A Software Architecture Framework for On-Line Option Pricing

  • Kiran Kola
  • Amit Chhabra
  • Ruppa K. Thulasiram
  • Parimala Thulasiraman
Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 4330)

Abstract

The problem of growing computational complexity in finance industry demands manageable, high-speed and real-time solutions in solving complex mathematical problems such as option pricing. In option trading scenario, determining a fair price for options “any time” and “any-where” has become vital yet difficult computational problem. In this study, we have designed, implemented, and deployed architecture for pricing options on-line using a hand-held device that is J2ME-based Mobile computing-enabled and is assisted by web mining tools. In our architecture, the client is a MIDP user interface, and the back end servlet runs on a standalone server bound to a known port address. In addition, the server uses table-mining techniques to mine real-time data from reliable web sources upon the mobile trader’s directive. The server performs all computations required for pricing options since mobile devices have limited battery power, low bandwidth, and low memory. To the best of our knowledge, this is one of the first studies that facilitate the mobile-enabled-trader to compute the price of an option in ubiquitous fashion. This architecture aims at providing the trader with various computational techniques to avail (to provide results from approximate to accurate results) while on-the-go and to make important and effective trading decisions using the results that will ensure higher returns on investments in option trading.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. 1.
    Kola, K., Thulasiram, R.K.: UNNATI: Ubiquitous option pricing - a fiNaNce ApplicaTIon framework. In: Proc. 13th Intl. Conf. on Advanced Computing and Communications, Coimbatore, India (December 2005) (yet to be published)Google Scholar
  2. 2.
    Varshney, U., Vetter, R.J.: Mobile Commerce: Framework, Applications and Networking Support. MONET 7, 3 (2002)Google Scholar
  3. 3.
    Geoffrey: Mobile Commerce and Wireless Computing Systems, 1st edn. Pearson/Addison Wesley (2004)Google Scholar
  4. 4.
    Hull, J.C.: Options, Futures and Other Derivatives, 6th edn. Prentice Hall, Upper Saddle River (2005)Google Scholar
  5. 5.
    Kargupta, H., Park, B., Pittie, S., Liu, L., Kushraj, D., Sarkar, K.: Mobimine: Monitoring the stock market from a PDA. SIGKDD Explorer. News 3(2), 37–46 (2002)CrossRefGoogle Scholar
  6. 6.
    Ajenstat, J., Jones, P.: Virtual decision making for stock market trading as a network of cooperating autonomous agents. In: Proc (CDROM) 37th Annual Hawaii International Conference on System Sciences (HICSS 2004), Big Island, Hawaii (January 2004)Google Scholar
  7. 7.
    Roche, J.: Mobile Trading Comes of Age. In: United Nations Conference on Trade and Development (September 2002)Google Scholar
  8. 8.
    CommSec: Keep up the market, whereever you are. CommSec (September 2003), http://www.satisfac.com.au/convCommSecsharetrading.htm
  9. 9.
    QuoTrek: Real time on-line data (February 2003), http://www.quotrek.com/default.asp
  10. 10.
    Microsoft: Mobile Solution Partner. Pit trader work wirelessly with pockets pcs and solution from phatware, Leapfrog technologies. In: Mobility Partner Council, San Diego, CA (2003)Google Scholar
  11. 11.
    Thinkorswim Inc: stock option trading: online brokerage services (March 2006), http://www.thinkorswim.com/tos/displayPage.tos?webpage=softwareLobby
  12. 12.
    Windale Technologies: Option Pricing Analysis X Software (June 2005), http://windale.com/optionsx.php3
  13. 13.
    FIS Group: Option calculator (2003), www.fis-group.com
  14. 14.
    Barua, S., Thulasiram, R.K., Thulasiraman, P.: High Performance Computing for a Financial Application using Fast Fourier Transform. In: Cunha, J.C., Medeiros, P.D. (eds.) Euro-Par 2005. LNCS, vol. 3648, pp. 1246–1253. Springer, Heidelberg (2005)CrossRefGoogle Scholar
  15. 15.
    Rahmail, S., Shiller, I., Thulasiram, R.K.: Different estimators of the underlying asset’s volatility and option pricing errors: Parallel Monte- Carlo simulation. In: Proc. Intl. Conf. on Computational Finance and its Applications (ICCFA), Bologna, Italy, April 21-23, pp. 121–131 (2004)Google Scholar
  16. 16.
    Thulasiram, R.K., Litov, L., Nojumi, H., Downing, C., Gao, G.: Multithreaded Algorithms for Pricing a Class of Complex Options. In: Proceedings (CD-RoM) of the IEEE/ACM Int. Parallel and Distributed Processing Symposium (IPDPS) (April 2001)Google Scholar
  17. 17.
    Tannehill, J.C., Anderson, D.A., Pletcher, R.H.: Computational Fluid Mechanics And Heat Transfer, 2nd edn. Routledge, New York (1997)Google Scholar
  18. 18.
    Thulasiram, R.K., Zhen, C., Chhabra, A., Thulasiraman, P., Gumel, A.: A second order L_{0} stable algorithm for evaluating European options. Intl. J. High Performance Computing and Networking (to appear)Google Scholar
  19. 19.
    White, J.: An introduction to java 2 micro edition (j2me); java in small things. In: ICSE 2001: IEEE CS Proceedings of the 23rd International Conference on Software Engineering, Toronto, Ontario, Canada, pp. 724–725 (2001)Google Scholar
  20. 20.
    Itani, W., Kayssi, A.: J2me application-layer end-to-end security form-commerce. Journal of Network and Computer Applications 27(1), 13–32 (2004)CrossRefGoogle Scholar
  21. 21.
    Kaisa, N., Mattila, N.V., Ruuska, S.: Design: Designing mobile phones and communi cators for consumer needs at nokia. Interactions 6(5), 23–26 (1999)CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2006

Authors and Affiliations

  • Kiran Kola
    • 1
  • Amit Chhabra
    • 1
  • Ruppa K. Thulasiram
    • 1
  • Parimala Thulasiraman
    • 1
  1. 1.Department of Computer ScienceThe University of ManitobaWinnipegCanada

Personalised recommendations