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Spreadsheet Shootout

By Andrew Webb and David Little

In the reviews that follow, Andrew Webb and David Little discuss the results of their separate examinations of the software. On page 40, William Margrabe gives his own view of the accuracy and functionality of the various systems. And on page 46, we publish an extensive series of comparison charts, listing the different features.

In one respect at least, not much has changed since the last Derivatives Strategy Spreadsheet Shootout some 30 months ago. Despite the continued evolution of all singing and dancing big-ticket derivative trading and risk management systems, the lowly spreadsheet is still hanging in there. If anything, it is fighting back. At the time of the last review, the spreadsheet focus was principally on derivatives pricing. Today, there are several vendors offering more than a measure of risk management functionality in their products. You may not get Excel-based plug-and-play global risk management, but you do at least get the analytics.

Trading desks need systems that can handle a number of functions: analyzing price and risk on changing deals; managing a portfolio; calculating profit and loss; and keeping a handle on the market, both in real time and historically. Most of the software systems reviewed here provide some or all of these functionalities, with varying degrees of success. The base of all the packages under review is a calculation library. This is also what most people think of first when looking for front-office software. “I can’t calculate the price of that” is the most obvious problem to be solved.

Other functionalities have been added over time, first as examples to demonstrate how to use the code, then in the form of templates for your own pricing spreadsheets. Some have even added portfolio management capabilities. Some tout real-time links, which are basically spreadsheet function calls to a data server, providing users with up-to-date rates that approximate where the market might have been a little while ago.

But central to the realistic implementation of any package is its ability to integrate into other systems currently in-house, or other systems that handle functions not covered by the package. Any investment in an analytics package will cost more time than it’s worth if it can’t be integrated into pre-existing systems. Don’t forget that someone will need to establish how the trade will flow from the computer to a secure, auditable environment. Then the process of P&L justification begins. This is not an idle caveat; it is, in fact, a fundamental consideration that will affect not only what, but if, you buy any of the products examined here.

FEA
Extensive market coverage in a wide range of popular add-ins.

Company Information
Name of firm: Financial Engineering Associates Inc.
Address: 2484 Shattuck Ave. Suite 225
City/state: Berkeley, CA
Zip/mail code: 94704-2029
Country: USA
Contact person: Tracie Rowson
Phone number: 510-548-6200
Fax number: 510-548-0332
E-mail address: info@fea.com
Web address: www.fea.com

Financial Engineering Associates, founded in 1989 and headed by Mark Garman, supplies a range of products relating to derivative securities and risk management. Apart from spreadsheet add-in functions, the company offers library software, scientific financial applications and consulting services. FEA’s clients include some 400 money-center financial institutions, international banks, Fortune 500 treasuries, and trading houses in North and South America, Asia/Pacific, Africa, and Europe. The company’s spreadsheet add-ins range from OUTLOOK, a risk management application for cash-flow mapping, value-at-risk, VARdelta and component VAR calculations, to SWING, which evaluates swing rights or base-load-factor contracts for energy markets.

David Little: FEA offers an extensive range of models for a variety of markets. All the spreadsheets and analytics are there and everything you want to look at has a template and wizard as well as documented direct access. FEA is strongest in portfolio management tasks such as analyzing equity portfolios or measuring how a particular stock trades vs. the market. But in many cases, the spreadsheets provide too much information; as a result, the screens don’t focus on the specific information a trader needs in a dealing environment. Some of the FEA applications also evince an academic bent. This efficient-market-theory-based approach, however, has also inspired some interesting FEA models that allow you to value the assets of a particular company and try out other unusual valuation projects that go beyond the trading floor.

FinancialCAD
Well-designed, intuitive and exhaustively comprehensive.

