Post Trade Solutions
Open source technology is being leveraged across almost every sector, giving firms access to specialised functionalities at little or no cost. In the post trade environment, the benefits of this technology are particularly clear. For example, tools such Open Source Risk Engine (ORE) - a free-to-access simulation engine which creates an environment to run risk scenarios and generate portfolio pricing, have transformed how firms of all sizes approach risk and pricing for traded products.
At a time when the trading environment has become increasingly complex, it is critical that solutions like these stay at the forefront of innovation and adapt based on user feedback. To keep pace with our customer’s requirements, Post Trade Solutions has now rolled out the 13th release of ORE.
The latest update includes a series of changes designed to provide best-in-class results and improve user experience. Highlights include an overhaul of ORE’s rich repository of example use cases, and a prototype of a new ORE wrapper that covers Excel, Python, and Restful API in a consistent framework. The update also features improvements to QuantLib (the open source library for quantitative finance upon which ORE is based) - including bug fixes and a significant speed up in historical fixing loading.
The update also incorporates a new XVA framework supporting fast calculation of XVA sensitivities and dynamic ISDA SIMM™ modelling using adjoint automatic differentiation (AAD).
User-first developments
ORE’s diverse range of example cases has been a trusted resource for users since inception, helping streamline project development and demonstrate the capabilities of this open source price and risk analysis framework. To enhance user experience, examples are now grouped by topic such as Market Risk, Performance, Products, among others - making it easier for users to explore relevant resources and navigate the platform more intuitively.
The publication of a new prototype wrapper for ORE covering Excel, Python and Restful API enables users to operate within familiar environments and supports teams to integrate ORE operations into existing workflows. This update also includes the full integration of the ORE-SWIG wrapper project, simplifying the process of building custom wrappers and creating a more streamlined, cohesive project suite.
Enhanced and expanded functionality
Previously, ORE only supported whole-coupon exercises in swaptions and callable swaps. Following the release of the 13th version, ORE now also supports mid-coupon exercises, a common feature in hedging strategies, significantly improving the accuracy of valuation and risk metrics for these instruments.
Additional enhancements include the expansion of the American Monte Carlo simulation framework into equity trades, extending its capabilities beyond the previously supported interest rate and FX trades. The update also introduces enhancements to the stress testing module, which now supports the output of cashflows under stress scenarios, in addition to Net Present Values (NPVs). This allows users to refine their analyses of stress scenario results.
Scott Sobolewski, Co-Head of Quantitative Services at Post Trade Solutions, commented: “We’re delighted to roll out the latest version of ORE with improvements that support a better user experience and expand the possibilities available on this open source and free-to-access tool. These updates have been the result of an ongoing effort by our dedicated team to enhance the software in line with user feedback.”
He continued, “If we’re to achieve the most efficient post trade landscape, then powerful, transparent and cutting-edge pricing and risk analysis functionalities must be accessible to all - not just to firms with the resources to build or buy expensive solutions. Even where that budget exists, such solutions may not necessarily be the best way forward for all firms. With the latest update to ORE, we’re ensuring that these critical capabilities remain accessible, competitive, and market-leading for all firms.”
An ongoing dialogue to development
ORE was first released in 2016. The iterative development of this open source solution is a result of the ongoing dialogue where user feedback is processed, reflected, and translated into updates that are then rolled out to the entire community of users. This also includes ongoing considerations as to what enhancements best equip users to operate in the ever evolving and complex market environment.
In recognising that solutions to dynamic challenges also need to be dynamic, Post Trade Solutions’ dedicated team of developers continue to listen to user feedback and monitor the market to ensure users are leveraging a tool that is collaborative, competitive and cutting-edge.
ORE is based on QuantLib, the open-source library for quantitative finance, and grew from work developed by market professionals and academics. As part of the programme’s roadmap, ORE’s SWIG language bindings facilitate integration of ORE with applications written in Python or Java. It is offered to the community free of charge as part of LSEG PTS’ commitment to improve the transparency of risk analytics and to improve accessibility to such tools.
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