Financial Modelling in Python

P1: JYS

c07 JWBK378-Fletcher April 24, 2009 8:16 Printer: Yet to come

7

Timeline: Events and Controller

In the preceding chapter we looked at trade representation. This chapter covers a number of

concepts that provide the glue between the trade representation and the pricing models. We

will first discuss the concept of an event. Once we have a firm understanding of an event we

will move onto the timeline, which is essentially a convenient container for a sequence of

events. We finish the chapter by reviewing the idea of a controller. Of all the classes discussed

in this chapter, the controller is the conduit through which pricing models communicate with

the trade representation.

7.1 EVENTS

A fundamental concept of any pricing analytics is that of an event. So what does an event

represent? In essence an event represents either a cash flow depending on some piece of

financial information, such as a foreign exchange rate on a particular date for example, or

an exercise decision. The module ppf.core.event, as outlined below, contains two core

classes: pay

event and exercise event. The class pay event is constructed from a

flow, a pay or receive flag, a leg id, and a reset id. The leg id enables clients to determine which

leg of the trade the flow belongs to and the reset id informs clients which observable of the

flow is represented by the event. The class exercise

event is constructed from an exercise

and a