Software for Quants Bridges Algorithmic, Math and Visualization Programs

A recently built bridge between two highly-regarded sets of programs for quants - Numerical Algorithms Group's C Library and Maplesoft's Maple mathematical and engineering tools - brings interesting new capabilities to those who write and use financial models for pricing and risk evaluation.The Numerical Algorithms Group's library components are used by many quantitative analysts on Wall Street, who use them to process algorithms and perform fast streams of numerical calculations. Combining this number-crunching capability with Maple's mathematic and graphical front-end via the Maple-NAG Connector could add at least two dimensions.

For one thing, Maplesoft's mathematical analysis tools can handle algebra. "These tools are different from conventional computer programming languages because they can emulate the way a human solves an equation," says Dr. Eliezer Prisman, Professor of Finance at York University, Ontario. "While conventional languages can process vast amounts of data, in symbolic computation, the effort is on trying to solve problems the way humans solve them." For example, a conventional or numerical language (like Numerical Algorithms Group's) cannot solve a problem like, "What is 2X + 3X?" because it can't handle symbols, every symbol must be assigned a number. Symbolic computation programs like Maplesoft's can handle variables. So if someone doing quantitative finance needs to express the price of a structured product as a function of some variable, such as the volatility of a stock, the volatility could be written as a symbol such as the Greek letter Sigma and the equation could be calculated. "This is where Maple excels," Prisman says.

Maplesoft also lets you visualize mathematic results in 2D, 3D and with animation, Prisman says. "If the solution depends on two different parameters and also on time, you could get frames of 3D pictures that move in time, so each instant of time is a 3D picture and the animation is showing you those one after another," he says. "That's important on Wall Street in the area of vetting or validation of models or risk management or VAR, where you need to see what happens to your solution or portfolio in different scenarios."

Using these two products together, a quantitative analyst could compute financial models and immediately see them in three dimensions. This could help the analyst verify results and decide what to do with them." Sometimes you look at a problem and you're not sure which way to go to solve it," Prisman says. "Visualizing it gives you a good feel of what the problem is about, and it helps with finding a way to solve it."

Dr. Prisman has written an ebook about Maple software. Excerpts can be found here.