Domain Specific Language For Specifying Operations of a Central Counterparty

Abstract

The domain that we are addressing in our research is Financial Markets (FMs) domain. Central Counterparty (CCP) is a highly regulated financial institute in this market. In our research we introduce a financial market(domain) specific language to define the operations of this financial institute, CCP. Financil Contracts (FCs) specify rights and obligations that parties are legally bind. Hence effective management of FCs is vital. Domain Specific Language (DSL) approach provides a method of defining rights and obligations of contracts using fixed and precisely defined set of combinators and observables.As a result, any contract can be composed using fixed set of symbols, the contract management becomes efficient and effective.The Haskell Contract Combinator Library (HCCL) is the driving force behind the DSL approach in finance sector. Through our research we explore the complete life cycle of a contract, that brings to CCP. With use of HCCL we compose series of contracts clearly showing the steps and cash flow semantics. We define new data types Instrument and Trade, that embodies and preserve the properties of contracts. We give right behavior for these types in performing the required operations. We use properties of functional programming and programming concepts in Haskell language to bring these behaviors. Margin calculation is the important operation of CCP. Margin is the amount of monetary adjustment needed for a contract. It is the CCP rules that specify the margin needed. Through this research we prove that we can utilize the HCCL in order to represent the cash flow semantics(the margin) that specify by CCP rule over a contract. This way we adapt the DSL approach to CCP in margin calculation. We do a great deal of analysis on CCP rules with respect to HCCL. We also explain the process bringing the properties of certified symbolic management such as monotonicity, contract equivalence, contract transformation and contract decomposition to the context of CCP rules. Our illustrations in CCP rules are explained using a seed contract, which is the composition of all the rules applied on a given contract. The proposed Margin Calculation Engine for CCP would the ultimate result of defining operations of CCP in DSL approach