Fairmat

As derivatives markets have gradually become more popular and available to less financial-savvy users, so too has there been an increase in digital tools meant to assist these traders in making the right decisions.

Fairmat is one such aid and it allows users to model derivatives with an algebraic language, capable of expressing and analyzing complex payoffs. It should be noted that, although the tool seeks to bridge the knowledge gap between casual users and the financial markets, operating it efficiently requires a fair degree of scripting and mathematical knowledge.

In essence, the application allows users to run analyses on models comprised of three core elements: parameters, stochastic processes and functions. All these elements can be configured and tailored to users' needs. Advanced stochastic processes can also be downloaded from the application's home page.

This is one of the great features of this program: it is modular in nature and allows users to import a wide variety of plug-ins. This can be a life-saver for users who either don't have the time or the knowledge to generate their own models.

Once satisfied with input parameters, users are free to generate multiple types of detailed analyses, including valuation, risk and market to market simulations. Univariate and bivariate sensitivity analyses can also be conducted. These are powerful instruments in themselves, but rely on the accuracy of the source model. One should check and double-check the foundational bricks of the model, as analysis errors can be quite costly.

To sum up, Fairmat is a great tool for anyone involved in modeling and analyzing financial derivatives, including uncertainty dynamics, payoff structures and risk evaluations.