Technical Debt in Software Development : Examining Premises and Overcoming Implementation for Efficient Management

Software development is a unique field of engineering: all software constructs retain their modifiability — arguably, at least — until client release, no single project stakeholder has exhaustive knowledge about the project, and even this portion of the knowledge is generally acquired only at project completion. These characteristics imply that the field of software development is subject to design decisions that are known to be sub-optimal—either deliberately emphasizing interests of particular stakeholders or indeliberately harming the project due to lack of exhaustive knowledge. Technical debt is a concept that accounts for these decisions and their effects. The concept’s intention is to capture, track, and manage the decisions and their products: the affected software constructs. Reviewing the previous, it is vital for software development projects to acknowledge technical debt both as an enabler and as a hindrance. This thesis looks into facilitating efficient technical debt management for varying software development projects. In the thesis, examination of technical debt’s role in software development produces the premises on to which a management implementation approach is introduced. The thesis begins with a revision of motivations. Basing on prior research in the fields of technical debt management and software engineering in general, the five motivations establish the premises for technical debt in software development. These include notions of subjectivity in technical debt estimation, update frequency demands posed on technical debt information, and technical debt’s polymorphism. Three research questions are derived from the motivations. They ask for tooling support for technical debt management, capturing and modelling technical debt propagation, and characterizing software development environments and their technical debt instances. The questions imply consecutive completion as the first pursued tool would benefit from—possibly automatically assessable—propagation models, and finally the tool’s introduction to software development organizations could be assisted by tailoring it based on the software development environment and the technical debt instance characterizations. The thesis has seven included publications. In introducing them, the thesis maps their backgrounds to the motivations and their outcomes to the research questions. Amongst the outcomes are the DebtFlag tool for technical debt management, the procedures for retrospectively capturing technical debt from software repositories, a procedure for technical debt propagation model creation from these retrospectives, and a multi-national survey characterizing software development environments and their technical debt instances. The thesis concludes that the tooling support, the technical debt propagation modelling, and the software environment and technical debt instance characterization describe an implementation approach to further efficient technical debt management. Simultaneously, future work is implied as all previously described efforts need to be continued and extended. Challenges also remain in the introduced approach. An example of this is the combinatorial explosion of technology-development-context-combinations that technical debt propagation modelling needs to consider. All combinations have to be managed if exhaustive modelling is desired. There is, however, a great deal of motivation to pursue these efforts when one re-notes that technical debt is a permanent component of software development that, when correctly managed, is a development efficiency mechanism comparable to a financial loan investment.Ohjelmistokehitys on uniikki tekniikan ala: kaikki ohjelmistorakenteet säilyttävät muokattavuutensa — otaksuttavasti ainakin — asiakasjulkaisuun asti. Yhdenkään projektiosakkaan tietämys ei kata koko projektia ja merkittävä osa tästäkin tiedosta karttuu vasta projektin suorittamisen aikana. Nämä ominaisuudet antavat ymmärtää, että ohjelmistokehitysala on sellaisten suunnitelupäätösten kohde, joiden tiedetään olevan epätäydellisiä—joko tarkoituksella tiettyjen projektiosakkaiden intressejä painottavia tai tahattomasti projektia vahingoittavia puutteelliseen tietoon perustuvia. Tekninen velka on konsepti, joka huomioi nämä päätökset sekä niiden vaikutukset. Konseptin tarkoitus on havaita, seurata ja hallita näitä päätöksiä sekä tuloksena syntyviä teknisen velan vaikutuksen alla olevia ohjelmistorakenteita. Edellisen kuvauksen valossa ohjelmistokehitysprojekteille on erityisen tärkeää huomioida tekninen velka sekä mahdollistajana että hidasteena. Tämän vuoksi kyseinen väitöskirja perehtyy tehokkaan teknisen velan hallinnan fasilitointiin moninaisille ohjelmistokehitysprojekteille. Väitöskirjassa tarkastellaan teknisen velan roolia osana ohjelmistokehitystä. Tarkastelu tuottaa joukon premissejä, joihin perustuen esitellään lähestymistapa teknisen velan hallinnan toteuttamiselle. Viisi väitöskirjan alussa esitettyä motivaatiota kiinnittävät ne premissit,joille ratkaisu esitetään. Motivaatiot rakennetaan olemassa olevaan teknisen velan sekä ohjelmistotekniikan tutkimustietoon perustuen. Näihin lukeutuvat muun muassa subjektiivisuus teknisen velan estimoinnissa, teknisen velan informaatiolle nähdyt päivitystaajuusvaatimukset sekä teknisen velan polymorfismi. Havainnoista johdetaan kolme tutkimuskysymystä. Ne tavoittelevat työkalutukea teknisen velan hallinnalle, velan propagoitumisen havainnointia sekä mallinnusta kuin myös ohjelmistotuotantoympäristöjen ja niiden velka instanssien kuvaamista. Tutkimuskysymykset implikoivat peräkkäistä suoritusta: tavoiteltu työkalu hyötyy—mahdollisesti automaattisesti arvoitavista—teknisen velan propagaatiomalleista. Valmiin työkalun käyttöönottoa voidaan taas edistää jos kuvaukset kehitysympäristöistä sekä niiden velkainstansseista ovat käytettävissä työkalun räätälöintiin. Väitöskirjaaan sisältyy seitsemän julkaisua. Väitöskirja esittelee ne kiinnittämällä julkaisujen taustatyön aikaisemmin mainittuihin motivaatioihin sekä niiden tulokset edellisiin tutkimuskysymyksiin. Tuloksista huomioidaan esimerkiksi DebtFlag-työkalu teknisen velan hallintaan, retrospektiivinen prosessi teknisen velan kartoittamiselle versionhallintajärjestelmistä, prosessi teknisen velan mallien rakentamiselle näistä kartoituksista ja monikansallinen kyselytutkimus ohjelmistokehitysympäristöjen sekä näiden teknisen velan instanssien luonnehtimiseksi. Väitöskirjan yhteenvetona huomioidaan, että teknisen velan hallinnan työkalutuki, teknisen velan propagaatiomallinnus ja ohjelmistokehitysympäristöjen sekä niiden teknisen velan instanssien luonnehdinta muodostavat toteutustavan, jolla teknisen velan tehokasta hallintaa voidaan kehittää. Samalla implikoidaan jatkotoimia, sillä kaikkia edellä kuvattuja työn osia tulee jatkaa ja laajentaa. Toteutustavalle nähdään myös haasteita. Eräs näistä on kombinatorinen räjähdys teknologia- ja kehityskontekstikombinaatioille. Kaikki kombinaatiot tulee huomioida mikäli teknisen velan propagaatiomallinnuksesta halutaan kattavaa. Motivaatio väitöskirjassa esitetyn työn jatkamiselle on huomattavaa ja sitä kasvattaa entuudestaan edellä tehty huomio siitä, että tekninen velka on pysyvä komponentti ohjelmistokehityksessä, joka oikein hallittuna on kehitystehokkuutta edistävänä komponenttina verrattavissa finanssialan lainainvestointiin.Siirretty Doriast

