6.0.0-dev.72

Product Model - Asset Refactoring: Product, SettlementPayout, Underliers

WORK IN PROGRESS

Background

The Asset Refactoring initiative (see #2805) is seeking to improve the Product Model to address some long-standing issues and to ensure the continued extensibility to additional financial products and markets. A proposal is being developed - through a cross-industry Task Force - to implement this remodelling in the CDM.

This release includes the third tranche of changes (of three planned tranches in CDM 6) to implement the refactored model. It introduces some significant refactoring of the Product structure in to the model.

What is being released?

Product Refactoring:

• This release completes the refactoring of the major financial product data types, that is Asset, Observable, and Index, and combines their use in a new structure for financial products.
• The new data type NonTransferableProduct has replaced the former ContractualProduct and is the main "product" data type used on a trade; it appears as the attribute product on the data type TradableProduct.
• On a Trade, all financial products should be composed into the EconomicTerms of a NonTransferableProduct.
• Separate PR but included here for completeness The data type payout is now a choice construct with the consequence that references to specific instances of a specific payout should refer to the capitalised data type name rather than an attribute, for example economicTerms -> payout -> performancePayout becomes economicTerms -> payout -> PerformancePayout. This has large impact in terms of the number of changes in this PR.

Underliers:

• An Underlier represents the financial product that will be physically or cash settled.
• Whereas all underliers were previously defined to use data type product, this has now been improved so that they can also be an Observable when the case warrants it.
• Underlier is modelled as a choice data type, that is, it can either be an Observable or a Product.
• A Product is also a choice type, either a TransferableProduct (a type of financial product which can be held or transferred, represented as an Asset with the addition of specific EconomicTerms), or a NonTransferableProduct (a product that can be traded, as part of a TradableProduct, but cannot be transferred to others).

Product and Trade Hierarchy:

• The Trade data type now extends TradableProduct; this means that the latter is "hidden" in many uses in the CDM, eg in the graphical view, and one level within the hierarchy is removed when generating JSON. This change has resulted to updates to 100s of occurences to path accesses within the model (particularly in the Event and Product functions). For example, the previous access path tradeState -> trade -> tradableProduct -> tradeLot has become tradeState -> trade -> tradeLot.
• The financial product hierarchy has also changed so that the previous path trade -> tradableProduct -> product -> contractualProduct -> economicTerms -> payout -> InterestRatePayout has become trade -> product -> economicTerms -> payout -> InterestRatePayout.

Product details:

• Security
  • Removed the attributes economicTerms and ProductTaxonomy because these are not appropriate for an Asset data type which is standardised. if economicTerms are required, these can be added by wrapping security into a TransferableProduct. The taxonomy of assets is explicitly defined in the type.
• Index
  • Index is now an Observable and the replaces the existing data type rateOption.
  • The path observable -> rateOption has become observable -> Index -> FloatingRateIndex.
  • Data type CreditIndex now extends IndexBase.

ProductQualification:

• Additional functions have been created to ease with the qualification process: UnderlierQualification. ObservableQualification.
• Extensive refactoring has been made to the qualification functions to reflect the refactoring, albeit with no changes to the actual logic.
• The qualification for options has been tidied up to be more readable and maintainable in the new model, without change to the functionality.
• The introduction of SettlementPayout has been included in the qualification logic.
• The qualification of Foreign Exchange transactions has been updated.
• The securities financing qualification functions have been enhanced to differentiate repos and lending; the new functions are: Qualify_RepurchaseAgreement, Qualify_BuySellBack, and Qualify_SecurityLending.
• A new enumerator data type has been added to support repo qualification: RepoTypeEnum. The corresponding attribute repoType was added to AssetPayout.

Payouts:

• A new payout type has been created: SettlementPayout
• The existing ForwardPayout has been collapsed into SettlementPayout; the latter should be used whereever the former was previously.
• Separate PR but included here for completeness The Payout data type has been refactored to be a choice and payouts now have multiple cardinality on EconomicTerms. The conditions that validated the business logic on payouts has been moved to EconomicTerms.

Event Model:

• Create_Exercise has additional logic to support an option underlier that coan be an Asset, a TransferableProduct or a NonTransferableProduct.
• Create_Execution now acts upon a more narrowly defined NonTransferableProduct rather than a generic product.
• Additional functions have been created to support events using the new product model: Create_NonTransferableProduct, Create_TransferableProductFromAsset, Create_TransferableProductFromIndex, CheckTransferableProduct, CheckTradeNotTransferableProduct, CreateTradableProduct.
• The function NewEquitySwapProduct now creates a NonTransferableProduct not a generic product.
• Event processing has been refactored to handle the new modeling of TradableProduct.
• The unused data types Affirmation and Confirmation have been removed.

Observable:

• The attribute Observable has been removed from ObservationTerms where it created duplication.

Collateral:

• AssetIdentifier replaces ProductIdentifier on AssetCriteria.
• The function CheckEligibilityForProduct now uses TransferableProduct not Product.

Namespace re-alignments:

• The following data objects have been moved to a more appropriate namespace:
  • enum PutCallEnum to cdm.base.staticdata.asset
  • choice Index to cdm.observable.asset
  • type IndexBase to cdm.observable.asset
  • type PriceQuantity to cdm.observable.asset
• The function InterestRateObservableCondition has been moved to the cdm.observable.asset function namespace.

Deprecated data types which have been removed:

• IndexReferenceInformation: replaced with Index.

Documentation updates:

• Significant improvements have been made to the pages on Product Model, Event Model and Process Model.
• As well as incorporating the direct changes that result from the refactoring, the pages have been restructured to improve the hierarchy, sections have been resequenced where this improves understanding, and "tips" have been added to highlight important definitions.
• The use case sections on Collateral, Securities Lending and Repos have been updated to reflect the revised modeling.

Review directions

The changes can be reviewed in PR: #3127

Backward-incompatible changes

This release contains changes that are not backward-compatible:

• TBA

A full description of the backward-incompatible changes, and how persisted objects should be remapped, will be included in the release notes for the production release of CDM 6.