In the latest Wilmott Magazine the editor in chief, Dan Tudball, interviewed Andreas Binder and Michael Aichinger of UnRisk about the direction the firm is taking its software and the never-endung battles with trees.
It began 1997 with a workshop for a London based trading desk of a large American bank.
The problem: they did not find an adequate pricing tool for convertible bonds with exotic contract features at the market. At this workshop Andreas Binder, our CEO, proposed a method known from complex technical system solving (Adaptive Integration) on the fly.
They trusted in our abilities and asked us to conduct a project starting with an experimental prototype. From that point we built the UnRiskVerse.
Already in early stages Andreas has criticized tree-based methods - To Tree or Not to Tree binomials and trinomials. From that time Dan calls us lumberjacks - I pointedly say: trees are good as firewood, but not for solving financial equations.
In Nov-01 we released UnRisk, a comparatively small piece of valuation software focussing on the most sophisticated deal types of interest rates. Over the years we have added, fast growing, deal types, models, numerical techniques, services and front-ends.
Always organizing them orthogonally, because we understood from the beginning that not only trees, but wrong instrument-model-method combinations bear the danger of fundamental mistakes that can become horrible in interplay. And that scenarios shall not only change inputs or contract features, but models and methods.
Now, All-New UnRisk will consist of entirely new numerical schemes which will be ported to OpenCL - and our orthogonal organization allows us for testing/benchmarking them against the existing bank proof implementations. We emphasize on tuned Montecarlo methods and advanced finite element techniques. And we work on the unification of object and data handling and the OpenCL code base.
Why we did and do this and why we still build big systems for small and medium-sized market participants will be explained by Andreas Binder at our 11 Years of UnRisk Event.