In Living Color...
Visualization software harnesses powerful graphics technology
to give derivatives users a vivid-and 3-D- look at their portfolios.
There is an unbreakable link between derivatives and technology-or so
goes the rationale for new systems. Each new technology holds the promise
of a competitive edge. And the institution that can obtain, process and
analyze critical data more rapidly than its competitors will win the race,
whether that race is to maximize trading profits, obtain the latest and
greatest in risk modeling capability or "mine" massive quantities
of historical data in search of solid-gold trends.
The latest technology to emerge on the horizon is what many users are
calling "visualization" software, and it is widely regarded as
a secret weapon. Most of the largest dealers are at least dabbling with
visualization techniques and at least one exchange is developing trading
applications that use visualization technology. The recent vogue status
of risk management has also brought visualization to the fore. According
to Bill Wright, chief designer at Toronto-based Visible Decisions, visualization
is particularly effective as a vehicle for providing easy-to-understand
management reports. "Risk reports are often just screen after screen
of numbers that take a while to interpret," he says. "Managers
may not immediately understand their significance. Visualization lets top
managers see at a glance all of the risks in their portfolio. Problem areas
are immediately apparent."
From a technical perspective, there are two ways of using visualization
software. According to Glyn Holton, president of Boston-based Contingency
Analysis, it is possible for banks to layer visualization technology over
existing applications to create super-enhanced versions of their old standby
reports. A better option is to use a visualization development environment
to create new applications designed to maximize the benefits of the technology.
James Aucoin, a product manager at Boston-based Advanced Visible Systems,
explains that visualization has been used for years in scientific disciplines
such as engineering analysis, medical imaging and oil and gas exploration
and is now being rapidly deployed to develop applications suitable for risk
management, portfolio analysis and derivatives pricing.
There are two types of data that visualization can help financial institutions
manage. The first is "discrete data" that needs to be consolidated
from standard, multiple-screen, list-intensive displays into elegantly designed
single screens. Real-time connectivity is essential for this type of application,
and design and system speed are critical. Otherwise, warns one New York-based
risk management consultant, "either the application will lag behind
true real time or, if it is badly designed, it will look like a flashing
Nintendo game without immediately conveying meaningful information."
Visualization can also be helpful for managing "continuous data"
generated by a theoretical model. This data is typically displayed in three-dimensional
geometric forms. Complex, portfolio-based risk management modeling, including
variants of value-at-risk, lends itself well to three-dimensional display.
So do multi-variable sensitivity and probability analyses.
It is possible to acquire a visualization programming environment for
under $30,000. Two visualization systems that are capable of supporting
large quantities of data and running reliably in a live trading or risk
management environment are Visible Decisions and Advanced Visual Systems.
Visible Decisions allows you to take reams of complex information from
a wide variety of data sources and create your own streamlined, comprehensible
report. Driven by the idea that information overload, in the form of thick,
line-by-line reports, can be more of a hindrance than a help to decision-making,
Visible Decisions makes it possible to view large data sets using striking
3-D textured graphics that can help illustrate basic risk information for
time-constrained senior managers.
In business since 1992, Visible Decisions offers two products, Discovery
for Developers and Discovery Runtime. Discovery for Developers is an object-oriented
toolkit, compatible with C and C++ programming environments, that allows
programmers to build applications capable of processing and displaying 3-D
information. Discovery Runtime provides a user-friendly interface that allows
end-users to run these applications.
Although the company does not offer much in the way of prepackaged applications,
it does offer an effective vehicle through which financial applications
can be developed. Clients have used the Discovery products for developing
risk management, trading, order management, portfolio management and analysis.
Risk management applications built with Discovery, for example, provide
visual analysis of interest rate, volatility, currency and counterparty
risks in firmwide inventories.
For trading applications, users can evaluate and direct market activity
in hundreds of assets at a glance, effectively eliminating the need for
many different market data screens. Indeed, the company says it specializes
in developing real-time trading applications that are able to incorporate
a wide variety of variables and a ton of market data into a single screen.
The firm also offers clients considerable development assistance.
Hardware requirements: The Discover products require powerful machines.
Right now, they will run on Sun Microsystems and Silicon Graphics UNIX workstations
as well as IBM's RISC System/6000 workstations.
Harry Mandell, a vice president in Morgan Stanley's global market risk
department, explains that visualization is critical to understanding complex
data. "Right now we are using visualization to obtain an intuitive
overview of firmwide risk on a single page, including a 3-D value-at-risk
report," he says. Although visualization is a relatively new technology
at Morgan Stanley, some key daily risk reports will soon be generated via
Visible Decision's visualization interface.
This is no small task, when you consider that Morgan Stanley's risk management
data comes from more than 200 sources. Indeed, says Mandell, "I've
gotten some gray hairs over this data management issue!" He's used
Illustra's object-oriented, SQL-style data management language to help tame
the unruly mass of information, primarily by making it possible for applications
to access data stored in multiple formats. That has eliminated the need
to convert every single piece of data into one single "super-format."
Mandell says most of the important data-related issues have recently
been resolved. His team is now concentrating on new applications for visualization.