Company Information
Name of firm: FinancialCAD Corp.
Address: 207-7565 132nd Street
City/state: Surrey, B.C.
Zip/mail code: V3W 1K5
Country: Canada
Contact person: Bob Park
Phone number: 604-572-3682
Fax number: 604-572-3684
E-mail address: info@fincad.com
Web address: www.financialcad.com

David Glassco and Bob Park, who had previously worked together at Wood Gundy, founded FinancialCAD in 1990. The company produces two principal spreadsheet products—FinancialCAD for Excel and FinancialCAD for Excel Plus. Instrument coverage is broadly divided across money markets, capital markets, bonds and notes, foreign exchange, equities, and commodities. Apart from the financial analytics function library, both products include a function finder, a function example generator that produces spreadsheets for every function on the FinancialCAD library, a function reference, a math reference and a user’s guide. In addition to the functions in FinancialCAD for Excel, FinancialCAD for Excel Plus also includes such features as VAR (compliant with RiskMetrics data sets), global zero-coupon bond curves and pricing, constant maturity Treasury, and swap analytics.

Little: The FinancialCAD application is a well-designed group of spreadsheets accessed through an Excel toolbar. It is quite intuitive and works well in the Excel environment. The code library is extensive, moderately well-documented and moderately well-designed. The products’ efforts at portfolio management are somewhat lacking, but at least point you in the right direction if you want to build your own. The system is large and comprehensive, covering everything from foreign bonds to general options on commodities to exotics. They have all the models. The adjective for this system is exhaustive—they have everything and it is all done well, with t’s crossed and i’s dotted. To use a call you can access it through an intuitive wizard, from the formula paste menu (with on-line context-sensitive help), or simply jump straight to a product or analysis template. The development environment is robust and complete. It’s the only package reviewed that really deserves the title of “software.”

Intermark
Tools for swaps, options, exotics and volatility market evaluation.

Company Information
Name of firm: Intermark Solutions, a Division of FNX Ltd.
Address: 575 E. Swedesford Ave. Suite 300
City/state: Wayne, PA
Zip/mail code: 19087
Country: USA
Contact person: Brian Bradley
Phone number: 610-989-9500 ext. 427
Fax number: 610-989-0410
E-mail address: bbradley@fnx.com
Web address: www.intermarkit.com

Intermark Solutions (which previously did business in collaboration with Financial Systems Software Ltd. under that name from 1994–96) is a division of FNX. Intermark’s Financial Toolkits line of spreadsheet add-ins consists of modules for options (UNIVOPT), exotic options (UNIVEXOT), yield (UNIVYLD), zero curves (UNIVZERO) and swaps (UNIVSWAP). The software is developed as dynamically linked libraries (DLLs), which can be integrated with Excel, Applix, Visual Basic, C++ and Lotus 1-2-3. All products provide the functionality implied by their title, with the exception of UNIVSWAP. Apart from providing analytics for the valuation of currency and interest rate swaps, this also incorporates the functionality of the other four products.

Little: Intermark’s application tools cover four basic areas: swaps, options, exotics and volatility market evaluation. The swaps area is lame and should be avoided by all but die-hard aficionados of DEC220 terminals. The screen looks like character-based back-office input screens grafted onto a spreadsheet. The other areas are more up-to-date but do not exactly exhibit state-of-the-art styling. The options module has the standard models and covers the usual types of products, as does the exotics module. The only outstanding feature in the product line is the volatility market evaluator, which allows users to input a set of market prices for options and option-based instruments to calculate a best-fit volatility surface for that set. Intermark has a long way to go in the market for standalone spreadsheet software tools. To be fair, the spreadsheet add-ins are not Intermark’s core product. The company’s main business is its FOCUS product, which is a front and middle office system for a wide variety of products.

Marvin
A user-friendly package with fast real-time links. More than a code library, but not quite cutting edge.

Company Information
Name of firm: Marvin Software
Address: 420 Lexington Avenue, Suite 2300
City/state: New York, NY
Zip/mail code: 10170
Country: USA
Contact person: Marc Berrebi
Phone number: 212-661-5200 ext. 24
Fax number: 212-661-7553
E-mail address: m.berrebi@marvinusa.com
Web address: www.marvinusa.com

Marvin offers a suite of five add-in products: Adfin Bonds, Adfin Options, Adfin Forex and Money Market, Adfin Swaps, and Adfin Dates. All are available for Excel or Applix and also as C++ libraries that can be directly integrated within applications written in C++, C, Visual Basic, PowerBuilder and a number of other environments. In addition, the recent release of Adfin Real Time allows a direct interface to real-time data, thus avoiding the potential bottleneck of DDE links. Adfin Dates provides calendar management and date calculations. With the exception of Adfin Options (which covers options on futures, currencies, commodities, bonds, stocks and indices), the other four products provide analytics for specific underlying markets.

