Flexible exotics pricing using parser technology The problem was straight-forward – the fx exotics quants were spending far too much time writing new models for valuing new exotic instruments. There were lots of new competitive deal possibilities being brought in by regional salespeople and each new deal needed to be priced. But each new exotic instrument meant some new maths, some new custom C++ code and careful testing to make sure the quote was correct. Could we make a flexible platform so the quants could value some of these derivatives without them having to write new code? You bet! So we wrote one of the first parser-based option valuation scripting languages and then we bolted it onto a Monte-Carlo valuation engine. Start-to-finish in 3 months. Yes, single factor gaussian and flat volatilities and rate curves. But hey, this was our first attempt and it had to be done at speed (because deals were being lost) and this was also back in 1993. Certainly we had never heard of anyone using this parser technique for option valuation before. So lots of path-dependant options could be valued by simply entering an Excel-like pay-off formula. Any formula of course. Moreover you could watch the option value and run the simulation until you got the required accuracy – targeting # of simulations or alternatively standard error. Very handy for new instruments and also incidentally for testing new C++ analytic code. And fairly easily adaptable to multiple assets and American options. Thirteen years later and there are still lots of investment banks that don’t have this technology yet!