Introduction :: To show what is possible in Java & Financial Modeling over the Internet
The Moore's Law for microprocessors has finally closed the speed gap between Java and the compiler languages of C, C++, C# and .NET. This speed gap will only continue to get smaller as microprocessor speeds double every 18 months. Java's capabilities to "write-once, deploy everywhere", as compared to compiling programs for different microprocessors, makes it an excellent choice for delivering real-time financial modeling applications on a private network or over the Internet. I have written two Java programs to demonstrate this, VaRT and Hedging. VaRT is for anyone to use and the Hedging application you will need to get a password.
The VaRT applet analyzes the Dow Jones industrials since 1928 using historic and parametric VaR, newly introduced VaR Trending, quantifies the worst days & worst trends for the dates analyzed and graphs using histograms & candle sticks. This gives the Risk Manager unprecedented ability to quantify daily and rolling market risk. Value-at-Risk (VaR) is fast becoming the industry standard for measuring risk management for both portfolio management and the banking industry. The applet demonstrates how fast VaR can be analyzed using Java and how simply it can be delivered to the end user. The applet introduces a new tool, VaR-Trending (VaRT) to help quantify illiquidity during times of financial crisis. For further description click here or click How to Use for a detailed explanation of VaRT.
The Hedging applet is an industrial strength application that once logged into expands out of the browser and on to the whole screen. The application employs the basic industry standard risk management tools used in the VaRT applet but the real value of the application is its proprietary three dimensional correlation. There are many advantages for using 3D correlation; hedging ratios can be accurately predicted for both up & down markets, optimal hedging securities and baskets of securities can be found, and negative convexity can be achieved. This enables the portfolio manager to create low volatility, high alpha, long-short positions. The hedging application provides a simple interface to pick and choose baskets of securities which are then graphed as a single synthetic security. You will need to request a password for the hedging application.
Peter del Rio
peter@ic3d.com
