FreeMarket

Overview

CompatibL uses FreeMarket format for processing of market data for use in pricing libraries. This includes curve and surface building and other functionality. FreeMarket comprises two market data representations: business representation and mathematical representation.

Business Representation

FreeMarket business representation captures information in a way that corresponds directly to business data such as term sheets, data feeds, etc.

The business representation is organized in a modular way, with reusable building blocks rather than a more typical flat list of attributes for each individual data type. Using the modular approach offers two advantages:

• It is easier to add new deal types not initially supported by the system
• Code which deals with specific aspects of the data format can assess the same reusable data component across a variety of deals, leading to greater code reuse

The modular nature of the business representation makes it suitable for representing a variety of deal features supported by different external formats.

The business representation can integrate with multiple existing external formats which include those defined by in-house development teams, third party software vendors, or standards committees such as FpML. For processing by the engine, each of these formats is converted into the business representation, and then into the mathematical format.

Mathematical Representation

In contrast with the business representation, FreeMarket mathematical representation captures only the economic effect of the deal or market data in condensed form, with significant reuse of concepts and components across different types of market and deal data. For example, the business format captures foreign exchange forward and fixed income bond as different deal types, while the mathematical format both captures both of them the same way, as a set of cashflows.