Post-recession news regarding the SEC’s pursuit of “programming language transparency on Wall Street”, coupled with the Obama administration’s “commitment to enhance procedural transparency” in the financial sector, has set the stage for a new, Italian start-up ready to disrupt the system. Fermat Consulting, makers of the free, financial modeling software “Fairmat” are adding a whole new level of transparency and accessibility to financial contract valuations. The new product is set to revolutionize the valuation of financial contracts and investment projects by subverting the “various elements” which Fermat Consulting says currently characterize the financial engineering world: complexity, high costs and opacity in valuation procedures.
According to Matteo Tesser, Fairmat’s Product Manager, “The first challenge when considering a financial contract is complexity. Even those who already possess excel skills and/or programming experience find that they need additional technical resources and market data, and more importantly, financial resources and instruments to get the needed outputs. This is how financial engineering creates information and knowledge asymmetry. The lending institutions, which have these expensive resources, make their profits to the detriment of other players. In Italy, for example, many problems related to varied and often complex derivative contracts, which are held by regional governments and small business, have been denounced by consumer protection agencies.
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We feel that the mismanagement of this complexity helped to cause, among other problems, the recent crisis in the derivative markets. Additionally, it is this lack-of transparency that continues to threaten the stability of the global financial and economic systems today.”
Simply put: Fairmat (http://www.fairmat.com/) is a software that enables users to model or replicate any kind of financial contract without having to actually write pricing routines. This is done using an intuitive graphic/algebraic language that simplifies and deconstructs a contract down to its basic elements. Then, several analyses -such as fair value calculation- are elaborated and then displayed by comprehensible charts and graphs. Given its modeling features and free access, Fairmat would be ideal for use in academia, say, for university students learning derivatives contracts.
The best part: Fairmat Academic is completely free. Fairmat is also multi-platform, with versions available for Windows, Mac OSX and Linux. Commercial versions include extended functionality, such as data-provider integration and IAS accounting analysis at a cost that is much lower than with other solutions, making this software accessible to small businesses and financial consultants. To stimulate innovation, the company is willing to create revenue-share partnerships with people who contribute open-source plug-ins to the project. This will add value to the core product and bring the additional benefits of crowd-sourced innovation and best-practices to the commercial users.