Little: Leave it to the French. Adfin, by Marvin, is easily the best designed, best packaged, most user-friendly product under review, but it’s not exactly a technically cutting-edge package. The spreadsheets are impressive in quality, and if it covers all you need to do (and you don’t mind paying a little extra cash), the product is fine and easy to use. Marvin places a high value on Adfin’s ability to put a real-time rate into a spreadsheet, but I suppose anyone in a relatively new partnership with Reuters would do the same. This is definitely more than a code library; Adfin is an off-the-disk configurable pricing and analytic environment.

MBRM
High-tech tools for sophisticated players with a comprehensive instrument range.

Company Information
Name of firm: Mamdouh Barakat Risk Management
Address: Warnford Court Throgmorton Street
City/state: London
Zip/mail code: EC2N 2AT
Country: UK
Contact person: Mamdouh Barakat
Phone number: 44-171-628-2007
Fax number: 44-171-628-2008
E-mail address: mbrm@mbrm.com
Web address: www.mbrm.com

Mamdouh Barakat, previously a managing director of FNX, founded MBRM (the trading name of Financial Systems Software Ltd.) in 1988. The company’s analytics are all implemented as function calls in a dynamic link library, and can therefore be called from Excel, Access, Visual Basic, C, C++, Fortran and so on. Two of the company’s most popular add-ins are organized by option type rather than on an underlying market basis. For example, UNIVOPT handles European- and American-style options on bonds, commodities, currencies, futures and equities. UNIVEXOT adds products such as Asians, barrier/double barrier (knock-out and knock-ins), digital, compound, contingent, ladder, lookback and one/two touch options on the same selection of markets. Among a total of more than 10 products, there are also add-ins for GARCH, multi-asset Monte Carlo and yields.

Little: MBRM has built far and away the best package in terms of cutting-edge code, technology and models. The Universal Add-ins package handles a full spectrum of instruments and a comprehensive range of functions, including pricing, risk management, trading and fund management. This is not for someone who wants to dabble in a few exotics—this is for a desk with big positions in exotics, hedged positions with profiles that can move significantly over time or with rates. It is also the most confusing package to use. Complex models are clearly explained in the documentation, but “intuitive design” is not a phrase that comes to mind when working with this product. You build your own spreadsheets, entering in the functions yourself. If your quant team is overdue for new toys, give them this to play with—in fact, every sophisticated desk should have a copy. MBRM has coded some of the most current models that have been showing up in the academic press. It’s smart, and can actually provide an analytic and technical advantage, if that’s what you’re looking for. The add-ins can be called from just about any environment—Excel, Access, Visual Basic, C, C++ and so on. And MBRM will, for a price, provide the source code and consult on integration into existing in-house systems.

Monis
A useful, consistent, well-designed suite of products with portfolio management functionality and a good Monte Carlo module.

Company Information
Name of firm: Monis Software Inc.
Address: The Chanin Building 122 East 42nd St. Suite 2815
City/state: New York, NY
Zip/mail code: 10168
Country: USA
Contact person: Michael Green
Phone number: 212-573-6733
Fax number: 212-573-6740
E-mail address: info@monis.com
Web address: www.monis.com

Monis was founded in 1979 as part of the finance faculty at the London Business School. Since 1994 it has operated as a separate commercial entity but has retained close ties with the school. The company has had great success selling its products to leading banks and now employs around 50 people in offices in London and New York, with sales and support offices in Madrid and Sydney. The spreadsheet add-in product line covers five main areas: convertibles, equity products, foreign exchange, commodities and interest rates. In addition, it offers a generalized Monte Carlo model. Other vendors also incorporate the company’s models into their own products. Rolfe & Nolan has integrated Monis pricing routines into its Lighthouse front-to-back-office treasury management system, and Midas-Kapiti has integrated Monis products into Plato, its portfolio analysis and market risk management product.

