The Process

At the start of the project AtomRain met with the Derivatas management team for a discovery consultation phase to determine the technical feasibility of the given requirements. After establishing technical feasibility, a team of AtomRain engineers set out to build the analytics engine while an AtomRain design team created wireframes and designs for the user interface. An iterative agile approach to development was employed from the start, allowing the product to develop quickly into usable software through quick iterations of design, coding and testing. The use of test driven development was essential in proving the accuracy and speed of the engine and the services utilizing it. Proper security considerations and standards were introduced as well as a continuous delivery pipeline for easy deployment. Derivatas required a cloud based solution so AtomRain established the server configuration, build automation and deployment, and database provisioning, replication, and schema deploys. AtomRain’s agile process provided Derivatas the flexibility to establish it's most valuable asset, the engine, while at the same time iteratively finding solutions for a user interface that would allow users to interact and perform valuations with ease.

The Challenge

AtomRain was presented with the challenge of creating an algorithm that, when given a set of quantifiable assumptions specific to the company being valued, could perform with 100% mathematical accuracy the allocation of equity across all securities in a private equity structure and the valuation of a private company using the Options Pricing Model and Black-Sholes Model. At the time AtomRain accepted the challenge, this valuation process was performed manually by analysts using error prone excel models, and many seasoned analysts claimed it could not be done any other way due to the complexity of variable combinations and company specific assumptions. The algorithm would be the critical starting point around which a cloud based SaaS platform would need to be built so that features like sensitivity analysis, the Options Pricing Backsolve Method, and customized report generation could be offered.

The Result

The result was Derivatas.com, a powerful yet easy to use web application that enables a user to upload an Excel compatible spreadsheet that contains the capitalization structure of the corporation and the necessary input assumptions to generate a result from the Options Pricing Model and Black-Sholes Model. Once the valuation data is on the server, the Derivatas engine processes the data performing a series of equity allocation calculations defined by the Options Pricing Model and Black-Sholes Model. The user is then given the ability to perform sensitivity analysis or use the Backsolve Method. Once the model has been tweaked to the users satisfaction, reports and schedules can be generated to better understand the calculated results of the engine.