Projects in the works include interactive risk reporting that would allow
users to delve into the specifics of, say, a single peak on a
3-D risk report with a mouse click and another project involving real-time
position monitoring. "The hard part is not building the visualization
interface, but rather perfecting screen designing and testing out appropriate
models," he says.
Still, there are drawbacks. Mandell reports that for visualization to
be effective, 3-D reports must be viewed on machines with a high computational
capability, such as Silicon Graphic's workstations. To date, visualization
is less than optimal when run on the humble PC. However, Morgan Stanley
is already looking for a way around this limitation. "We are experimenting
with VRML, an Internet graphics language, that may allow us to distribute
multidimensional reports to PC users via Netscape or another Internet-based
interface," he says.
Mandell says Visible Decisions beat out its competitors by virtue of
its rapid-development, interpretive programming language known as "ANNA."
"ANNA lets us create new applications and modify them without performing
endless, redundant compiles," he says. He also cites Visible Decisions'
customer service and consulting services as additional plusses.
1. Emphasis on finance. Visible Decisions has a robust list of financial
clients. The firm got its start developing financial applications and has
a wealth of experience to draw upon when helping a client develop its own
custom applications from scratch.
2. Superior development language. ANNA, Visible Decisions' development
language, gets high marks for interactivity, ease of use and for cutting
weeks off development time.
3. Good with discrete data. Visible Decisions is reputed to be particularly
good with "trading screen" type applications, which help traders
consolidate many screens into one.
1. Works best on top-of-the-line hardware. Visible Decisions interfaces
(and indeed the other graphic interface visualization programs we are aware
of) require sophisticated machines to look their best.
Price: Development Toolkit, approx. $30,000, including Tekmekron, Reuters,
and other data interfaces; Runtime libraries, approx. $3-5,000; Bill Wright,
however, notes that prices can vary considerably based on each client's
For more information, contact: Bill Wright, phone: (416) 864-4342, e-mail:
Advanced Visual Systems
Originally used in scientific and technical research to create visual
representations of continuous data, Advanced Visual Systems (AVS) now has
a strong foothold in the financial world. Like Visible Decisions, AVS offers
a development tool, known as AVS/Express. AVS/Express is available in three
distinct kits, which include the following:
The Graphics Display Kit: This package includes the tools required
to display and manipulate text, 2-D images and 2- and 3-D geometric objects.
The Graphics Display kit's 3-D imaging feature is especially robust: it
will function to specification, regardless of whether or not the platform
you are using has 3-D capability. Other special features include sophisticated
graphics and charting with precision axis control, 2-D annotation for text
and graphics and 2-D geometry editing and color management tools.
The Data Visualization Kit: This toolkit contains tested models
and algorithms that can help users create applications capable of processing
real-world data. Other applications can be created to assist end-users with
engineering analysis, seismic interpretation, econometrics, etc.
The AVS/Express Database Kit: This toolkit gives users the ability
to interface with most popular SQL-based database management programs. In
addition, this kit contains an Open Database Connectivity (ODBC) interface;
this means that a library of objects can be combined to provide connections
to one or more databases.
Developers also have two programming options. First, they can integrate
AVS objects into existing C++ class libraries, or they can use Object Linking
and Embedding (OLE)-otherwise known as "visual programming"-in
a Windows environment. Faster than text-based 3GL and 4GL, which are programming
languages geared towards prototyping and rapid development, OLE can cut
development time in half.
Glyn Holton of Contingency Analysis says he has used the Advanced Visual
Systems programming environment to develop risk management systems and to
create enhanced reports by linking existing systems to the visualization
environment. The development environment's strong points include its ability
to create textured reports that can reveal much more in a glance to time-pressed
senior managers than a regular two-dimensional report. He also says that
the use of visualization to create meaningful value-at-risk reports that
display much more than a single VAR number is becoming increasingly popular
among his clients. He says, "AVS can produce 3-D curves that maximize
Although AVS does have real-time connectivity to most popular live data
feeds, he says that he has yet to use the environment for many real-time
applications. Holton attributes this to the fact that many firms's VAR models
are so complex that they currently take hours to run. Right now, he says,
"Visualization is used most often for end-of-day type risk reports."
1. Good "snapshot" of risk. AVS can be used to produce 3-D
geometrical representations of portfolio risk, making it much easier to
identify high-risk "spikes" and low-risk "valleys."
2. Flexible development. AVS can be used on its own or integrated into
existing systems environments.
1. New to finance. AVS's client base spans several industries. Derivatives
users are a significant part of their business, but finance is not the firm's
2. Less adept with discrete data. Currently, AVS appears to be used almost
exclusively for risk management rather than trading applications beyond
Price: The complete development environment costs between $20,000 and
$30,000; per-user license fees run from $2,000 to $3,000.
Data mining: The analysis of massive quantities of historical
data in the hopes of finding a pattern that can then be exploited to gain
a trading edge. A more elaborate descendant of "charting" and
"technical analysis," data mining lends itself to visual displays
that make patterns more apparent.