FreeTrade

Overview

CompatibL uses FreeTrade format for representing deal data for use in pricing libraries. This any deal type from standard instruments (for example, a vanilla 10y swap) to very complex exotics with features such as customized index schedules, redemptions, principal payments, embedded options and triggers.

Business Representation

FreeTrade business representation captures information in a way that corresponds directly to business data described in the term sheet.

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, FreeTrade mathematical representation captures only the economic effect of the deal 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.

FreeTrade and FpML

FreeTrade and FpML serve two different but complimentary purposes. As a data interchange format, FpML must encode all of the information about the deal in a single message, as it is not possible to access security master and reference databases when FpML is used to transmit trade confirmation between two different organizations. This causes FpML representation to contain a lot of data even for simple deals.

Because FreeTrade is not intended as an interchange format between organizations but rather is an integration tool for different software products within a single organization, and it can advantage of defaulting whenever possible. This means that messages for simple deals are very compact, which makes them also easy to create, while it can stil capture a wide range of complex structured exotics.