright ACTUS 20131Date: 07.05.2015 Financial Data and the Challenges for the Analytic Use Case Willi Brammertz, CTO ACTUS

2 © Copyright ACTUS 20132Date: 07.05.2015 The model

3 © Copyright ACTUS 20133Date: 07.05.2015 Financial contracts > Financial contract: Central to the system > What is a financial contract? > Agreement between two (or more) Counterparties > To exchange cash flows > Following a set of rules > Only deterministic (factual) part of finance

4 © Copyright ACTUS 20134Date: 07.05.2015 Financial contract as a set of rules > Lawyers intention > Expressed esoterically > Different languages > Different expressions within language > Different expressions even within single bank > Nevertheless clear in intention and understandable > Can be substituted by computer algorithms > Substitution by algorithms is necessary condition for the analytic use case > The number of rules and their combination is limited (coverage 98+%) > One specific set of rules we call Contract Type (CT)

5 © Copyright ACTUS 20135Date: 07.05.2015 A closer look at financial contracts Endre vullumsandio dion endipsummy nos dolobore vel ut alis amet autem dionseq uismodigna feumsan dionse dolor ullandre magna feuipsummy nullum ad tin …. Bank shall pay the sum of __________ USD on __________ (date) to ______ (obligor). Obligor will pay an interest of ____ % on a semi-annual basis and repay the full amount in 3 years. Date, Signatur 2013.01.01 1000 Mr. xzy10

6 © Copyright ACTUS 20136Date: 07.05.2015

7 © Copyright ACTUS 20137Date: 07.05.2015 Variations Endre vullumsandio dion endipsummy nos dolobore vel ut alis amet autem dionseq uismodigna feumsan dionse dolor ullandre magna feuipsummy nullum ad tin …. Bank shall pay the sum of __________ USD on __________ (date) to ______ (obligor). Obligor will pay an interest of ____ % on a semi-annual basis and repay the full amount in 3 years. Date, Signatur 2013.01.01 10000 Mr. xzy10

8 © Copyright ACTUS 20138Date: 07.05.2015

9 © Copyright ACTUS 20139Date: 07.05.2015 More variations Endre vullumsandio dion endipsummy nos dolobore vel ut alis amet autem dionseq uismodigna feumsan dionse dolor ullandre magna feuipsummy nullum ad tin …. Bank shall pay the sum of __________ USD on __________ (date) to ______ (obligor). Obligor will pay an interest of ____ % on a semi-annual basis and repay the full amount in ___ years. Date, Signatur 2013.01.01 10000 Mr. xzy10 2

10 © Copyright ACTUS 201310Date: 07.05.2015

11 © Copyright ACTUS 201311Date: 07.05.2015 Even more variations Endre vullumsandio dion endipsummy nos dolobore vel ut alis amet autem dionseq uismodigna feumsan dionse dolor ullandre magna feuipsummy nullum ad tin …. Bank shall pay the sum of __________ USD on __________ (date) to ______ (obligor). Obligor will pay an interest of ____ % on a semi-annual basis and repay the full amount in ___ years. Date, Signatur 2013.01.01 10000 Mr. xzy10 2

12 © Copyright ACTUS 201312Date: 07.05.2015

13 © Copyright ACTUS 201313Date: 07.05.2015 CT´s and master agreements > Master agreements define every aspect of financial contracts > Terms and their interpretations > Algorithms (e.g. interest calculations, option pay off…) > CT´s can be interpreted as > Set of global master agreements > Consistent master agreements across sectors

14 © Copyright ACTUS 201314Date: 07.05.2015 Data and algorithms Example of interest calculation I > Creditor and debtor agree to exchange periodic interest payments > This cannot be expressed by data alone. We need > Data > Algorithms > Data > Interest rate > Principal and its evolution > Payment cycles > Day Count Methods, End of Months Conventions, Business Day Convention

15 © Copyright ACTUS 201315Date: 07.05.2015 Data and algorithms Example of interest calculation II > The actual payment must be calculated using data and the algorithms > Interest payment algorithm needs > Cycle algorithm > EoM > BDC > Yearfraction calculation (DCM) > Principal algorithm > Etc.

16 © Copyright ACTUS 201316Date: 07.05.2015 What can we learn? > It´s not about data only. It´s about > DATA AND > ALGORITHMS > A financial contract needs both

17 © Copyright ACTUS 201317Date: 07.05.2015 An analogy DNA and gene expression DATAALGORITHMS

18 © Copyright ACTUS 201318Date: 07.05.2015 DNA CT DNA > DNA information > Gene expression > Context sensitive > Result: Protein, some other results > Important: Cells are autark in reproduction CT > Contract information > CT specific algorithm > Risk factor sensitive > Result: > State contingent cash flows > Analysis elements > Contracts must become autark in results production

19 © Copyright ACTUS 201319Date: 07.05.2015 Autark Financial Contracts Self executing analysis Riskfactors Basic Results DATA ALGORITHMS

20 © Copyright ACTUS 201320Date: 07.05.2015 Consequence for XBRL Open Questions > XBRL knows how to move data > Does XBRL know, how to move algorithms along? > What about the context? > Input: Risk factors > Output: Analysis results Riskfactors Basic Results DATA ALGORITHMS

21 © Copyright ACTUS 201321Date: 07.05.2015 www.projectactus.org


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