(GPL licence,
Copyright Tuan Nguyen, Arbitragis)

A Free, Robust and Fast Derivatives Pricing Software

June 16, 2005


DerivaQuant (first release date : end of June, 2005) aims at creating a free robust front-office GPL software for hedge funds, proprietary trading firms and derivatives traders. For academics, it will also be a platform to test new models against regular models. It offers multiple option pricing models, links with databases, and the risk analysis of a derivatives position. Ultimately, it will be the basis for a fully automated trading system trading the market in real-time.

As opposed to commercial softwares, DerivaQuant pricing models will be subject to practitioners / academics peer-review and auditing in order to attain an industrial-grade level good enough for trading derivatives professionaly. Both the interface and the pricing models are published under the GPL licence, i.e. DerivaQuant is free.

Comparisons betwee the different algorithms will be discussed in order to check their reliability under different conditions.


This software is different from apparently similar projects :

There are different parts in this project :



Arbitragis, the sponsor of this project, is a proprietary trading firm focused on equity derivatives trading. We found different issues with current commercial softwares :

Eventually, peer-review of option pricing models is going to benefit the whole community.


Tools : Gcc for pricing algorithms and Qt for the interface, Financial Recipes in C++,

Platforms : Suse Linux 9.3 and FreeBSD mainly. Support for Windows might be added later on, but should be very easy to do as Qt is a cross platform development tool.

Database : Postgresql 8.0 (

Interface : Qt (

Charting tool : gnuplot 4.0 (

Historical data : Bloomberg, Yahoo Finance, Exchanges around the world,

Real-time data : Interactive Brokers.


Pricing screen :

Rates Screen :

Dividends screen :

Settings Screen :


Each project is rated by a perceived level of difficulty : 1 = Easy, 5 = very difficult.

On the quant side :

Contributors wanting to create derivatives pricing algorithms not yet in Financial Recipes are welcomed. Here is a non-exhaustive list :

-parallelization of Monte Carlo pricing and of non-recombining binomial trees via MPI (level : 3),

-fine-tuning of pricing parameters taking into account : rates conventions in ZC discounting, correction of time decay due to week ends etc... (level : 2).

-integration of discrete dividends for finite-differences american option pricing models (level : 3),

-time varying volatility on a binomial tree (level : 2),

-stochastic volatility (level : 4),

-Avellaneda model (level : 4),

-Dupire model (level : 5),

On the trading side :

-help is needed on the development of an interface between the Java API of Interactive Brokers and DerivaQuant in order to get real-time options data and calculate real-time smile surfaces (level : 4),

-pricing greeks on a whole portfolio (level : 2),

-real-time VAR (level : 3),

-visual representation of greeks (level : 3),

On the interface side :

-we would like to implement XML importing capability in order to import derivatives portfolios, dividends, index components etc....Work is neededon the definition of the XML protocol and its implementation via SAX (level : 3),

-the current charting tool is gnuplot, which is very handy, but is unfortunately not interactive : once a graph is calculated, in order to generate another view, all data need to be recalculated. One solution would be to integrate the 3D Qt plotting library “qwtplot3d” : (level : 4),

On the programming side :

-the object structure on different derivatives might need some work in order to have a global generic API which would price an object modelled as a structure, with relevant parameters (level : 3),

-a Windows branch should be established, which should be easy as Qt is portable, with only one source code for Linux and Windows (level : 1),

On the partners' side :

-we are working on a way to link retrieve data seamlessly from the closed-source Opalit software ( to DerivaQuant in order to run risk analyses (level : 3),
-we are looking for other partnership, especially with a data provider,

On the artist's side :

-any suggestions for a wonderful logo and a splash screen ? (level : infinite)


Forums on Quantitative Finance :

Wilmott :

Theoretical Papers on Derivatives Pricing / Quantitative Finance :

Science et Finance :

Peter Carr's papers :

Derivatives Pricing Libraries :

Numerical Recipes (the one we are going to rely on) :

QuantLib :

Parallel computing and grid computing :

Trading interface:

Interactive Brokers (free if you open an account) :

Trade$tation (commercial software) :

Open source softwares :

Qtstalker :

Eclipse Trader :

Open Source Development Tools :

Qt Designer (IDE):

QwtPlot3D (plotting software for Qt) :

Postgresql :

Operating Systems :

FreeBSD :

FreeBSD forums :

Suse Linux :

LinuxQuestions :

Commercial Softwares :

Sungard :

Ito 33 :

Bibliography :

Options, futures and other derivatives, John C. Hull, Prentice Hall.

Building Financial Derivatives Applications with C++. Brooks.

Numerical methods in finance. Brandimarte, Wiley Inter Science.

Monte Carlo methods in finance, Peter Jäckel, Wiley Finance.

Implementing Derivatives Models, Les Clewlow and Chris Strickland, John Wiley and Sons.

Paul Wilmott on Quantitative Finance, Wiley.

Applied Computational Economics and Finance, Mario Miranda and Paul L. Facklers, The MIT Press.

New Directions in Mathematical Finance, Paul Wilmot, Henrik Rasmussen, Wiley Finance.

Proprietary Trading Firms / Hedge Funds :

Miscellaneous sites :

Caltech Laboratory for Experimental Finance :