By scrolling down to tmp and double clicking on this folder you will see all of the trading session files that are stored in tmp.

There are several trading sessions above. For example, trading case RE1 has been recorded for a section B. The results from this market are in the file titled GBTEST.RE1.

Select this file by double clicking or clicking on OK. You are now given the option to convert this file as indicated below.

Click on the button Convert to convert. The conversion utility will automatically work through each trial period until it finishes. At this time you will see the converted data grid:

This lets you see what every trader did in the market. See the section below titled Additional Information (immediately following Graphics) for a description of these fields. You can save this file (be sure to rename it first) to whatever directory you want. This saves the results of the market in an easy to ready ascii format that you can later bring into a spreadsheet or database program of your choice. There are other features such as copy and paste etc., supported. For example, if the trading case had private information you can convert this into an easy to read grid by selecting the menu item View, and sub menu item Information.

Note: If you are running any of the RE? Cases and want to view the realizations of private information you should select the menu item View and Information. This lets you compute what the efficient market solution is for the case.

Graphics

If you select this menu item you get to replay the market and the following graphical display appears:

By clicking on Plot you will see the replay of all bids, asks and last traded prices displayed (unless you choose to suppress any of these by turning them off). In the following screen dump the price scale has been set to 0-60 and plotting the horizontal line has been set to 20.

You can of course choose to view any particular security/period/trial for that trading case. This allows you to relate your classroom discussion to the actual results from your current market session. You can then explore other menu options that are available.

Additional Information

By converting your trading session file translates it into a form readable by most spreadsheet programs or by a program you write.

The spreadsheet that appears has converted data in the following format:

Column 1 : Trial

Column 2 : Period

Column 3 : The security number

Column 4 : Time remaining in the period. Note that time ticks down to zero

Column 5 : The trader initiating the activity, either bidding, asking, or exercising an option. In case of a trade this is the buyer.

Column 6 : The seller. This is only used when there is a trade.

Column 7 : The action

1 = Bid

2 = Ask

3 = The trader in column 5 bought from the trader in column 6

4 = The trader in column 5 exercised a put option.

5 = The trader in column 5 exercised a call option.

Column 8 : The price

Column 9 : The quantity

If a trading case has private information then this program also lets you view what private messages each trader received.

10. View Grades From a Trading Session

If you select this feature the following type of screen appears:

In this example, the market is stored on the server in directory fts which is on the r drive. Scroll down to the subdirectory tmp to see the grade files. Following along with the example given in Section 9 above we will look at the grades from this trading session.

The grades for the XR1 session (section B) are stored in the file named NAMGRD.XR1. You would, of course, select the grade cash file for whatever session you want to view. Double clicking on this filename reveals the following:

Appendix A. Customizing the trader screens

Once you have conducted a successful trading session, you may want to change the text that appears on a trader's screen. This can be done by editing the ASCII text file called fts.txt. This file is used by the trader program, and if you examine the file, you will see that the first half contains much of the text that appears on a trader's screen. You can change any label that appears on the trader's screen. The second half of the file tells you the number of characters allowed in each field. Thus, the word "Sell" can be replaced with "Vend". Of course, the meaning of the terms you substitute must be the same as the original.

Notes:

1. Please pay special attention to the number of characters you are allowed in each field. If you violate the limits, then the results can be unpredictable.
2. Some phrases are "hard coded" within the FTS Trader and cannot be changed. Over time, you will be able to customize more and more of the display. Please contact us if there is something specific you want to be able to change.

Appendix B. Formal Definition of the Market

A. The One-Period Market

Let S denote a set of states of nature. A primary security, say x, specifies an integer value to every state. We call x(s) the payoff per share from security x in state s.

States of nature are generated randomly, either using a random number generator or by reading realizations from a specified data file. We assume that every state is equally likely. This does not entail any loss of generality. For example, if there are two states and state 1 is twice as likely as state 2, then this is equivalent to having three equally likely states, with the payoff from every security being the same in the first two states.

The payoff from a primary security must be specified prior to a trading session. A derivative security is one whose payoff depends on that of another (underlying) security. This underlying security need not be a primary security or even a security that is actually traded. We define these next.

Stock Indexes

A stock index is any weighted average of primary securities. If you define a stock index, you have to first define the primary securities, and then specify the weight of each security in the index. Alternatively, you can create a "value-weighted" index, where the weights depend on market prices. Once you have defined a stock index, it is treated like a primary security. Thus, you can allow (or disallow) traders to buy and sell the index itself. The payoff to the index will equal the weighted average of the payoffs of the underlying securities. You do not have to define an index to construct derivative securities on an index (with the exception of American options as noted).

