Algorithmic Contract Types™
BACKGROUND
Recent financial crises laid bare serious shortcomings in risk management and financial regulation. In retrospect, the lack of timely granular data reported in a data standard capable of supporting financial analysis contributed much to the crises. The ACTUS project aims to remedy this weakness by creating a global standard for the consistent representation of financial instruments.
The centrality of expected cash flows for financial analysis is obvious and undisputed. Less obvious is the role of the financial contracts. Financial contracts are mutual agreements between counterparties to exchange cash flows. The agreements are written by lawyers in different languages, legal terminology, and jurisdictions. This leaves us with a plethora of terms and different contracts.
However, if one abstracts from the legal terms and focuses on the cash flow obligations, the diversity of financial contracts or agreements shrinks drastically. The vast majority of the relevant financial contracts are built on a manageable number of underlying mechanisms. Financial contracts follow a limited number of patterns.
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The goal of ACTUS is to provide open, royalty-free standards for the combined data and algorithmic representation of financial contracts in order to promote efforts for transparent interoperability of financial contract information as well as support the use of the ACTUS standards and open source software in developing a broad range of applications and systems that utilize the forward-looking cash flow analysis that ACTUS enables and which can provide major benefits for both private and public sectors of the financial industry.
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Thereby, ACTUS defines two standards:
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The Data Standard defines a universal set of legal terms – or CT Attributes – used as parameters throughout the different financial agreements. It is implemented in form of a Data Dictionary with Attribute Applicability by Contract Type.
The Algorithmic Standard defines the logic embedded in legal agreements that eventually turn the contract terms into actual cash flows, or more generally business events.
ACTUS Data Standard
ACTUS Algorithmic Standard
These two Standards together will support forward-looking financial and risk analysis. ACTUS software code is available under an open source license and can be integrated with any commonly used risk and finance analysis platform. Maintenance of ACTUS is ensured by the not-for-profit ACTUS Financial Research Foundation and the ACTUS Users Association.
ACTUS FOUNDATION
Project ACTUS has been incorporated in the form of two not-for-profit corporations to hold the intellectual property of ACTUS and to further the development as well as maintenance of the ACTUS Contract Types and their use. The not-for-profit corporations with legal residence in the US are the following:
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The ACTUS Financial Research Foundation is the holder and curator of the intellectual property of the royalty-free, open standard that is ACTUS.
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Not-for-profit 501 (c)(3) Research Foundation
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Financed by tax-deductible donations and grants
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The AFRF is responsible for developing, maintaining and protecting the ACTUS standards
The ACTUS Users Association is primarily concerned with building up and further developing an active community and industry support.
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Not-for-profit (501)(c)(6) Industry Association
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financed by membership fees
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Supports AFRF with advice and financing
ACTUS FINANCIAL RESEARCH FOUNDATION (AFRF)
ACTUS USERS ASSOCIATION (AUA)
BOARD OF GOVERNORS
Willi Brammertz,
Dr. Oec
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CO-Founder of IRIS, now part of Wolters Kluwer, and father of one of the world’s leading financial analysis systems riskpro™.
Founder of Ariadne Business Analytics; Author of the book “Unified Financial Analysis – the missing links of finance” (Wiley, 2009) that provides the concept on which ACTUS builds.
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Chair, ACTUS Users Association
Board of Governors
John A. Bottega
Executive Director, EDM Council; Principal, Data Management Advisory Services, LLC;,
Formerly Chief Data Officer of Citibank, Bank of America and the Federal Reserve Bank of New York.
Jefferson Braswell
Founding Partner and CEO, Tahoe Blue Ltd; Chair, Technology, Operations and Standards Committee of the Board of Directors, Global LEI Foundation;
Formerly, President of Risk Management Technologies (RMT Berkeley, provider of the Radar Enterprise Risk Management Solution, acquired by FICO).
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Chair, ACTUS Financial Research Foundation Board of Governors
Bob Mark, Dr.
Managing Partner of Black Diamond Risk Enterprises, founding Executive Director of the MFE Program at the UCLA Anderson School of Management, Co-Founder of PRMIA; awarded as the Financial Risk Manager of the Year by GARP;
Formerly Chief Risk Officer at several tier 1 banks as well as co-author of three Risk Management books.
The Honorable Allan I. Mendelowitz, Ph.D
The Honorable Allan I. Mendelowitz, Ph.D
Former Chairman of the Federal Housing Finance Board and Co-Leader of the Committee to Establish the National Institute of Finance.
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President of ACTUS Financial Resarch Foundation and ACTUS Users Association
Professor Henriette Elise Breymann, Dr. phys
Professor at Zurich University of Applied Sciences, member of the Board of Ariadne Business Analytics,
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Secretary of ACTUS Financial Resarch Foundation and ACTUS Users Association
Jan Klein
CFO MCT Worldwide, formerly Professor of Finance, Equity Analyst and Venture Capitalist; CPA,
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Treasurer of ACTUS Financial Resarch Foundation and ACTUS Users Association
Joseph Langsam
Retired, Former Morgan Stanley Managing Director responsible
for Fixed Income Analytic Modeling. During retirement, 2 years
as senior lecturer, Sloan School, MIT, 6 years member Board on
Mathematical Sciences and Analytics for the National Academy
of Sciences, and 6 years as Policy Fellow, Smith School, U. of Md.
Founding member of Committee to Establish the
National Institute of Finance. Co-Editor, Handbook on Systemic Risk
CONTRIBUTORS
