Adams Financial Software Inc.

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Testing

A well designed and rigorously tested software is mandatory. There are several categories of Fixed Income securities. The design of a software system requires knowledge of each type and its characteristics. The design must consider what processes are required for each security type. For example, there are fundamental differences between a municipal bond and a treasury bond; there are major differences between a bullet bond and an amortizing bond, etc. The system design is a “top-down” structure. The design resembles an organizational chart with modules defining the organization’s structure. Software design identifies the modules (blocks of program code) and the function each is to perform. The code for a module, therefore, performs a specific task. The characteristics of the specific security define the processing requirements.

The investment industry often offers new security types with unique features. Our top-down and modular design will address this situation. This design allows new security types to be added with minimum impact on existing programs.

Another design feature to consider is the flexibility built into the software. A major aspect of flexibility avoids hard-closes, i.e., closes that require special handling. To accomplish this, the design must allow last minute changes to a portfolio even after a monthly close has occurred. The software developed by AFS has this feature; there is no hard close until the customer posts the numbers to the general ledger. This assures that the investment portfolio and the general ledger agree.

It is essential that the design and code of a computer-based system undergo strenuous testing. The first installation of the AFS software took place in 1984 with IPMS I. The system underwent significant changes and improvements in 1989 and designated IPMS II. This was the top down modular version. IPMS III, released in 1994, retained the same basic structure but included a module designed for CMO securities. Analytic features (stress test and interest rate shock) additions became IPMS IV. This occurred in 1995. There have been very few changes applied to the basic software since 1995. There have been new features added as requested by customers; most of which were reporting changes. There have been numerous requests for interface files used by third-party systems such as general ledger or asset liability systems.

This, of course, implies that AFS has been able to satisfy its customers for over ten (10) years with very few changes. As stated above, the advent of a new security type may require new programming code; otherwise, AFS plans no changes to the basic operating software.