Financial Modeling

SUMMARY
We developed a set of parallel stock option pricing models for benchmarking this application on massively parallel computing architectures, applied optimization techniques to these models, carried out a large scale comparison of model and historical market prices, and developed an interactive visualization prototype system for real-time trading and model comparison.

PARTICIPATING INSTITUTIONS
NPAC, Syracuse University
Vice President for Research and Computing at Syracuse University
Digital Equipment Corporation
School of Management, Syracuse University

KEY CONTACTS
Kim Mills | kim@npac.syr.edu | 315-443-4686
Gang Cheng | gcheng@npac.syr.edu | 315-443-2083

INDUSTRIAL/REAL WORLD IMPACT
Demonstrate the potential for parallel computing in the financial industry;
Gain early experience in parallel computing technology transfer to industry applications.

PROJECT DESCRIPTION
A set of parallel stock option pricing models, including Monte Carlo, two binomial approximation models incorporating stochastic volatility with American call (exercise at any time in contract) and with European call (exercise only at option maturity), are developed on DECmpp-12000, CM2, CM5, NCUBE2, IBM SP1 and networked workstations. These models are compared with conventional Black-Scholes and binomial models assuming constant volatility, using a large set of option market data from CBOE. Numerical optimization techniques are applied to estimate key models parameters such as volatility, variance of volatility, and corelation of price and volatility. An interactive visualization environment of this application is developed on a distributed high performance system in which a graphical user interface in AVS is coupled with the (parallel) pricing models running on multiple parallel machines and workstations.

Summary of Performance Timings on Various Platforms

A Large Scale Comparison of Option Pricing Models with Historical Market Data

An Interactive Visualization Environment for Financial Modeling on Heterogeneous Computing Systems

SIMULATION ON-DEMAND DEMO

SOURCE CODE
Sequential Fortran77
Data-Parallel Fortran90

REFERENCES
  1. F. Black, and M. Scholes. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, 81, 1973, 637-59. 1973.
  2. T. Finucane, "Binomial Approximations of American Call Option Prices with Stochastic Volatilities," published in Journal of Finance. 1992.
  3. G. Cheng, K. Mills and G. Fox, " An Interactive Visualization Environment for Financial Modeling on Heterogeneous Computing Systems, " Proc. of the 6th SIAM Conference on Parallel Processing for Scientific Computing, R. F. Sincovec, eds., SIAM, Norfolk, VA, March 1993.
  4. Mills, K., Vinson, M. and Cheng, G., " A Large Scale Comparison of Option Pricing Models with Historical Market Data," in Proc. of the 4th Symposium on the Frontiers of Massively Parallel Computation, McLean, VA, IEEE Computer Society Press, October 1992.
  5. Mills, K., Cheng, G., Vinson, M., Ranka, S. and Fox, G.," Software Issues and Performance of a Stock Option Pricing Model on the Connection Machine-2 and DECmpp-12000," in Proc. of Fifth Australian Supercomputing Conference, Melbourne, Australia, December, 1992.
  6. G. Cheng, G. Fox, K. Mills and Marek Podgorny, " Developing Interactive PVM-based Parallel Programs on Distributed Computing Systems within AVS Framework," to be presented at the 3rd Annual International AVS Conference, JOIN THE REVOLUTION: AVS'94, Boston, MA, May 2-4.

Northeast Parallel Architectures Center, Syracuse University, npac@npac.syr.edu
This page is maintained by Gang Cheng, gcheng@npac.syr.edu