Extent3 exactpro the_future_of_risk_controls

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  • 1. The Future of Risk Controls EXTENT Trading Technology Trends and Quality AssuranceEXTENT ConferenceApril 14, 2012, Kostroma, Russia
  • 2. Brokerage System
  • 3. Brokerage System
  • 4. Naked Sponsored Access
  • 5. Access ProceduresFinancial Controls to prevent:o Orders that exceed appropriate pre-set credit or capital thresholdso Orders that exceed appropriate price or size parametersRegulatory Controls:o Prevent entry of orders unless there has been compliance with all regulatory requirementso Restrict a person’s access to only those market-access systemsand technologies that are pre-approved by the brokerso Provide surveillance system of the brokers with immediate post-trade execution reports
  • 6. Risk Control Module
  • 7. Implementation options:• Hardware implementation:  Firewalls  Microcontrollers  FPGA vs. ASIC• Software implementation:  A program integrated into OS
  • 8. FIREWALLSTypes of traffic:  Packets  Connections  StateTechnologies in Firewalls: Packet filtering Proxy firewall Stateful packet filtering (Dynamic Filtering)Dynamic Filtering: The best combination of performance and security ACL (Access Control List) A state table
  • 9. Microcontroller• central processing unit - ranging from small and simple 4-bit processors to complex 32- or 64-bit processors• volatile memory (RAM) for data storage• ROM, EPROM, EEPROM or Flash memory for program and operating parameter storage• discrete input and output bits, allowing control or detection of the logic state of an individual package pin• serial input/output such as serial ports (UARTs)• other serial communications interfaces like I²C, Serial Peripheral Interface and Controller Area Network for system interconnect• peripherals such as timers, event counters, PWM generators, and watchdog• A clock generator - often an oscillator for a quartz timing crystal, a resonator or RC circuit• A lot of microcontrollers include analog-to-digital converters, some include digital-to-analog converters• in-circuit programming and debugging support
  • 10. FPGA vs. ASIC(FPGA) Field-programmable gate array Configurable by customer. Reprogrammed as many times as customer needed. High performance. High costs.(ASIC) Application-specific integrated circuito Configurable by customer.o Non possible to reprogram.o The performance higher than FPGA.o The cost lower than FPGA with large amounts.
  • 11. Non-physical implementation. Only a program integrated into Client workstationLow costsSimple installationAcceptable speed performance for most tasksMobility and speed when requirements change
  • 12. Pricing moduleGoal: to provide correct parameters to the riskcontrolRisk exposure of portfolioo e.g. options delta calculationPricing thresholdo Parameters for pricing threshold calculationTo make it fast:o Delegate complicated calculations to GPU
  • 13. Concurrent Computing in GPUPortfolio: Parallel pricing for several optionsMonte-Carlo simulation: Parallel simulation of several pathsDelta: Parallel pricing with different market rates Pricing Ma rk e tR at e s Portfolio revaluation New Order Risk exposure o tfoli Por
  • 14. Example: SABR model for American options (Monte-Carlo simulation)SABR – Stochastic Alpha, Beta, Rhoo Stochastic volatility model with three parameters – alpha, beta, rhoo Price and volatility evolution based on 2 correlated Wiener processeso The model can be calibrated to suit the market dataAmerican options – early exerciseMonte-Carlo Simulation – average random walkEarly exercise requires additional computationo Solution of a system of linear equationso No parallelizing  Gauss method ~ O(n3)o Parallelizing  n multiplications and a number of additions
  • 15. Thank you! Questions?