To explain it, I followed Shawn's approach of microscopic and macroscopic diagnosis…but I've used UnRisk CM as an example before I described the microscopic methodology to lay out the elements of a quant innovation…for didactic reasons (the motivation room).
Moving from the frog's to the bird's view is not so easy…and it may unmask that my quick typology of UnRisk CM requires a correction?
The Quant Innovation Spreadsheet represent a first view...it's motivating, but t's not answering the core questions of innovation marketers.
- What's the type?
- What are the conventions, rules, state of the art for the type?
- What's the point of view?
- What are the desires, requirements, needs?
- What are the controlling ideas, methods and technologies?
- What are the Constructor, Build and Payoff?
Types will save us. They'll manage clients and actors expectations…so looking at the big picture of or innovation we'll know how to position it. This needs a scheme, a checklist…The Quant Innovation Mesh for quant innovations is that checklist.
Let's run it down for UnRisk CM (now based in microscopic views)
Time: it's fast enough, event driven and synchronized…real-time
Reality: its models are calibrated and re-calibrated to market data…realistic
Style: it provides evidence of all valuations, valuators and valuation events in a document-centered way…documentary
Structure: instruments and portfolio flows and are valued across scenarios…multi flow
Matter-Purpose: it's to expose market risk horrors and manage them in order to optimize them…market risk optimization thriller
Matter Realization: capabilities for fundamental quant work and automated risk services…an open valuation and risk management factory (implemented in a multi paradigm-hybrid programming environment)
Knowing the types help to fill in The Quant Innovation Mesh (scheme)
I don't want to look at UnRisk CM through the lens of a potential marketer- It's a results, it works and it sells….I check how it looks through my Quant Innovation Mesh….searching for improvements.
At the macroscopic level, I look into the innovation as a whole, the beginning hook, usual the general constructor, the middle build with progressive problems and critical moments and the ending payoff the solution and the capabilities to adaptations, extensions....
Whatever the details are UnRisk CM is a risk thriller, it provides life or death "probabilities" of financial deals…it's taking actors beyond experience…it's actors must face dramatic downturns…and UnRisk CM helps those market participants who don't have the most sophisticated quant teams to conserve capital, set the stage of successful risk management, build quant finance skills and leverage technologies.
We look through the functions, tasks, workflows and (sub)system(s), and their building blocks…
Tasks of the "risky horror innovation" UnRisk CM may turn on other values, but the system as a whole helps detecting and quantifying deal killers, toxic instruments and portfolios, impact of market regime anomalies…to change that would lead to a disaster.
It's what it's for. It's not a portfolio composition, not a front office trading, not a limit management, not a reporting...not an accounting system.
In a future post, i'll try to dive deeper into the internal matters. How what's it and what's it for influences how it's built and what it needs.