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2015 | OriginalPaper | Chapter

49. Computer Technology for Financial Service

Authors : Fang-Pang Lin, Cheng-Few Lee, Huimin Chung

Published in: Handbook of Financial Econometrics and Statistics

Publisher: Springer New York

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Abstract

Securities trading is one of the few business activities where a few seconds processing delay can cost a company big fortune. The growing competition in the market exacerbates the situation and pushes further towards instantaneous trading even in split second. The key lies on the performance of the underlying information system. Following the computing evolution in financial services, it was a centralized process to begin with and gradually decentralized into a distribution of actual application logic across service networks. Financial services have tradition of doing most of its heavy-duty financial analysis in overnight batch cycles. However, in securities trading it cannot satisfy the need due to its ad hoc nature and requirement of fast response. New computing paradigms, such grid and cloud computing, aiming at scalable and virtually standardized distributed computing resources, are well suited to the challenge posed by the capital market practices. Both consolidate computing resources by introducing a layer of middleware to orchestrate the use of geographically distributed powerful computers and large storages via fast networks. It is nontrivial to harvest the most of the resources from this kind of architecture. Wiener process plays a central role in modern financial modeling. Its scaled random walk feature, in essence, allows millions of financial simulation to be conducted simultaneously. The sheer scale can only be tackled via grid or cloud computing. In this study the core computing competence for financial services is examined. Grid and cloud computing will be briefly described. How the underlying algorithm for financial analysis can take advantage of grid environment is chosen and presented. One of the most popular practiced algorithms Monte Carlo simulation is used in our case study for option pricing and risk management. The various distributed computational platforms are carefully chosen to demonstrate the performance issue for financial services.

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Title: Computer Technology for Financial Service
Authors: Fang-Pang Lin
Cheng-Few Lee
Huimin Chung
Publisher: Springer New York
Book: Handbook of Financial Econometrics and Statistics
Print ISBN: 978-1-4614-7749-5

Electronic ISBN: 978-1-4614-7750-1

Copyright Year: 2015
DOI: https://doi.org/10.1007/978-1-4614-7750-1_49