Kalahari is completing internal alpha testing of a Microsoft Excel plug-in for its kACE² analytics, modeling and publishing engine, designed to offload the calculation of derivative pricing models that rising data volumes have made unsustainable to perform in spreadsheets alone.
The Excel plug-in will allow traders to pull data from a spreadsheet into the kACE² calculation engine to run against a broad range of financial models, including for pricing FX and interest rate swaps, and have the results delivered back into their spreadsheet.
Kalahari has developed a prototype and expects to start showing the plug-in to clients—initially targeting mid-tier banks that may not have their own in-house development teams to build proprietary systems—and beta testing it by early December, with a production version scheduled for rollout in the first quarter of 2012, says Graham Mansfield, managing director at Kalahari.
kACE² aggregates streams of data across multiple asset classes to build interest rate curves, zero-coupon yield curves, pricing models for FX swaps and crosses, or other models—which users can drag and drop from the server into their spreadsheet using the add-in’s browser interface—while also enabling users to make changes to the aggregation model, such as to apply rules to use US-based sources during certain hours before switching to Asia-based sources, or to create a stream of best bids and offers.
Despite the challenges of maintaining a large and unwieldy spreadsheet—and in spite of kACE² being specifically designed for real-time calculations—“traders still fight against adopting a whole new infrastructure because they’re accustomed to their spreadsheets, so the Excel plug-in provides them with a halfway house and more flexibility for working with their spreadsheets,” Mansfield says.
“As data volumes grow, those spreadsheets become difficult to manage, and get even more difficult as data keeps being added. If a trader only needs one source, a spreadsheet can keep up, but as the market becomes disparate, you need to have multiple sources to support your pricing models, and updates come in so fast that the spreadsheet just can’t keep up,” he adds.
Firms can also leverage kACE²’s logging capability to provide a full audit trail of changes made to any models to meet regulatory compliance, which cannot be performed using spreadsheets, Mansfield says.