Fairmat A community solution for financial valuation and risk assessment.
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Fairmat Description

A community solution for financial valuation and risk assessment. Fairmat is a platform for modeling and pricing financial derivative contracts and capital investment projects. It is designed with the dual aim of being both friendly and flexible.Fairmat enables modeling a financial contract or a project with many contingencies by decomposing it into basic parts. Complex structures and dependencies are modeled using a graphical interface. Virtually any payoff function can be written using a simple algebraic language. Fairmat's capabilities can be extended and specialized by a growing set of plug-ins.Fairmat free-of-charge academic version is designed for developers, students and academics.Fairmat allows the user to choose the best description of the dynamic evolution of the valuation drivers from a set of different models. Next, with Fairmat you can design any financial project using a graphical representation blended with a high level algebraic language.In order to price structures with conditional/compound payments, with switching decisions among different modes, or simply options that can be exercise earlier than maturity, an optimal policy must be computed. Usually, this requires case-specific coding. Fairmat's graphical/algebraic language allows users to save hours (and sometimes days) of code writing and testing and to focus solely on the specific features of the financial projectComplex payoffs occurring in exotic contracts or in real options valuation can be expressed easily with a flexible built-in algebraic language.The dynamic stochastic model of the underlying factors can be chosen from a set of possible models. Furthermore, we are working to make it possible to access a service for model parameters estimation from different data providers. This will simplify the test of the assumptions on the underlying factors dynamics and to assess their impact on the value of the project.Fairmat calculates the fair value of a financial project using a range of numerical methods, from simple one, like binomial lattices, to sophisticated approaches, like Least-Squares Monte Carlo simulation. In addition, the optimal execution policies, the distribution of future cash flows, and various risk assessments can be obtained as by-products of the valuation.Fairmat has an academic version that can be downloaded and used on many different OS platforms free of charge. Anyone who wants to study or do research on financial problems can use it. Moreover, if you want to contribute to the development of the software, you can create open source implementations of new features as “plug-ins”. Only the business version of the software requires the payment of a license fee.Cntracts and projects implemented with Fairmat can be easily assessed, checked and compared with other users and softwares. This is because the whole description of the contract can be saved within a single model-file.We believe in the open source model for software: a development team, whatever its size, cannot be as effective as a community of users/developers. However, one the limits of the typical open source business model, is that frequently the value generated by a common effort is retained by the original contributors, or – in the worst case - by free-riders who exploit the effort without paying back the community. We believe that, being a community effort, the value of the project must be shared with those who create it. This is in line with Om Malik’s opinion on the need of rewarding the time a community spends on improving on-line projects. While the software’s core is closed in order make sure that the project's outcomes are shared among creators and contributors, this project is owned by the community. For that reason, if outcomes are generated, they will be shared with the community through a revenue sharing agreement with developers/contributors. We think that this approach is revolutionary, especially for financial softwareWe are setting up a free repository where developers can upload and share open-source applications (“plug-ins”). We invite users to create and publish innovative contributions in any area of financial economics. This would permit other users to test and review the contributions. Every 6 months (see the road map) the best plug-ins (tested and organized) will be packed into an official open-source collection available free of charge. This process is driven by the community itself. Lastly, let us hear your suggestions on how to improve all aspects of this project, including the sharing agreements and the development aspects.

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