Fiscal-monetary-financial stability interactions in a data-rich environment

In this paper, we shed some light on the mutual interplay of economic policy and the financial stability objective. We contribute to the intense discussion regarding the influence of fiscal and monetary policy measures on the real economy and the financial sector. We apply a factor-augmented vector autoregression model to Czech macroeconomic data and model the policy interactions in a data-rich environment. Our findings can be summarized in three main points: First, loose economic policies (especially monetary policy) may translate into a more stable financial sector, albeit only in the short term. In the medium term, an expansion-focused mix of monetary and fiscal policy may contribute to systemic risk accumulation, by substantially increasing credit dynamics and house prices. Second, we find that fiscal and monetary policy impact the financial sector in differential magnitudes and time horizons. And third, we confirm that systemic risk materialization might cause significant output losses and deterioration of public finances, trigger deflationary pressures, and increase the debt service ratio. Overall, our findings provide some empirical support for countercyclical fiscal and monetary policies.Web of Science18322419

The BoC-GEM-Fin: Banking in the Global Economy

This article describes the Bank of Canada’s version of the Global Economy Model structured to incorporate an active banking system that features an interbank market and cross-border lending. After describing the new model, the authors use it to examine the responses of selected U.S. and Canadian macroeconomic variables to a “credit crunch” in the United States and also to study the impact of changes in the regulatory limits to bank leverage in Canada. They also discuss the relative merits of a monetary policy framework based on inflation targeting and one based on price-level targeting in the presence of shocks to the U.S. and Canadian banking sectors.

BoC-GEM: Modelling the World Economy

BoC-GEM, an adaptation of the Global Economy Model, initially developed at the International Monetary Fund and the New York Federal Reserve, is a very useful tool to tackle a broad range of issues pertinent to the current economic context, such as the recent movements in commodity prices and the adjustment of global imbalances. This article describes the structure and functioning of BoC-GEM and details some examples of recent application in the areas of monetary policy and issues in the real economy and questions of financial stability and describes ongoing research into introducing a financial sector into the model.

Russia from Bust to Boom: Oil, Politics or the Ruble?

