Composing contracts: an adventure in financial engineering (functional pearl)

ABSTRACT

Financial and insurance contracts do not sound like promising territory for functional programming and formal semantics, but in fact we have discovered that insights from programming languages bear directly on the complex subject of describing and valuing a large class of contracts.We introduce a combinator library that allows us to describe such contracts precisely, and a compositional denotational semantics that says what such contracts are worth. We sketch an implementation of our combinator library in Haskell. Interestingly, lazy evaluation plays a crucial role.

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INDEX TERMS

Primary Classification:
  D. Software
  D.3 PROGRAMMING LANGUAGES
      D.3.2 Language Classifications

          Nouns: PEARL

Additional Classification:
  D. Software
  D.1 PROGRAMMING TECHNIQUES
  D.3 PROGRAMMING LANGUAGES
      D.3.2 Language Classifications

          Nouns: Haskell

  F. Theory of Computation
  F.3 LOGICS AND MEANINGS OF PROGRAMS
      F.3.2 Semantics of Programming Languages
          Subjects: Denotational semantics

  J. Computer Applications
  J.1 ADMINISTRATIVE DATA PROCESSING
      Subjects: Financial (e.g., EFTS)

General Terms:
Design, Languages, Management, Performance, Theory