The scheme shall span the scope and describe orientation, positioning and rough plans. To master the complexity, it's driven by conventions, rules and recommendations related to types and categories. But no, it's not a constructor.
The best architectural plan does not guaranty that the building's not lousy erected. But if there are flaws they may be corrected by hard work. But if the architecture is lousy top practitioners cannot make it attractive. And no marketer can sell it.
As an example I fill The Quant Innovation Mesh out for the UnRisk Capital Manager
The Quant Innovation Mesh
The Type in one sentence - Time Type, Reality Type, Style Type, Structure Type, Matter Type
Realistic, Real-Time, Documentary, MultiFlow, Financial Market Risk Management, a HPC Valuation and Data Management FactoryExternal Value / Risk
Risk-controlled, regulation-conform Investment Management / needs external information and intelligent set upInternal Value / Risk
Inherent parallelism, stable and robust mathematics, web deployment / increasingly massive valuations and data need to be managedPurpose - what the quant innovation is for
Serve fund and risk professionals performing advanced risk management processesPoint of View
Financial markets, Capital Management, Market risk managementObjects of Desire
Conserving capital, set the stage for successful investment management, leverage technology, build quant finance skillsWorldview, Status...
Arming David with affordable systems that were fit for the GoliathsConventions, Rules...
Risk needs to be managed in a strict regulatory framework. Instrument (especial derivative) and portfolio valuations are subject to laws. The regulatory regime sets cornerstones like, counter party rules, collateral management, initial margin ruler...risk limit treatment, core capital requirements...Characteristic Workflow
Portfolio across scenario simulationRealization - how the quant innovation moves from a beginning to and end
The controlling idea
It works like a valuation and data management factory, supports risk management cascades throughout the process...exposes risk from a single instrument to a complex portfolio...supports decision making for risk optimization.Hook.Build.Payoff - how the innovation drives movements, solves problems and master critical situations…
Set-up
Set-up users, instruments, portfolios and scenarios…value portfolios across model, market data, stress...scenarios for a variety of simulative risk tests…special simulations, VaR calculations across risk factors, historic or simulative scenarios...Problems
Model, method and calibration risk can become horrible in interplay, regime switches, like low interest rates require model and method switches, VaR calculations are only as good as they backtest, simulations and risk tests depend on the set-up...Crisis
Toxic instruments have been identified, they contribute to unexpected severe risk limit breaks, portfolio risk may drive the core capital requirements up.Solution
All actions and actors are evident over the whole life time of the system. It provides insight from the analysis of the critical cases, expected shortfalls can be calculated and power law analysis of fat tail events can be performed. Portfolios cam be re-engineered or re-configured easily…Payoff
Tons of resulting risk data can be individually post processed an integrated into the overall enterprise workflowConventions - in general, combine computation and data management, use multi-model and method approaches, use programming languages that are perfect for the purpose.
UnRisk Valuation and data management are twins. Models and methods can be cross validated in scenarios. UnRisk applies hybrid programming…Techniques and technologies
UnRisk CM built of the UnRisk Technology Stack atop the Wolfram Technology Stack and proprietary technologies. The technologies are multi (programming) language, inherently parallel and platform agnostic. Most of UnRisk is programmed in UnRisk.Its an exciting innovation that creates values for its clients and its makers by the ability to swiftly meet new requirements, performance criteria, deployment and integration needs.
I've filled some textual description into the scheme, but you could also put some keywords or even short quality scores.
However the criteria themselves need more explanation…this will be done in my next posts...
p.s. I've used a quant finance innovation, because it's "thrilling". It has features of crime (even horror), (catastrophic) misuse and investigation…guilt and atonement...innocence...impacting individuals, institutions and even entire economies…but it introduces innovations (options and future…) that could influence the real economy positively…at the instrument level as well as at the technology level…but the Main Street and the Wall Street does not love each other…
Innovation is About Change…I'll come back to this at a concluding post.
