Codefarm Galapagos toolkit gives KBC Financial Products a competitive edge
5 April 2004
KBC Financial Products (KBC FP) is working with software developer Codefarm to supplement its financial modelling by using computer programming techniques inspired by the Darwinian theory of evolution.
Codefarm has delivered Galapagos, its quick-start evolutionary computing toolkit, for use by KBC FP to create trading strategies based on its existing price models in the convertibles and equity / credit derivatives markets.
This is the first commercial application of the Brighton-based start-up’s evolutionary computing software toolkit that is bringing programming inspired by Darwinian theories of evolution to the complex optimization challenges faced by commercial enterprises. Designed for use with existing in-house models, the Galapagos product supports major languages and toolkits including Java, C/C++, Excel and Matlab.
Evolutionary computing simulates evolutionary mechanisms in computer programming — specifically selection of the fittest, genetic re-combinations and mutations. Evolutionary software generates candidate solutions to complex problems and, harnessing considerable computing power, subjects these to testing and retesting while evolving.
The initial target market for Codefarm’s Galapagos is the financial sector, but it can also be applied to intractable problems found in engineering, bioinformatics and pharmaceutical industries.
“During our trial of the Galapagos package, we found that it allowed us to easily integrate our existing models, and quickly optimize new trading strategies with quantifiably better results,” said Brian Collings, Chief Information Officer of KBC FP. “Galapagos is now being integrated with a particular pricing model by our quantitative analysts. It fits well with our current systems to provide optimization on demand and is enabling more sophisticated and comprehensive forecasting, which in turn leads to more profitable trading opportunities.”
Jeremy Mabbitt, Managing Director of Codefarm explained: “The convertibles and derivatives markets are highly complex and so it has been very encouraging to see how quickly and easily our evolutionary computing toolkit has been applied with immediate benefits.
“Galapagos fits well with all types of model and we were quickly able to tailor our toolkit to KBC FP’s specific requirements. Galapagos enables our clients to apply the principles of evolutionary computing — selection of the ‘fittest’ solution and improvement of that fitness by recombining solutions and altering or mutating fragments of them — in a straightforward fashion. They can then achieve a level of optimization that easily outperforms conventional methods especially with non-linear models.”
About KBC Financial Products
KBC Financial Products is a leading specialist within the growing global marketplace for equity and credit-linked products. KBC Financial Products’ approach to these markets is distinguished by the clever application of technology and financial expertise to further its clients’ investment and financing strategies.
KBC Financial Products’ clients include some of the most widely-recognized corporations and institutional investors as well as fledgling high-tech companies and early-stage investment management funds.
KBC Financial Products has 416 employees and is a wholly-owned subsidiary of KBC Bank NV, a leading bancassurance institution centred in Brussels, Belgium. Formed in June 1998 through the merger of Kredietbank, Cera Bank, and ABB Insurance, the group controls assets of over €175 billion and has received strong credit ratings from agencies (Aa3 Moody’s, AA Thomson Bank Watch, AA- Fitch IBCA, A+ S&P). The KBC group employs nearly 30,000 individuals in 31 countries.
KBC Bank NV is in turn a wholly-owned subsidiary of KBC Banking & Insurance Holding Company NV.