Little: Monis has four products: Monis Generalized Monte Carlo Simulator, Optimum Interest Rates, Optimum Equity Options and Optimum Convertibles. Monis’ is the only package reviewed that had any real right to claim portfolio management functionality. The ideas of a portfolio, consistent pricing and flexible hedging are the basis on which their system is designed. (Yes, designed.) The product is consistent, sensible and, consequently, was easy to review—it was simple to figure out what did what. There are buttons on every sheet that allow users to jump to any section while simultaneously retaining the control header. The interest rate product is the core of this functionality. It prices and manages basically all the products that any small capital markets desk would ever trade, and it does so with ease.

The Monis Generalized Monte Carlo (MGMC) simulator is slightly different from the rest of the Optimum suite of packages. It uses Excel mainly as a code editor for parameter input into a Monte Carlo simulator. The MGMC is rudimentary but well-documented, both in terms of its abilities and market terminology. Any payoff function can be input and a simulation run. The documentation of the process is good and includes the necessary flowcharts to guide users through it. MGMC, however, takes too long for a trader to set up—it is a tool for a quant—and while a standalone model like this is useful for pricing highly exotic deals on a one-off basis, it will take some work to integrate the results into a larger system. All in all, however, the MGMC is a useful and well-executed financial tool.

Savvysoft
Straightforward and intuitive tools to price the exotic options that most systems lack and most desks need.

Company Information
Name of firm: Savvysoft
Address: 17 State St., Fourth Floor
City/state: New York, NY
Zip/mail code: 10004
Country: USA
Contact person: LeeAnn Chen
Phone number: 212-PIC-TOPS (742-8677)
Fax number: 212-425-TOPS (425-8677)
E-mail address: staff@savvysoft.com
Web address: www.savvysoft.com

Savvysoft was founded by Richard Tanenbaum, the former head of derivatives research at Bankers Trust from 1984 to 1990. The company’s TOPS (Tanenbaum Option Pricing Software) product line consists of some 60 models organized into six principal groups: TOPS CL (classic options), TOPS ST (strip of options), TOPS MA (multiple risky asset derivatives), TOPS PD (path-dependent derivatives), TOPS CV (convertible bonds) and TOPS MBS (mortgage-backed securities).

Each TOPS model can value multiple derivative structures and is distinguished by TOPS Power Ranges, which allow for changing strikes, step-up and step-down coupons, amortizing balances, accreting balances, as well as full yield curves, full volatility curves, and full forward price curves. In addition, each TOPS option model handles European, American and Bermudan exercise. TOPS models can be combined in order to provide flexibility in handling as wide a range of derivative products as possible.

Little: The Tanenbaum Options Pricing Software is focused on the markets and products that most systems lack and most desks need. It has excellent coverage for a wide range of exotic swaps and options. Everything is accessible through a TOPS button on the Excel Toolbar. The button gives you a menu of transaction types covered—choose one and you are lead through a wizard that selects the correct models and pastes them into the sheet. TOPS’s area of expertise is not curve or risk management but rather pricing. It can handle quantos, look-backs, choosers, options on spreads and it even takes a shot at MBS theoretical pricing. The two-volume documentation is excellent. If you need something to support only the exotic part of your trading operation, this is probably the package for you. It is relatively straightforward and, because it limits itself to a subset of the markets, it covers that niche extremely well.

Tech Hackers
Extensive, well-documented capital markets market code library, particularly strong in fixed income.

Company Information
Name of firm: Tech Hackers Inc.
Address: 50 Broad Street
City/state: New York, NY
Zip/mail code: 10004
Country: USA
Contact person: Ron Weinberg
Phone number: 212-344-9500
Fax number: 212-344-9519
E-mail address: rweinberg@thi.com
Web address: www.thi.com

Tech Hackers was founded by Atul Jain and Michael How in 1986. The company’s spreadsheet product, @nalyst, consists of six principal add-in libraries: Financial @nalyst, Bond @nalyst, Options @nalyst, MBS @nalyst, Exotics @nalyst and Swap @nalyst. As the titles imply, the products are mostly aimed at specific underlying markets. The exception is Financial @nalyst, which is a suite of utilities for such functions as NPV, IRR, date arithmetic and business day calculations. The products are in use with some 3,000 institutions worldwide and are supported by offices in New York and London. The analytics in the packages are also available as QuantTools, C/C++ callable object libraries. The @nalyst range provides a total of more than 200 functions that can be run in either Excel or Applix.

