System and method for financial instrument modeling and valuation

A system for valuing a financial instrument which automatically generates software code based on a user-defined specification of said financial instrument, comprising:

• a knowledge base containing constraints, heuristics and defaults for developing a finance problem specification based on said user-defined specification and said constraints, heuristics and defaults;
• a computer algebra system for writing at least discrete portions of the solution of partial differential equations indicative of said finance problem specification;
• one or more templates describing said partial differential equations, describing evolution of said partial differential equations, and generating pseudo-code reflecting said partial differential equations;
• and
• a code generator which generates software code in a target language from said pseudo-code for valuing a financial instrument based on said user-defined specification.

A method for valuing a financial option using specified factors comprising the steps of:

• modeling the financial option with one or more partial differential equations, at least one of said partial differential equations being based on the Black-Scholes equation;
• constructing a finite difference solution for at least one of the partial differential equations;
• producing a template describing boundary values associated with said equations;
• discretizing at least a portion of the solution for the partial differential equation;
• generating pseudo-code for said solution;
• transforming said pseudo-code to a target language;
• compiling said target language into code;
• and
• valuing said financial option using said specified factors running said code.

A system for providing a solution to a financial instrument problem using a user-defined specification, comprising:

• a knowledge base containing constraints and defaults related to financial instruments, wherein the user-defined specification is expressed using said constraints and defaults;
• a computer algebra system operable for expressing said user-defined specification mathematically as one or more partial differential equations;
• a template generator which generates templates representing said partial differential equations and pseudo-code corresponding to said templates:
• a compiler for compiling said pseudo-code into executable code;
• a microprocessor for executing said executable code using said user-defined specification to value at least a portion of said financial instrument.

A method for modeling a finance problem useful for valuing financial instruments associated with the problem, comprising the steps of:

• assembling a set of algorithm templates some of which represent partial differential equations describing the finance problem,
• the templates being human readable declarations of said partial differential equations independent of dimensionality, data structure and target language specifics,
• one or more of said templates including pseudo-code expressions including matrix operators, scalar operators, or Boolean operators;
• filling in the problem attributes in said templates including invoking a knowledge base having constraints, heuristics, and defaults to refine design decisions of the finance problem;
• and
• building pseudo-code from said templates which models said finance problem.