To obtain the DerivaTool patent, FEA was required to describe the state of the art and the improvement on that state through its invention. The programmer then codes and compiles the program and executes the simulation, presenting the evaluation results to the trader in numerical or graphical format. And if this process experiences any breakdowns in communication between the programmer and the trader, potentially catastrophic errors may result. Efforts must then be made to correct the errors, resulting in further delays and frustrating the trader's ability to act quickly in response to market opportunities. The basic design concept of DerivaTool was to provide the trader or other user the opportunity to obtain a Monte Carlo simulation without reliance upon a programming staff.
Most traders are unfamiliar with programming, but they generally are familiar with spreadsheets.
Using a simple syntax describing basic expressions and functions for decision making, statistical concepts, and date arithmetic, DEL is sufficiently intuitive that a spreadsheet user can be up and running to analyze a new derivative instrument, all within a relatively few minutes. After each event of a derivative security is described in DEL, the problem is then submitted to the DerivaTool simulation engine for processing. Scenarios can be modified, annotated and their results can be accumulated, that is, DerivaTool will remember the results of a prior simulation so that additional results can be added to the prior results, saving further time. DerivaTool works well for one instrument per simulation, where instrument value is dependent on the value of up to three underlying assets. It can also be organized for batch operations.