Little: The main selling point of Tech Hackers’ @nalyst package is its extensive market coverage, especially in fixed income. If you are buying a code library for a floor with multiple desks that focus on fixed-income areas, this is the one to choose. The product has MBS swaps, international EMG bonds, exotics of all types, a base set of core functionality that will be shared by all, and a great generic cash-flow manipulation/modeling module. The package is ideal for the enterprise that will be supported by a technical infrastructure but is smart enough not to build its own code. The documentation is extensive and covers everything you need to use the product (including numerous examples), and is available both in print and on-line. The functions are not designed to be that easy to use; I found that you could get lost in the code, because the parameters are complex and have no real design sensibility. Tech Hackers has made this a lot easier with helpful wizards that set most of the things up for you, but still, when you have to get down into it you might find yourself squinting at the screen, counting commas and underlining the examples in the book. Overall the package is strong, will do most things that you need a code library for, and covers almost the entire capital markets trading world. The only hitch is that Tech Hackers makes you pay for each different type of exotic option set. Why not stick them all together and raise the price? No one who trades path-dependent options makes a decision on code libraries based on money.

TrueRisk
A specialist code library to price portfolios of convertibles.

Company Information
Name of firm: TrueRisk Inc.
Address: 70 Richmond Street East, Suite 315
City/state: Toronto, ON
Zip/mail code: M5C 1N8
Country: Canada
Contact person: Dan Rissin
Phone number: 416-869-1119
Fax number: 416-869-1116
E-mail address: info@truerisk.com

TrueRisk was founded in 1988 by Dan Rissin. The company’s activities in the spreadsheet add-in market started with the launch of the first version of its TrueCalc convertible bond product in 1994. TrueCalc Version 2 was released in mid 1995, with Version 3, which among other things extended the range of instrument coverage, appearing in June 1998. The product offers two pricing models—Black-Derman-Toy and a two-factor quadrinomial tree. It calculates theoretical prices, implied volatilities and hedge ratios for a broad selection of domestic and international issues.

Little: If convertibles are your specialty, then consider taking a look, because the package is basically limited in market scope to the world of equities, equity options and converts. But you had better be sure that all you want to do is convertibles before you learn the package, because the time you spend with it will not really be extendible to anything else. TrueRisk at least lets you know up front that its portfolio templates are configurable to only two possible situations—an all convertibles portfolio, whose downside is that it can’t easily recalculate an individual convertible, and a mixed portfolio that it admits, not a few times, is rather slow to calculate. TrueCalc’s financial technology is not as up-to-date as some of the other code libraries under review here, nor does screen design seem to be a priority—pull-down menus are cramped, and there’s a whole lot of gray.

Which One Would I Buy?
There are two ways to use code libraries: as the basis for front-office price modeling, and as the underlying basis for custom development of a more integrated system that hooks into the back office. There are essentially three ways of getting to the code: straight functions with on-line documentation, template spreadsheets organized by product, and screen environments in which the user picks a trading option, opens a new screen for parameter entry, and pastes add-in functions into his or her own sheet.

When considering a code library with which to do one-off pricing and analytics, a balance has to be made between ease of use and the complexity of the financial technology. For these purposes, Marvin’s Adfin is simple and well-designed. Although MBRM is not well-designed, it blows all the others away from a technical standpoint. Savvysoft is somewhere in between: relatively easy to use but still quite powerful, analytically speaking, for the product space it covers. As mentioned earlier, Monis has a nice generic Monte Carlo. The limitation of using a full-blown front-office pricing and risk management system based on a spreadsheet as the data storage vehicle is that the spreadsheet environment is open, fluid and insecure, with data structures that don’t go beyond simple relational tables.

