Domain specific language for specifying operations of a central counterparty

Abstract

Domain Specific Language (DSL) approach empowers effectve financial contract management through fixed and precisely defined set of combinators and observables. Haskell Contract Combinator Library (HCCL) follows DSL approach and it offers a flexible mechanism in composing Financial Contracts(FCs). Financial institutes such as banks, use FCs. Central Counterparty(CCP) is one such financial institute and this institute is highly regulated one. Out of all operations, “Margin Calculation”(MC) operation in CCP, consider to be most significant operation. The process of MC involves series of rules to follow. For example, a rule could specify, transfer of money if certain condition met by a given date. All these rule specify a form of probable future cash flow. In the research literature, the DSL approach has not explored in the context of CCP rules. In our research, we analyzed a contract that goes through CCP operations and we modeled series of FCs using HCCL clearly showing the steps and cash flow semantics. In our research, we defined two new data types Instrument and Trade that embodies and preserve the properties of FCs. Through our research we proved the hypothesis that, HCCL could be use in defining CCP rules and as a result we could use HCCL in the process of MC. We introduced a ”seed” contract to simulate the contract behaviour in our design methodology. We further explored the HCCL defined CCP rules in the context of financial contract management.