Abstract
Financial and insurance contracts do not sound like promising territory for functional programming and formal semantics, but in fact we have discovered that insights from programming languages bear directly on the complex subject of describing and valuing a large class of contracts.We introduce a combinator library that allows us to describe such contracts precisely, and a compositional denotational semantics that says what such contracts are worth. We sketch an implementation of our combinator library in Haskell. Interestingly, lazy evaluation plays a crucial role.
References
- Boyle et al., 1997 Boyle, P., Broadie, M., and Glasserman, P. (1997). Monte carlo methods for security pricing. Journal of Economic Dynamics and Control, 21:1267-1321.]]Google Scholar
Cross Ref
- Claessen and Sands, 1999 Claessen, K. and Sands, D. (1999). Observable sharing for functional circuit description. In Thiagarajan, P. and Yap, R., editors, Advances in Computing Science (ASIAN'99); 5th Asian Computing Science Conference, Lecture Notes in Computer Science, pages 62-73. Springer Verlag.]] Google Scholar
Digital Library
- Cook and Launchbury, 1997 Cook, B. and Launchbury, J. (1997). Disposable memo functions. In Launchbury, J., editor, Haskell workshop, Amsterdam.]]Google Scholar
- Cook et al., 1998 Cook, B., Launchbury, J., and Matthews, J. (1998). Specifying superscalar microprocessors in Hawk. In Formal techniques for hardware and hardware-like systems, Marstrand, Sweden.]]Google Scholar
- Cox etal., 1979 Cox, J. C., Ross, S. A., and Rubinstein, M. (1979). Option pricing: a simplified approach. Journal of Financial Economics, 7:229-263.]]Google Scholar
Cross Ref
- Elliott and Hudak, 1997 Elliott, C. and Hudak, P. (1997). Functional reactive animation. In ACM SIGPLAN International Conference on Functional Programming (ICFP'97), pages 263-273. ACM, Amsterdam.]] Google Scholar
Digital Library
- Finne et al., 1999 Finne, S., Leijen, D., Meijer, E., and Peyton Jones, S. (1999). Calling hell from heaven and heaven from hell. In ACM SIGPLAN International Conference on Functional Programming (ICFP'99), pages 114-125, Paris. ACM.]] Google Scholar
Digital Library
- Ho and Lee, 1986 Ho, T. and Lee, S. (1986). Term Structure Movements and Pricing Interest Rate Contingent Claims. Journal of Finance, 41:1011{1028.]]Google Scholar
Cross Ref
- Hudak, 1996 Hudak, P. (1996). Building domain-specific embedded languages. ACM Computing Surveys, 28.]] Google Scholar
Digital Library
- Hughes, 1985 Hughes, J. (1985). Lazy memo-functions. In Proc Aspenas workshop on implementation of functional languages.]] Google Scholar
Digital Library
- Leroy et al., 1999 Leroy, X., Vouillon, J., Doligez, D., et al. (1999). The Objective Caml system, release 3.00. Technical Report, INRIA, available at http://caml.inria.fr/ocaml.]]Google Scholar
- Marlow et al., 1999 Marlow, S., Peyton Jones, S., and Elliott, C. (1999). Stretching the storage manager: weak pointers and stable names in Haskell. In International Workshop on Implementing Functional Languages (IFL'99), Lecture Notes in Computer Science, Lochem, The Netherlands. Springer Verlag.]] Google Scholar
Digital Library
- Musiela and Rutkowski, 1997 Musiela, M. and Rutkowski, M. (1997). Martingale Methods in Financial Modelling. Springer.]]Google Scholar
- Peyton Jones et al., 1999 Peyton Jones, S., Hughes, R., Augustsson, L., Barton, D., Boutel, B., Burton, W., Fasel, J., Hammond, K., Hinze, R., Hudak, P., Johnsson, T., Jones, M., Launchbury, J., Meijer, E., Peterson, J., Reid, A., Runciman, C., and Wadler, P. (1999). Report on the programming language Haskell 98. http:/haskell.org.]]Google Scholar
- Revuz and Yor, 1991 Revuz, D. and Yor, M. (1991). Continuous Martingales and Brownian Motion. Springer.]]Google Scholar
- van Deursen et al., 2000 van Deursen, A., Kline, P., and Visser, J. (2000). Domain-specific languages: an annotated bibliography. Technical report, Centrum voor Wiskunde en Informatica, Amsterdam.]] Google Scholar
Digital Library
- van Deursen and Klint, 1998 van Deursen, A. and Klint, P. (1998). Little languages: little maintenance? Journal of Software Maintenance, 10:75-92.]] Google Scholar
Digital Library
- Willmot et al., 1993 Willmot, P., Dewyne, J., and Howison, S. (1993). Option Pricing: Mathematical Models and Computation. Oxford Financial Press.]]Google Scholar
Index Terms
Composing contracts: an adventure in financial engineering (functional pearl)






Comments