Reclaiming Certainty at the Core of Finance

Before risk is modeled and value is estimated, financial obligations must be represented by standardized machine readable and machine executable algorithms to be precise, consistent and certain.

Finance is often described as a world of risk, uncertainty, and volatility. Yet the article Reclaiming Certainty at the Core of Finance published by Willi Brammertz, Bob Mark, and Allan I. Mendelowitz in The Quarterly Journal of Finance, argues that this view overlooks a foundational truth: financial contracts contain an inherent element of certainty. At their core, financial contracts specify who pays whom, how much, and when. These payment obligations are not vague aspirations. They are cash flows determined by contract terms and mathematical algorithms.

The authors show that this certainty was once better understood. Historically, financial institutions recorded contractual obligations with great care because future cash flows were the foundation of banking. But the computerization of finance, beginning with accounting systems in the 1960s, moved the industry in the wrong architectural direction. Instead of placing the financial contract at the center, banks built fragmented systems around accounting, and payment systems.  Later, transaction processing, risk, liquidity, valuation, and reporting systems were added as an afterthought.  Each system represents the same contract differently, creating costly reconciliation burdens, inconsistent analytics, operational fragility, and lower confidence in reported results.

The proposed solution is a financial contract-centric architecture based on the granular algorithmic representation of financial contracts. This must include both the contract terms and the cash-flow-generating algorithm. Data alone is not enough. Only when terms and algorithms are standardized together can financial institutions calculate contractual cash flows consistently across transaction processing, accounting, risk management, valuation, liquidity, and regulation. This is established by the open-source ACTUS financial standard, with a data dictionary, standardized contract types, and an open-source reference implementation.

This distinction also clarifies the relationship between certainty, risk, and uncertainty. Contractual obligations are certain, while market, credit, and behavioral risk factors remain stochastic. Once risk assumptions are applied, state-contingent cash flows and analytical results can be computed consistently. This separation reduces model risk related to contract representation and leaves institutions to focus on the irreducible uncertainty of risk factors.

ARIADNE Software Solutions Implementing ACTUS

This is exactly where Ariadne Software can help financial firms operationalize certainty. Ariadne’s digital twin technology creates an analytical representation of a firm’s financial activities without disrupting production systems. Legacy contracts are mapped to the open-source ACTUS financial standard, allowing organizations to verify expected cash flows, understand their balance sheet and off-balance-sheet activities, and generate consistent views for treasury, finance, risk, and the board. Ariadne AnalytX supports integrated analytics, scenarios, accounting views, interest-rate risk, profitability, and forward-looking regulation. Digital twins therefore turn fragmented financial complexity into an analytically clear, verifiable foundation for a safer transformation.  SolitX provides ACTUS-compliant lifecycle management and is a universal product engine with which any financial instrument can be configured without a software change.  It delivers the state of any financial contract anywhere needed in milliseconds, for End of Day at any time needed.  

Author biographies

Willi Brammertz Willi Brammertz is the founder of Ariadne Business Analytics and a leading contributor to contract-centric financial analytics and ACTUS-based standardization. He is the creator of riskpro™, a financial simulation and analytic system used by hundreds of institutions, and has extensive experience in banking risk, accounting, regulation, and integrated financial architecture. His key book publication is Unified Financial Analysis: The Missing Links of Finance, published by Wiley, which argues for a unified financial language and a better-organized set of information and algorithms for finance, risk, valuation, and regulation. 

Bob Mark 

Bob Mark is Managing Partner of Black Diamond Risk Enterprises, former Chief Risk Officer of CIBC, and Founding Executive Director of the Master of Financial Engineering program at UCLA Anderson School of Management. He is a co-founder of PRMIA and was named Financial Risk Manager of the Year by GARP. His major book publications include Risk Management and The Essentials of Risk Management, co-authored with Michel Crouhy and Dan Galai. The Essentials of Risk Management, now in its third edition, is described by McGraw Hill as a widely used and fully updated guide to financial risk management. 

Allan I. Mendelowitz 

Allan I. Mendelowitz is President of the ACTUS Financial Research Foundation and has held senior U.S. government roles across financial regulation, housing finance, trade, and economic policy. He previously served as Chairman of the Federal Housing Finance Board, Executive Vice President of the U.S. Export-Import Bank, and Managing Director for International Trade and Finance at the U.S. GAO. Following the great financial crisis, he co-founded and co-led the committee whose legislative strategy helped create the Office of Financial Research through the Dodd-Frank Wall Street Reform and Consumer Protection Act, a central post-crisis reform aimed at improving financial transparency and systemic-risk oversight.

Publication description

The article appeared in The Quarterly Journal of Finance, Vol. 16, No. 1, 2026, published by World Scientific Publishing Company and the Midwest Finance Association. The journal publishes finance research across areas such as corporate finance, asset pricing, financial econometrics, international finance, macro-finance, banking, risk management, derivatives, and quantitative finance.

Gemini Notebook Generated Explainer Video

ARIADNE asked Gemini Notebook to generate an explainer video. Except for difficulties pronouncing ACTUS and SOFR, it demonstrates the power of AI to explain academic concepts.

Here is how Gemini summarizes its delivery:

To break down the paper, the video synthesizes its technical arguments into a clear narrative—highlighting the shift from today's fragmented banking systems to a standardized, contract-centric model. It translates complex academic concepts into an accessible, multi-layered explainer covering historical context, mathematical logic, and future financial applications.

GEMINI NOTEBOOK EXPLAINER VIDEO