In choosing a code library for custom development, you need completeness coupled with a reliable, stable and expanding vendor. A vendor with development experience would be an added perk. The companies that fill this bill are FEA, FinancialCAD, Marvin and Tech Hackers. FinancialCAD is the clear winner in this category—the code is well-designed, has development options, with pricing to fit any in-house or third-party development effort. The company has years of experience in this field, some of which it talks about and some of which it does not. It is even doing some of this data-oriented enterprise coding itself, so if your development efforts fail, it might make a nice backup. FinancialCAD supports C, C++, VB, Active X, Delphi and PowerBuilder. Marvin has the advantage of a stable and wealthy parent, but I don’t think it is committed to selling Adfin as a development library—it would prefer to keep it as an add-in.

And what would I buy? Frankly, for the enterprise, none. Which code library you choose is inconsequential, compared with the operational demands of the overall system. I wouldn’t build an enterprise-wide system, because I have enough gray hair from managing integration projects, and one of my favorite front-to-back-office solutions actually uses full-on code libraries. This allows for consistent, integrated extensibility. But these are criteria for buying a large operations system, not a code library. For analytics, you can’t beat something like Bloomberg; no training, no coding and no investment—just turn it off when you leave. If you want a code library that is worth learning the ins and out of, the only choice is MBRM. It may be difficult, but at least you get some real advantage in cutting-edge analytics and technology.

—David Little

Spreadsheet Ratings
Products FSS
MBRM
Savvysoft
TOPS
FEA FinCad Monis
Optimum/MGM
Marvin
AdFin
TechHackers
@analyst
TrueRisk
TrueCalc Conv
Intermark
Financial Toolkits
fixed income
simple
generic
global
mbs

3
3
3

3
3
3

2
2
2
2

3
2
3

3
3
2

1
2
2
2

3

3
swaps
IRS
currency
exotics

3
3
2

2
2
2

3
3
3

2
2
2

2
2

2
3

2
3
2
3
3
3
options
generic
serial
path dependent
multi asset/basket

2
2
1
1

2
2
2
2

2
2
2
2

2
2
2
2

2
2
2
2

3
3

2
2
2
2

2
2
2
2
equity
basket
options
converts

2
2
2
   
2
2
2
 
3
3
 
2
2
2
 
commodities
cash
options
swaps
 
2
2
 

2
2
2
         
analytics
Monte Carlo
option analytics
curves
risk

1
1
2
2


2
3

3
2
2
2


2
2
2

2
2
2
2


3
3
3


3
3
3


3
3
3

3
2
2
3
front ends
product templates
analysis spreadsheets
wizards
portfolio support
 


2

3
2

2
2
2
3


2
2
1

1
2
2

3

2



3
3

3
3
3
code library
ease of use
design
documentation
dev environ

3
3
2
3
 
3
3

2
2
2
1

3
2
2
3

1
1
2
3

3
3
1
3

3
3
2

3
3
3
3

Bare Knuckles Competition in the Spreadsheet Wars
A popular trick used by the owners of pornographic web sites to attract unwitting hits is to embed popular (and completely innocent) brand names as metatags in their web pages. This is done to ensure that when a search engine looks for that brand name it ranks the porno site as having the most relevance to the keyword and puts it at the top of the result list. If you click on the link provided, you end up looking at something that you didn’t quite expect.

We got a measure of just how competitive the spreadsheet add-in market really is when we found one of the participants in the survey using exactly this technique to hijack prospective visitors to competitors’ web sites. A search at Alta Vista for “Savvysoft” gave us a list of several different sites, three of which led to the same page: www.financialobjects.com. That turned out to be a page associated with Tech Hackers that contained a hyperlink labeled “Financial Formulas”.

When we clicked on that, we were sent right to the main Tech Hackers home page, www.thi.com/company.

How was this engineered? When we scrolled to the bottom of the financial formulas page, we saw all the names of Tech Hackers’ competitors in large print, skewed to attract the most hits from search engines.

When we clicked on Savvysoft’s link at the bottom of the page, instead of being taken to Savvysoft’s web site we found ourselves at another Tech Hackers page that read: “Savvysoftware? For reliable software and service that never lets you down, come check us out. Please click TechHackers Inc. for our home page.”

Since our discovery in May, the company has covered its tracks, replacing the bogus links with genuine hyperlinks to competitors’ sites.

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