This paper develops and estimates a small macroeconomic model of the Russian economy. The model is tailored to analyze the impact of the oil price, the exchange rate, and political stability on economic performance. The model does very well in explaining Russia’s economic history in the period 1995-2002. We then use the model to simulate two sets of scenarios, one with various oil price scenarios and one with various adverse shocks. The simulations suggest that the Russian economy is still very vulnerable to oil price swings, and that these swings have asymmetric effects. Indeed the cost of a downward swing of oil prices seems to be larger than the benefit of an upward swing. We also find that the aggregate effects of an oil price collapse are comparable to these of renewed political instability. Although their propagation mechanism is quite different, both adverse shocks do have a similar effect on real GDP. A real exchange rate appreciation on the other hand has relatively mild effects on real GDP. All in all, it is suggested that Russia should reduce its vulnerability to adverse oil price shocks and maintain political stability.http://deepblue.lib.umich.edu/bitstream/2027.42/40108/3/wp722.pd

Proliferation of risk and policy responses in the EU financial markets

Summary for non-specialistsThis study draws attention to the proliferation of tail risks in financial markets prior to and during the course of the recent global financial crisis. It examines the level of tail risks in selected equity, interbank lending and foreign exchange markets in selected EU Member States in relation to the United States. The extent of tail risks is assessed by applying general error distribution (GED) parameterization in GARCH volatility tests of the examined variables. The empirical tests prove that tail risks were pronounced across all of the examined European financial markets throughout the crisis. They were also significant prior to the crisis outbreak. The analyzed interbank lending markets exhibited more extreme volatility outbursts than the equity and foreign exchange markets. Several countercyclical monetary and macroprudential policies aimed at abating tail risks are identified and discussed. Flexible capital adequacy and contingent capital requirements for financial institutions are advocated.Global financial crisis equity markets foreign exchange markets monetary policies macroprudential policies Orlowski

Too Interconnected To Fail: Financial Contagion and Systemic Risk in Network Model of CDS and Other Credit Enhancement Obligations of US Banks

Credit default swaps (CDS) which constitute up to 98% of credit derivatives have had a unique, endemic and pernicious role to play in the current financial crisis. However, there are few in depth empirical studies of the financial network interconnections among banks and between banks and nonbanks involved as CDS protection buyers and protection sellers. The ongoing problems related to technical insolvency of US commercial banks is not just confined to the so called legacy/toxic RMBS assets on balance sheets but also because of their credit risk exposures from SPVs (Special Purpose Vehicles) and the CDS markets. The dominance of a few big players in the chains of insurance and reinsurance for CDS credit risk mitigation for banks� assets has led to the idea of �too interconnected to fail� resulting, as in the case of AIG, of having to maintain the fiction of non-failure in order to avert a credit event that can bring down the CDS pyramid and the financial system. This paper also includes a brief discussion of the complex system Agent-based Computational Economics (ACE) approach to financial network modeling for systemic risk assessment. Quantitative analysis is confined to the empirical reconstruction of the US CDS network based on the FDIC Q4 2008 data in order to conduct a series of stress tests that investigate the consequences of the fact that top 5 US banks account for 92% of the US bank activity in the $34 tn global gross notional value of CDS for Q4 2008 (see, BIS and DTCC). The May-Wigner stability condition for networks is considered for the hub like dominance of a few financial entities in the US CDS structures to understand the lack of robustness. We provide a Systemic Risk Ratio and an implementation of concentration risk in CDS settlement for major US banks in terms of the loss of aggregate core capital. We also compare our stress test results with those provided by SCAP (Supervisory Capital Assessment Program). Finally, in the context of the Basel II credit risk transfer and synthetic securitization framework, there is little evidence that the CDS market predicated on a system of offsets to minimize final settlement can provide the credit risk mitigation sought by banks for reference assets in the case of a significant credit event. The large negative externalities that arise from a lack of robustness of the CDS financial network from the demise of a big CDS seller undermines the justification in Basel II that banks be permitted to reduce capital on assets that have CDS guarantees. We recommend that the Basel II provision for capital reduction on bank assets that have CDS cover should be discontinued.

Mapping the State of Financial Stability

The paper uses the Self-Organizing Map for mapping the state of financial stability and visualizing the sources of systemic risks on a two-dimensional plane as well as for predicting systemic financial crises. The Self-Organizing Financial Stability Map (SOFSM) enables a two-dimensional representation of a multidimensional financial stability space and thus allows disentangling the individual sources impacting on systemic risks. The SOFSM can be used to monitor macro-financial vulnerabilities by locating a country in the financial stability cycle: being it either in the pre-crisis, crisis, post-crisis or tranquil state. In addition, the SOFSM performs better than or equally well as a logit model in classifying in-sample data and predicting out-of-sample the global financial crisis that started in 2007. Model robustness is tested by varying the thresholds of the models, the policymaker’s preferences, and the forecasting horizon.systemic financial crisis; systemic risk; self-organizing maps; visualisation; prediction; macroprudential supervision