Ud’s Model for Coherent Financial Engineering

Consider the following models:

Bottom up
At the basis of the triangle, software meets finance. The combination of the two allows the translation of clever mathematical finance into a solid computer program that can be used in production. Our model is about operationalizing, thus digitalizing, financial knowledge. Only with expertise from both domains can one deliver the high quality information systems upon which modern financial institutions are utterly dependent. Creating information sources which communicate with each other and the end users directly results in a flexible platform that can quickly deliver new functionality.

A prerequisite for this model is a guarantee that all information sources are working as expected and can safely be changed if required. Best practices in software engineering can be used to achieve this. For example, test driven design, mocks, setting up version control and continuous integration – these all help to keep source data ‘clean’. These technical practices should be complemented with a continuous improvement track for development teams. (i.e each team should follow their own Plan-Do-Study-Act Cycle.)

A cornerstone of any software project must be domain knowledge, financial knowledge in this case. Ugly Duckling offers detailed financial modeling knowledge, solid architectural experience, and an understanding of relevant market data (and how to manage it). Finally,  we have intimate knowledge of the mathematical details. In addition we offer contract knowledge of most financial instruments and understand and have experience in dealing with pension and insurance contracts.

The emphasis is on bringing expertise together in a cross functional team, rather than one expert, enabling deeper knowledge for individuals and broader knowledge for the team as a whole.

Top down
Expert engineering teams, via their use of the Plan-Do-Study-Act Cycle, provide management with new information. How should this information be used? As engineers it is our responsibility to explain which levers that can be pulled, the buttons that can be pushed and what their effect will be. Once management is comfortable with these decisions, they can redirect more focus to strategical decisions, only monitoring projects and course correcting if the necessity arises.

Management will be left with self-organizing teams. Leaving them to focus on strategic decisions and monitoring rather than being involved with day to day activities. The company will see an  increase in continuity, since the knowledge of the systems will be spread over various team members.

From Here to There
The model we describe here is achievable, with each financial institution being somewhere along a continuum of maturity. Ugly Duckling’s job in the finance sector is helping clients close the gap between their current reality and the model we describe here.