Futures Contracts

A futures contract can be defined on any primary security or on a weighted average of primary securities. If it is defined on such an average, then settlement of the contract is in cash; otherwise, it is by delivery of the underlying primary security. Cash settlement can take place in two ways. The contract can be settled using the last traded prices at close of trading or by using the actual realized payoff of the underlying securities.

When a futures contract is traded, no cash changes hands. All settlement is at the expiration date. If you close out your futures position and have made a profit, this profit will only be realized at the time the contract expires. There are currently no margin requirements and no marking to market.

Option Contracts

An American call option and an American put option can be defined on a primary security or on a futures contract. These can be exercised during a trading period, in which case the underlying security is exchanged for the strike price.

European call and put options can also be defined on a primary security. These options can also be defined on a weighted average of a set of primary securities (such as a stock index); in this case, settlement is in cash. As in the case of futures, the cash settlement can be based on either the realized payoffs or on the last traded prices.

Various hybrid securities can be created by combining other securities. For example, a "cap call option" is a call option which has a pre-defined maximum payoff. You can create such an option by creating an "index" of two call options with different exercise prices. The weight on the option with the lower strike price would be +1 while that on the other would be -1.

Payoffs from Securities and Settlement

At the end of the market (which in this section is the end of period 1), all accounts are cleared in the following order.

First, interest is paid on cash balances using the risk free interest rate. Those with negative balances pay interest at the risk free rate.

Then, the futures market is cleared for all futures which are defined on an underlying security. Note that the cash transfer and script exchange that takes place at this stage is post-interest, i.e. is done after interest is paid on cash balances.

Next, every trader receives the payoff per share for every primary security. This is again in post-interest dollars. If you have defined an index, it is treated like a primary security. If a trader has a short position in the security, then the trader must cover the payoff

per share from his/her cash balances.

Simultaneously with the settlement in the options market, the futures market is settled. Since there is no "option" to settle, those with a long position in a contract receive the payoff to the underlying security or basket of securities in return for the price specified in the futures contract.

At this point, the trial has ended, and the final cash balance of the trader is used to determine performance. This can either be used directly or converted into incentive cash using different conversion methods.

B. The Multi-Period Market

We assume the states follow a first order Markov process. Thus, given that the state at time t is s, then the state will move to s' at time t+1 with a given probability (which must be specified). There are three types of payoffs from security x:

x (s) = payoff in the first period in state s.

xt (s,s') = payoff at t if the state at t is s and the state at

t-1 was s', t = 2,...,T.

xT(s) = payoff at the terminal date if the last period

state is s.

(Note that there are two payoffs at the terminal date; this allows some flexibility in adjusting for the fact that all the markets have a finite life). To conserve space, we use the concept of a security-specific state. Thus, if security 1 has 10 different payoffs and security 2 has also has 10, then if the two securities are independent, there are in fact 100 states. The program only requires you to specify that there are ten states, the payoffs from the securities in each of these states, and to tell it that the two securities are independent.

In a multi-period setting, you must also specify the life of each security. Thus, some securities can expire before the market ends. In such markets, a variety of other securities can also be created:

Caps and Floors

Payoffs from a cap are defined as follows. Let P be a principal amount, and suppose that the interest rate in state s' at time t+1 given s at time t is r (s,s'). Let C be the cap (interest rate). Then, the buyer of the cap receives 0 from the seller of the cap if r (s,s') < C and receives P[r (s,s')-C] otherwise. This has the characteristics of a call option. Note that this calculation is made every period up to the expiration of the cap contract.

A floor is the opposite of a cap. If F is the floor, then the buyer of the floor receives 0 from the seller if r (s,s') > F, and receives P[F-r (s,s')] otherwise. This has the characteristics of a put option.

A collar can be created by combining a cap and a floor with C > F. A swap is an "index" of a collar and a floor with C = F.

By first creating collars and floors, you can easily create a swap. It is then possible to create options on swaps, which are swaptions. This approach applies equally to a one-period except that the option component is no longer interpreted as a sequence of European options but instead as a simple European option.

At the end of every period, payoffs for every security are computed as in the one period model. If some option and futures contracts have expired, then they are settled in the same way as described above. The endowments of all assets at the end of the period are held over to the beginning of the next period.

The display of profits is as before: profits earned during a period are grossed up by the interest rate, and this happens every period. This does not apply to futures, for which we display the value of the futures position prior to expiration. This value is in dollars at the expiration date.